ECON 102 Chapter Notes - Chapter 2: Intermediate Good, Income Approach, Inventory Investment

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viridianwildebeest744

3 May 2020

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Gdp = measure of aggregate economic activity, dollar value of final output produced during given time period within the borders of a country. = published quarterly as part of nipa (national income and products accounts) 3 approaches to measure gdp (all included in nipa) = product, expenditure, income. Intermediate good = good that is produced and used in input to another production process (eg. flour is an intermediate good that is used to make bread) After tax profits for producers (eg. flour producers + baker) = total revenue - wages - interest - cost of intermediate inputs - taxes. Total value added = value of all g&s produced in economy - value of intermediate goods used in production. Expenditure approach = gdp as total spending on all final g&s production in the economy, doesn"t involve intermediate goods. > income-expenditure identity, lhs = aggregate income, rhs + sum of components of aggregate expenditure.

Related Questions

51. Gross national product equals:
A) the aggregate output of the citizens & businesses of aneconomy in a 1-year period.
B) the aggregate final output of the citizens & businesses ofan economy in a 1-year period.
C) the total market value of all goods & services produced inan economy in a 1-year period.
D) the total market value of all final goods & servicesproduced in an economy in a 1-year period.

52. Which of the following is not included in GNP but is includedin GDP?
A) The value of a Portuguese company's production in the UnitedStates.
B) The income of a U.S. citizen working in Portugal.
C) The value of a U.S. company's production in Portugal.
D) The sales of a U.S. company to U.S. citizens.

53. To calculate GDP, multiply the __________ of each final goodand service produced in an economy in a year by its __________ andthen sum the result.
A) quantity; share in total output C) price, share in totaloutput
B) quantity; price D) price, quality

54. Counting both the value of the flour used to make a loaf ofbread and the value of the loaf of bread as part of GDP:
A) is necessary to accurately compute GDP.
B) is incorrect because bread is an intermediate product.
C) is incorrect because flour is an intermediate good.
D) is incorrect because flour is a final good.

55. Suppose the value of your home increases from $100,000 to$125,000. If you continue to live in your home, the increase in itsvalue:
A) adds nothing to GDP. C) increases GDP by $100,000.
B) increases GDP by $25,000. D) increases GDP by $125,000.

56. If a used car dealer buys a car for $6000 and resells it for$6500, how much has been added to GDP?
A) nothing. B) $500. C) $6000. D) $6500

57. Which of the following is not a part of this year's GDP?
A) The value of a product produced last year but sold thisyear.
B) The value of a haircut.
C) The value of a new car produced and purchased during theyear.
D) The value of new homes built this year, regardless of whetherthey are sold.

58. Which of the following would not increase this year'sGDP?
A) Home repairs performed by the owner.
B) A commission charged by your broker when you sold 100 shares ofBorden stock.
C) The sales of a corporation.
D) The value of a doctor's services to his or her patients.

59. The circular flow model shows:
A) the movement of expenditures and factor payments through theeconomy.
B) how national income is distributed to individuals.
C) how national income changes over time.
D) the movement of goods from one business to another.

tealelephant71

The expenditure and resource cost-income approaches to calculating GDP arrive at the same final number, but they calculate that number in different ways. To illustrate, consider the possible effects of the following transactions on GDP:

Ralph pays The Home Station $1,200 to plant a new lawn in his backyard. He's attracted by The Home Station's guarantee that he'll be happy with the new lawn, or he'll get his money back.

The Home Station pays Al's Lawn Care $850 to plant the lawn.

Al's Lawn Care buys grass seed worth $200 from Green Center Nursery.

Compute contributions to GDP, using the expenditure approach. Assume that Green Center Nursery receives the grass seed at no charge and that other costs are zero.

Hint: Add the amount of money spent by buyers of final goods and services.

Which of the following would be included in the expenditure method of calculating GDP? Check all that apply.

-The Home Station spends $850.

-Ralph spends $1,200.

-Al's Lawn Care spends $200.

The total contribution to GDP, measured by the expenditure method, is $______

Now use the following table to compute contributions to GDP, employing the resource cost-income approach. In particular, indicate the costs of intermediate goods and the value-added at each stage of production.

Stage of Production	Sale Value	Cost of Intermediate Goods	Resource Cost-Income
Green Center Nursery	$200	?	?
Al's Lawn Care	$850	?	?
The Home Station	$1,200	?	?

The contribution to GDP that you found using the expenditure approach corresponds to the sum of the _____ at each stage of production.

peachhedgehog527

All the following transactions take place during the same year.

Assume that a farmer rents a 20-acre farm in the White Creek Valley. During the current year, the farmer produces 100,000 bushels of wheat that he sells to a miller for $300,000 using various farming equipment. The farmer had to borrow from the bank to buy the farming equipment and pay $50,000 interest. Finally, the labor costs are $200,000 and the rent he pays to the owner of the land is $30,000.

The miller produces and sells to "Bang Bakery" in Newark 1,000 lbs of flour worth $600,000. The flour is produced in a $100,000 mill in Hockessin; no rent is paid, the wage bill is $180,000 and interest payments are $70,000. Finally, "Bang Bakery" makes and sells bread to Newark consumers for $1,000,000. The rent for their factory and their stores is $100,000 their interest payments are $50,000 - their wage bill, $300,000. It was not a good year for "Bang Bakery"

Calculate the contribution to GDP of these transactions using three different methods:

(8 points) The value-added approach

Value added by the farm:

Value added by the mill:

Value added by the bakery:

Total value added:

(8 points) The income approach (fill the table and explain how you obtain the values)

Various forms of income (Name the categories)					Total
farm:	$	$	$	$	$
mill:	$	$	$	$	$
bakery:	$	$	$	$	$
Total	$	$	$	$

(4 points) The expenditure approach

scarletraccoon576

ECON 102 Chapter Notes - Chapter 2: Intermediate Good, Income Approach, Inventory Investment

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