shared via CourseHero com This study resource was This study source was downloaded by 100000815672568 from CourseHero com on 10 27 2021 09 37 13 GMT 05 00 https www coursehero com file 21348845 TUTORIAL QUESTIONS AND ANSWERS FOR CHAPTER 2 TUTORIAL QUESTIONS AND ANSWERS FOR CHAPTER 2 GROSS DOMESTIC PRODUCT1 Classify each of the following items as a final good or service or an intermediate good or service and identify which is a component of consumption expenditure investment or government expenditure on goods and services Airline ticket bought by a student Airline tickets are intermediate goods that are used for the final service airline flights They are part of consumption expenditure New airplanes bought by Southwest Airlines New airlines purchased by Southwest Airlines are a final good They are part of investment Cheese bought by Domino s Cheese bought by Domino s is an intermediate good The purchase of a new iPhone for the vice president This purchase is a final good It is part of government expenditure on goods and services New house bought by Bill Gates A new house purchased by Bill Gates is a final good It is part of investment Use the following figure which illustrates the circular flow model to work Problems 3 and 4 3 During 2008 in an economy Flow B was 9 trillion Flow C was 2 trillion Flow D was 3 trillion and Flow E was 0 7 trillion shared via CourseHero com This study resource was This study source was downloaded by 100000815672568 from CourseHero com on 10 27 2021 09 37 13 GMT 05 00 https www coursehero com file 21348845 TUTORIAL QUESTIONS AND ANSWERS FOR CHAPTER 2 Name the flows and calculate the value ofFlow A is aggregate income Flow B is consumption expenditure Flow C is government expenditure Flow D is investment Flow E is net exports a Aggregate income Aggregate income is 13 3 trillion Aggregate income equals aggregate expenditure which is the sum of consumption expenditure Flow B investment Flow D government expenditure Flow C and net exports Flow E Therefore aggregate expenditure equals 9 billion plus 3 billion plus 2 billion plus 0 7 trillion which is 13 3 trillion Therefore aggregate income also equals 13 3 trillion b GDP GDP is 13 3 trillion GDP equals aggregate income which from part a is 13 3 trillion 4 During 2009 flow A was 13 0 trillion flow B was 9 1 trillion flow D was 3 3 trillion and flow E was 0 8 trillion Calculate the 2009 values ofa GDP GDP is 13 0 trillion GDP equals aggregate income Flow A is aggregate income soaggregate income and hence GDP is 13 0 trillion b Government expenditure Government expenditure is 1 4 trillion Aggregate expenditure equals GDP which from part a is 13 0 trillion Aggregate expenditure is the sum of consumption expenditure Flow B investment Flow D government expenditure Flow C and net exports Flow E Therefore government expenditure equals aggregate expenditure minus consumption expenditure minus investment minus net exports Government expenditure equals 13 0 trillion minus 9 1 trillion minus 3 3 trillion minus 0 8 trillion which is 1 4 trillion 5 Use the following data to calculate aggregate expenditure and imports of goods and services Government expenditure 20 billion Aggregate income 100 billion Consumption expenditure 67 billion Investment 21 billion Exports of goods and services 30 billionAggregate expenditure equals aggregate income so aggregate expenditure equals 100 billion Aggregate expenditure also equals consumption expenditure plus investment plus government expenditures on goods and services plus exports of goods and services minus imports of goods and services so imports of goods and services equals consumption expenditure plus investment plus government expenditure on goods and services plus exports minus aggregate expenditure Using this formula gives imports of goods and services equals 67 billion 21 billion 20 billion 30 billion 100 billion which is 38 billion Use the following data to work Problems8 and 9 The table lists some macroeconomicItemBillions ofdollarsWages paid to labor 8 000Consumption expenditure10 000Net operating surplus 3 200Investment 2 000Government expenditure 2 800Net exports 700Depreciation 1 800 shared via CourseHero com This study resource was This study source was downloaded by 100000815672568 from CourseHero com on 10 27 2021 09 37 13 GMT 05 00 https www coursehero com file 21348845 TUTORIAL QUESTIONS AND ANSWERS FOR CHAPTER 2 data for the United States in 2008 8 Calculate U S GDP in 2008 GDP equals consumption expenditure plus investment plus government expenditure plus net exports so GDP equals 10 000 billion 2 000 billion 2 800 billion 700 billion or 14 100 billion 9 Explain the approach expenditure or income that you used to calculate GDP The expenditure approach was used Use the following data to work Problems 10 and 11 The national accounts of Parchment Paradise are kept on you guessed it parchment A fire destroys the statistics office The accounts are now incomplete but they contain the following data GDP income approach 2 900 Consumption expenditure 2 000 Indirect taxes less subsidies 100 Net operating surplus 500 Investment 800 Government expenditure 400 Wages 2 000 Net exports 20010 Calculate GDP expenditure approach and depreciation For the expenditure approach GDP equals the sum of consumption expenditure investment government expenditure on goods and services and net exports Fortunately these data were saved from the fire Hence GDP C I G X M 2 000 800 400 200 3 000 From the income approach GDP equals wages plus net operating surplus plus indirect taxes less subsidies plus depreciation The value of the income approach GDP survived the fire and is 2 900 The sum of wages net operating surplus indirect taxes less subsidies equals 2 000 500 100 2 600 So depreciation equals 2 900 2 600 300 11 Calculate net domestic income at factor cost and the statistical discrepancy Net domestic product at factor cost equals the sum of wages and net operating surplus Once again all these data were fortunately saved from the fire so net domestic product at factor cost 2 000 500 2 500 The statistical discrepancy equals GDP from the expenditure approach 3 000 fromproblem 2 minus GDP from the income approach 2 900 So the statistical discrepancy is 100 Use the following data to work Problems 29 to 31 An economy produces only applesand oranges The base year is2012 and the table gives thequantities produced and theprices Quantities20122013Apples60160Oranges80220Prices20122013Apples 0 50 1