ECO201 CUNY Borough of Manhattan Gross Domestic Product Questions

1. Provide the formula for the expenditure approach to GDP accounting and include an example of each category of spending.

2. Suppose a consumer buys 10 units of good X and 20 units of good Y every year. The following table lists the prices of goods X and Y in the years 2005-2007. Assume that these two goods constitute the typical market basket. Calculate the price indices for these years with 2005 as the base year. Comment on the inflation picture for these years.

Year

Good X

Good Y

2005

$3

$6

2006

4

7

2007

4.5

7.5

3. Using the expenditure approach, calculate GDP using the following data.

Item

Amount in dollars (billions)

Consumption

10,000

Consumption of Durable Goods

2,000

Consumption of Non Durable Goods

2,800

Consumption of Services

3,200

Investment

5,000

Fixed Investment

1,000

Government purchases of Goods & Services

3,000

Government Transfer Payments

450

Exports

1,850

Imports

2,000

GDP Equals

4. a. What is the importance of measuring per capita GDP?

b. Why nominal GDP can be misleading?

5. Do you believe that China is guilty of unfair trading practices including currency manipulation? no less than 350 words.

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Assignment Solutions

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