Answer the following questions.

1.Country A has export sales of $20 billion, government purchases of $1,000 billion, business investment is $50 billion, imports are $40 billion, and consumption spending is $2,000 billion. What is the dollar value of GDP?

2.Which of the following are included in GDP, and which are not?

a.The cost of hospital stays

b.The rise in life expectancy over time

c.Child care provided by a licensed day care center

d.Child care provided by a grandmother

e.A used car sale

f.A new car sale

g.The greater variety of cheese available in supermarkets

h.The iron that goes into the steel that goes into a refrigerator bought by a consumer.

3.Is it possible for GDP to rise while at the same time per capita GDP is falling? Is it possible for GDP to fall while per capita GDP is rising?

4.Explain briefly whether each of the following would cause GDP to overstate or understate the degree of change in the broad standard of living.

a.The environment becomes dirtier

b.The crime rate declines

c.A greater variety of goods become available to consumers

d.Infant mortality declines

5.What does GDP not tell us about the economy?

6.Should people typically pay more attention to their real income or their nominal income? If you choose the latter, why would that make sense in today's world? Would your answer be the same for the 1970s?

7.Why do you suppose that U.S. GDP is so much higher today than 50 or 100 years ago?

8.Why do you think that GDP does not grow at a steady rate, but rather speeds up and slows down?

9.Cross country comparisons of GDP per capita typically use purchasing power parity equivalent exchange rates, which are a measure of the long run equilibrium value of an exchange rate. In fact, we used PPP equivalent exchange rates in this module. Why could using market exchange rates, which sometimes change dramatically in a short period of time, be misleading?

10.Why might per capita GDP be only an imperfect measure of a country's standard of living?

11.How might you measure a "green" GDP?