1.The annual output and prices of a 3-good economy are shown in the table below.

Good

Price

Year 1

Quantity of

Goods Year 1

Price

Year 2

Quantity of

Goods Year 2

Quarts of Ice Cream

$6

3

$6

5

Bottles of Shampoo

$4

1

$4

2

Jars of Peanut Butter

$3

3

$4

2

What was GDP in year 1? $________

What wasGDP in year 2?$________

2.Given the following data for a hypothetical economy in a given year:

Category

Value

Personal consumption expenditures

$70 billion

Purchases of stocks and bonds

$36 billion

Net exports

$10 billion

Government purchases

$30 billion

Sales of secondhand items

$9 billion

Gross investment

$25 billion

What is the country's GDP for the year? $ _________billion

1. The following table shows nominal GDP and an appropriate price index for a group of selected years. Compute real GDP, and indicate in each calculation whether you are inflating or deflating the nominal GDP data.

Year

Nominal GDP (Billions)

Price Index

(Year 2005 = 100)

Real GDP

(in $ Billions)

Effect on Nominal GDP

(inflating or deflating)

1968

$ 924.80

22.01

1978

2308.80

40.40

1988

5115.40

66.98

1998

8808.50

85.51

2008

14456.40

108.48

The following table shows nominal GDP and an appropriate price index for a group of selected years. Compute real GDP, and indicate in each calculation whether you are inflating or deflating the nominal GDP data.

OVER F

4.Below is a list of domestic output and national income figures for a given year.All figures are in billions.The questions that follow ask you to determine the major national income measures by both the expenditure and income methods.The results you obtain with the different methods should be the same.

Category

Value

Personal consumption expenditures

$245

Net foreign factor income

4

Transfer payments

12

Rents

14

Statistical discrepancy

8

Consumption of fixed capital (depreciation)

27

Social Security contributions

20

Interest

13

Proprietors' income

33

Net exports

11

Dividends

16

Compensation of employees

223

Taxes on production and imports

18

Undistributed corporate profits

21

Personal taxes

26

Corporate income taxes

19

Corporate profits

56

Government purchases

72

Net private domestic investment

33

Personal saving

20

a. Using the above data, determine GDP by both the expenditure and the income approaches and then determine NDP.

GDP, the expenditure approach: $__________ billion

GDP, the income approach: $_________billion

NDP: $__________billion

b.Now determine NI: either, by making the required additions and subtractions from GDP (Method 1), or by adding up the types of income and taxes that make up NI (Method 2).

NI: $___________ billion

c.Adjust NI (from part b) as required to obtain PI.

PI = $ ___________billion

d. Adjust PI (from part c) as required to obtain DI.

DI = $__________billionrev: 09_21_2011