1. For each of the following state whether the activity is included in U.S. GDP. If part of GDP, state which of the expenditure categories it belongs (Investment, Durable goods consumption, nondurable goods consumption, consumption of services, government purchases of goods and services, exports and imports. If not part of GDP, explain why it is not part. Ignore any possible brokerage costs or sales commissions associated with the activity.

a. United airlines purchases a plane from Boeing

b. You buy pizza from Dominos

c. Dominos buys cheese from a dairy

d. A family pays tuition to a private school

e. The city of Chicago pays salaries to its police force

f. You purchase stock in Apple

g. You babysit your neighbor's children. In return, your neighbor fixes your car.

h. You purchase a new American made car

i. You purchase a new Chinese made car

j. The purchase of a used textbook

k. You babysit your neighbor's kids and in return your neighbor fixes your car.

l. Unemployment benefits paid by the Federal government.

m. California repaves U.S. highway one.

n. A hurricane destroys houses in Florida (do not count the cost of relief efforts)

o. Global warming causes households to use more electricity to run air conditioners in the summer.

p. You pay rent for a house that was built in 1990;

2. State whether the following transactions are part of U.S. GDP, GNP, both or neither. a. Salary paid to Colin Firth (a British citizen) for acting in a movie made in Hollywood. b. Interest on a Japanese bond earned by Warren Buffet (a U.S. citizen) c. Profits earned by Ford on an automobile factory located in the U.S.

3. Visit the site bea.gov to answer question 3.

Note that "chained 2017 dollars" refers to real GDP and "billions of dollars" refers to nominal GDP.

a. What was the growth rate of real GDP in the third quarter of 2023 above or below the U.S. long run average?

b. Calculate consumption as a percentage of GDP in 2022. For this, you will need some detailed information. At the top of the BEA home page, click on data, then by topic, and then click on Gross Domestic Product. Once there, click on full release and tables. The relevant information can be found in table 3.

c.What fraction of U.S. consumption in 2022 is due to services?

d. Did the U.S. spend more on housing or health care in 2022?

e. Which branch of the U.S. government, federal or state and local, spent more on final goods and services in 2022?

f. GDP is estimated as total final expenditures on goods and services and as gross domestic income. Which estimate was larger in 2022? (Hint: look at the addenda at the bottom of the table).

4. Assume an economy with only two firms, a farm (Fresh fields) and a retail outlet (Green grocer). Fresh fields sells to both the public and to Green grocer. Green grocer sells to both domestic and foreign households. Green grocer froze $50 of vegetables and stored them in its freezer for later use. Their sales and expenses are as follows:

Fresh fields farm Green grocer Value of Sales 500 1,000 Green grocer 400 0 Households 100 800 Foreign sales 0 150 Addition to inventories 0 50 Expenses and Profits Intermediate purchases 0 400 (Fresh fields) Wages 300 300 Depreciation 50 100 Profits 150 200