Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
7th Edition
ISBN: 9780134472669
Author: Blanchard
Publisher: PEARSON
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Chapter 2, Problem 10QAP
a)
To determine
The level of change in the
b)
To determine
The increase in the measured GDP do actually reflect the effect on the output of our decision to work overtime.
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A country has just one resource - labor - that it can use to produce two goods, books and clothing.
At first the country has 10 million workers, and each worker can produce either 2 books or 5 units of
clothing per day.
Suppose the country wants to produce 8 million books.
Suppose the price of a book is $10, and the price of a unit of clothing is $20. Using this
information and your answer from the last question, calculate the country's GDP (measured in
dollars per day). Enter your answer as a number in the space below. (For example, if your
answer is $3.75 million, enter it as 3750000 in the space below.)
Paolo and Sharon Zambetti live in Swarthmore, PA. Their son, Van, is an artist living in New York City.
For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply.
Transaction
C
I
G
X
M
Paolo buys a bottle of Italian wine.
Sharon gets a haircut.
Van paints a landscape and sells it to an art collector in Japan.
The Zambettis build an addition on their house.
The Federal Aviation Administration expands the runways at Philadelphia International Airport, which is just a few miles from Paolo and Sharon's house.
The participation of women in the U.S. labor force has risen dramatically since 1970.
How do you this this rise affected GDP?
Now imagine a measure of well-being that includes time spent working in the home and taking leisure. How would the change in this measure of well-being compare to the change in GDP?
Can you think of other aspects of well-being that are associated with the rise in women’s labor-force participation? Would it be practical to construct a measure of well-being that includes these aspects?
Chapter 2 Solutions
Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
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Similar questions
- GDP is a good and useful measure of general economic activity for each of the following reasons except for which one? (Which one of the following is not either correct or a reason to rely on GDP as a measure of economic activity?) In order to raise the amount of goods and services available in a country, GDP must rise. In order to have a true measure of economic activity, the income of all people needs to be considered, and the value of goods and services for all people must be considered, and GDP considers the income and spending for all people (in the country). The total value of GDP is lower if the distribution of income is lower and less equitable, and is higher if the distribution is higher and more equitable, and this makes GDP a good indicator of aggregate economic activity. In order to raise the income of some people, and have the income of no people go down, GDP must rise. People care about their income, and GDP is a measure of total income.arrow_forwardWhat would happen to measured GDP if more people started hiring workers to do house chores such as cooking and cleaning?arrow_forwardGross Domestic Product was designed as a measure of economic activity, specifically a measure of national production. Despite this intent, GDP is widely interpreted as a measure of economic welfare or standard of living (when measured in per capita terms). What are the shortcomings of using GDP as a measure of economic welfare? What would you like to add to (or subtract from) GDP to make it a better reflection of how well people are doing in a nation?arrow_forward
- Which of the following will be counted as part of the U.S.'s GDP for a given year? Select one: a. An All-Terrain Vehicle produced by Honda in Timmonsville, South Carolina b. Cleaning service by an illegal immigrant that is not reported to the IRS c. A whopper burger produced by Burger King in Tel Aviv, Israel d. Tools purchased by a professional plumber at Home Depot e. An antique car that is sold at an auctionarrow_forwardLast year, a small nation with abundant forests cut down $200 worth of trees. It then turned $100 worth of trees into $150 worth of lumber. It used $100 worth of that lumber to produce $250 worth of bookshelves. Assuming the country produces no other outputs, and there are no other inputs used in producing trees, lumber, and bookshelves, what is this nation's GDP? In other words, what is the value of the final goods the nation produced including trees, lumber and bookshelves?arrow_forwardLarry and Megan Smith live in Swarthmore, PA. Megan's father, Raphael, lives in Sweden. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. Transaction Larry buys a sweater made in Guatemala. The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore. Megan's father in Sweden orders a bottle of Vermont maple syrup from the producer's website. Megan gets a new video camera made in the United States. Larry's employer upgrades all of its computer systems using U.S.-made parts.arrow_forward
- Wheelan argues that although GDP is not the perfect measure of economic progress, we continue to use it to measure economic progress for all of the below reasons EXCEPT for this one: Group of answer choices Joys of art and leisure, sorrows of environmental destruction and stress, and spiritual satisfaction, are subjective measures of human well-being and difficult to quantify or measure. All else equal, it is better for a nation to produce more goods and services than fewer. Quality of life factors such as healthcare, leisure, protection of the the environment, and stress, are not important, and therefore there is no need to develop a broader, more inclusive, measure of well-being than the GDP. When GDP turns negative, the damage is real: jobs lost, businesses closed, productive capacity turned idle.arrow_forwardThe participation of women in the Gambian labor force has risen dramatically since 2000. How do you think this rise affected GDP? Now imagine a measure of well-being that includes time spent working in the home and taking leisure. How would the change in this measure of well-being compare to the change in GDP? Can you think of other aspects of well-being that are associated with the rise in women’s labor-force participation? Would it be practical to construct a measure of well-being that includes these aspects?arrow_forwardIf real GDP for a given year is $2400 and nominal GDP is $2400, what is the GDP Deflator?arrow_forward
- Gross Domestic Product was designed as a measure of economic activity, specifically a measure of national production. Despite this intent, GDP is widely interpreted as a measure of economic welfare or standard of living (when measured in per capita terms). What are the shortcomings of using GDP as a measure of economic welfare? What would you like to add to (or subtract from) GDP to make it a better reflection of how well people are doing in a nation? Don’t limit yourself to ideas from the module.arrow_forwardWhy is real GDP a more accurate measure of an economy's production than nominal GDP? Real GDP is not influenced by price changes, but nominal GDP is. Real GDP does not include the value of intermediate goods and services, but nominal GDP does. Real GDP measures the value of the goods and services an economy produces, but nominal GDP measures the value of the goods and services an economy consumes.arrow_forwardThe expenditures on tires by the Ford Motor Company are not included directly in GDP statistics while consumer expenditures on replacement tires are included. Why?arrow_forward
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