Question

 1.  When you are trying to determine whether something is "output" and therefore part of GDP, what is the principle or rule you can use as a guide ?

 2. What is the difference between nominal GDP and real GDP ?

 3. Which is the largest of the components of spending using the Expenditure approach to measuring GDP: C, I, G, or NX ?

 4. Are the following included in U.S. GDP? Briefly explain why or why not:

 a. Used books sold at a your college bookstore:

 b. Cars manufactured in the United State at a Toyota factory.

 c. Cars manufactured in Germany at a General Motors factory.

 d. A ticket for a Yankee baseball game.

Answer 1

1. Output is the total quantity of good and services produced in an economy in a year. This defination of output is used for GDP calculations.

2. Real GDP is adjusted for inflation while nominal GDP is not.

Nominal GDP is calculated at current prices while real GDP is calculated at a pre determined base market price.

3. The largest component of spending is C or Consumption spending. Consumption is broadly divided into durable goods, non durable goods and services. Consumption spending meant for final consumption of good and service.

4. a. No, sale of used goods is not counted in GDP to avoid double counting as it was counted at the time of first sale.

b. Yes, as the car is made and sold in US.

c. No, as the car/output is produced in Germany.

d. Yes, as the baseball match ticket is sold for a match in US.