economics questions (this is the right one)

ECON302 Homework 1

Due at the beginning of class on July 18.

1. Use the information given on Table 1 to answer the following questions:

Table 1: U.S. 2011-2012 Expenditures ($ billions) 2011 2012

Personal consumption expenditures 10,729 11,120 Goods 3,625 3,783 Services 7,104 7,337 Gross private domestic investment 1,855 2,062 Fixed investment 1,818 2,004 Change in private inventories 37 58 Net exports of goods and services –568 –560 Exports 2,094 2,184 Imports 2,662 2,744 Government expenditures 3,060 3,063 Federal 1,222 1,214 State and local 1,838 1,849

a. Calculate GDP in 2011 and 2012. b. Is there trade deficit or surplus? What does it imply about the future?

2. Which of the following counts toward changes in the current GDP? Explain each of them

briefly. a. Increase in crime level. b. Building new jails. c. You find $10 on the sidewalk. d. You fix your own sink.

3. Use the information given on Table 2 to answer the following questions:

Table 2: National Income Accounting

2017 2018 Quantity of pistachios 1,000 1,100 Quantity of video games 500 500 Price of pistachios $1.00 $1.50 Price of video games $15.00 $14.75

a. Calculate the growth of the economy from 2017 to 2018. b. Calculate inflation from 2017 to 2018.

4. What would happen to real GDP, if the nominal GDP rises by 6 percent and the price level rises by 3 percent?

5. Use the information given on Table 3 to answer the following questions:

Table 3: U.S. and Eurozone Nominal GDP in 2011

2011 Eurozone nominal GDP (€ billions) €13,144 U.S. nominal GDP ($ billions) $15,100 Dollar/euro exchange rate $1.28/€1 PEURO /PUS 0.96

a. What is the value of the Eurozone nominal GDP in U.S. dollars adjusted for price differences?

b. How big is the US economy compared to the Eurozone economy once adjusted for price differences?

6. Using the expenditure approach to national income accounting, when discussing government expenditures, do we include transfer payments? Why or why not?