Economic20beconomics

1. What components of GDP (if any) would each of the following transactions affect? Explain.a. A family buys a new refrigerator.b. Aunt Jane buys a new house.c. Ford sells a Mustang from its inventory.d. You buy a pizza.e. California repaves Highway 101.f. Your parents buy a bottle of French wine.g. Honda expands its factory in Marysville, Ohio.2. The government purchases component of GDP does not include spending on transferpayments such as Social Security. Thinking about the definition of GDP, explain why transferpayments are excluded.3. Below are some data from the land of milk and honey.

a. What was the growth rate of nominal GDP between 1998and 2018? (Hint: The growth rateof a variable X over a N-year period is calculated as 100 × [(Xfinal/Xinitial)1/N–1].)b. What was the growth rate of the GDP deflator between 1998and 2018?c. What was real GDP in 1998measured in 2009prices?d. What was real GDP in 2018measured in 2009prices?e. What was the growth rate of real GDP between 1998and 2018?f. Was the growth rate of nominal GDP higher or lower than the growth rate of real GDP?Explain.5. A farmer grows wheat, which he sells to a miller for $100. The miller turns the wheat intoflour, which he sells to a baker for $150. The baker turns the wheat into bread, which he sells toconsumers for $180. Consumers eat the bread.a. What is GDP in this economy? Explain.b. Value added is defined as the value of a producer’s output minus the value of theintermediate goods that the producer buys to make the output. Assuming there are nointermediate goods beyond those described above, calculate the value added of each of thethree producers.c. What is total value added of the three producers in this economy? How does it compare tothe economy’s GDP? Does this example suggest another way of calculating GDP?6. The participation of women in the U.S. labor force has risen dramatically since 1970.a. How do you think this rise affected GDP?b. Now imagine a measure of well-being that includes time spent working in the home andtaking leisure. How would the change in this measure of well-being compare to the change inGDP?c. Can you think of other aspects of well-being that are associated with the rise in women’slabor-force participation? Would it be practical to construct a measure of well-being thatincludes these aspects?Chapter 24 questions:1. The residents of Vegopia spend all of their income on cauliflower, broccoli, and carrots. In2010, they buy 100 heads of cauliflower for $200, 50 bunches of broccoli for $75, and 500carrots for $50. In 2011, they buy 75 heads of cauliflower for $225, 80bunches of broccoli for$120, and 500 carrots for $100.a. Calculate the price of each vegetable in each year.