Question

1. samuel recently moves to Florida and lives in a home he was gifted by his grand parents. If he were to rent that place, he could have earned $20,000 per year in rent. Further, the house he owned in Maine was rented to another family for $21,000 per year. How much do the housing services provided by the two houses contribute to GDP?

	a.	$41,000
	b.	$0
	c.	$21,000
	d.	$20,000

2. In an economy, the nominal GDP in year 2017 was $4 billion dollars and the real GDP was $5 billion dollars. Based on this the GDP deflator

	a.	would be 100 for this economy which reflects a deflation of 100% compared to base year.
	b.	would be 100 for this economy which reflects an inflation of 100% compared to base year.
	c.	would be 80 for this economy which reflects a deflation of 20% compared to base year.
	d.	would be 80 for this economy which reflects an inflation of 80% compared to base year.

3. Mike and Jenny are friends who love mangoes so much that they planted 4 trees each in their back yard four years ago. They buy mangoes from the grocery store whenever they go for shopping and also consume the mangoes that are produced by the trees in their back yard. Which of the following statement based on the above scenario is correct?

	a.	Only the mangoes produced by the trees in their back yard are included in GDP.
	b.	Only the mangoes purchased by them from the grocery store are included in GDP.
	c.	Both the mangoes purchased from the grocery store and produced by the trees in their back yard are included in the GDP.
	d.	Mangoes produced by the trees in their backyard will be included in the GDP of four years ago.

4. Assume that an imaginary economy's GDP in 2018 was 12,600, consumption expenditure was $6,000, investment expenditure was $3,000, government expenditure was $2,600 and exports were $2,400. What was their imports for that year?

	a.	$1,000
	b.	-$1,400
	c.	$1,400
	d.	-$1,000

Answer 1

Ans1. The answer is C. 21,000

The reason is that the first house where samuel recently moved in florida is where he lives, So that rent will not be included as he lives there. But the house he owned in Maine was rented to another family for $21,000 per year. so here they are paying the rent which will contribute to the GDP as income earned.

Ans2. Nominal GDP in 2017 = 4 Billion $

Real GDP in 2017 = 5 Billion $

So, GDP Deflator = Nominal GDP / Real GDP * 100

= 4 / 5 * 100

=80 % (That means there is deflation of 20 %) (Base = 100)

The answer is C. "would be 80 for this economy which reflects a deflation of 20% compared to base year."

Ans3. Only the mangoes purchased by them from the grocery store are included in GDP. Because there is money flow which is used to calculate the economic activity.

Ans4. GDP in 2018 = 12,600

Consumption Exp = 6000

Investment = 3000

Government Exp = 2600

Exports = 2400

Import = ?

GDP = Consumption Exp + Investment + Government Exp + Net Exports(Exports - Imports)

12600 = 6000 + 3000 + 2600 + (2400 - Imports)

Imports = 6000 + 3000 + 2600 + 2400 - 12600

Imports = 1,400

Good luck!!!!