Question

In: Economics

4. Most goods and services produced at home (e.g. making coffee or assembling a desk bought...

4. Most goods and services produced at home (e.g. making coffee or assembling a desk bought from Home Depot)

a. and most goods and services produced illegally are included in GDP.

b. are included in GDP while most goods and services produced illegally are excluded from GDP.

c. and most goods and services produced illegally are excluded from GDP.

d. are excluded from GDP while most goods and services produced illegally are included in GDP

5. Suppose GDP in an economy is $3,542 billion. Personal Consumption Expenditures (C) are $2,343 billion, Government Spending (G) is $865 billion, and Gross Private Domestic Investment (I) is $379 billion. Net foreign factor income (NFFI) is $ 10 billion.

What are net exports (NX)?

a. 7049

b. 3587

c. – 45

d. + 45

e. 3532

Solutions

Expert Solution

4. c. This is the CORRECT choice

GDP is a measure of final goods and services in an economy in a period. Intermediate goods and services are not counted in GDP measurement.

GDP = Consumer spending + Investment + Government expenditure + Net Exports (Exports - Imports).

There are some transactions that don't get counted in the GDP. All goods and services produced and sold illegally don’t get counted in GDP.

Thus options (a) and (d) are incorrect

Coffee making and assembling desk are not creating new product but are part of making the final products, thus not included in GDP. Option (b) is incorrect.

Option (c) is the correct choice

5. c. – 45 This is the CORRECT choice

GDP = Consumer spending + Investment + Government expenditure + Net Exports (Exports - Imports).

GDP = $3,542 billion

Personal Consumption Expenditures (C) = $2,343 billion

Government Spending (G) = $865 billion

Gross Private Domestic Investment (I) = $379 billion

Net exports (NX) = $3,542 billion - $2,343 billion - $865 billion - $379 billion

                         = -$45 billion

Net foreign factor income (NFFI) measures the difference between gross national product (GNP) and gross domestic product (GDP). NFFI ia not part of GDP

Net exports (NX) is -$45 billion


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