Question

1) If Joan receives a Social Security check, would we include that transfer payment from the government in this year’s GDP? Why or why not?

2) In the following situations, explain what is counted in this year’s GDP:

A. You bought a new Wii at GameStop last year and resold it on eBay this year

B. You spend your Saturday cutting grass at your house

C. You purchase an Investing for Dummies book at Barnes and Noble

D. You purchase a historic home using the services of a real estate agent

E. You purchase a tire to replace the damaged tire on your car

3) To which component of GDP expenditure (C, I, G, or NX) does each of the following belong?

a. a new home

b. a parachute purchased by the US. Army

c. wheat imported from Canada

d. a cheeseburger you purchase for lunch

4) Many goods and services are illegally sold or legally sold but not reported to the government. How would increased efforts to count those goods and services affect our calculation of GDP? Would it increase, decrease or stay the same? Why?

5) Fill in the missing data in the following table: (Round to the nearest dollar)

Year         Nominal GDP              Real GDP              GDP Deflator

2009           100000                                                      93

2010                                        117000                         100

2011           125000                   120000

2012          150000                                                     119

2013                                        152000                       136

Answer 1

1)	No, transfer payments are not included in GDP. Transfer payments are only transfers of income and it does not add economic value.
2)
A. You bought a new Wii at GameStop last year and resold it on eBay this year
Since you have bought it last year, it will not be included in this year's GDP.
Second-hand goods are also excluded from GDP. Services of eBay will be included in this year's GDP
B. You spend your Saturday cutting grass at your house
No, it is not included as it has economic value. GDP includes the final value of goods and services produced in a given year within the country's border.
C. You purchase an Investing for Dummies book at Barnes and Noble
Included
D. You purchase a historic home using the services of a real estate agent
Not included as this is a historic home and is being resold. The services of the real estate agent is included in this year's GDP.
E. You purchase a tire to replace the damaged tire on your car
Included
3)
a) Buying a new house is investment.
b)
a parachute purchased by the US. Army
Government purchases.
c. wheat imported from Canada
Net imports. Exports add to GDP and imports subtract from GDP.
d)
d. a cheeseburger you purchase for lunch
Consumption.
4)
Increase, as they add value to the GDP.
5)
	YEAR	Nominal GDP	Real GDP	GDP deflator
	2009	100000	107527	93
	2010	117000	117000	100
	2011	125000	120000	104
	2012	150000	126050	119
	2013	206720	152000	136
GDP deflator= Nominal GDP/Real GDP
Let real GDP be x
(100000/x)=93
93 x=100000
x=100000/x=
1,07,527