U.S. real GDP is substantially higher today than it was 60 years ago. What does this tell you, and what does it not tell you, about the well-being of U.S. residents? What are the limitations of the GDP as a measure of economic well-being? Given the limitations, why is GDP usually regarded as the best single measure of a societys economic well-being?

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What is an intermediate good? How does an intermediate good differ from a final good? Explain why the value of intermediate goods produced and sold during the year is not included directly as part of GDP. Explain why the value of intermediate goods produced and not sold is included directly as part of GDP.

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3) GDP is defined as the market value of all final goods and services produced within a country in a given period of time. As we covered in the previous question, intermediate goods are not included in GDP. However, that is not the only production that is left out of GDP. Explain why some final goods and services, other than intermediate goods, are not included in GDP.

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The table below contains hypothetical data for country A for a given year.

Country As Goods and Services	Total
Household purchases of durable goods	$1293
Household purchases of nondurable goods	$1717
Household purchases of services	$301
Household purchases of new housing	$704
Purchases of capital equipment	$310
Inventory changes	$374
Purchases of new structures	$611
Depreciation	$117
Salaries of government workers	$1422
Government expenditures on public works	$553
Transfer payments	$777
Foreign purchases of domestically produced goods	$88
Domestic purchases of foreign goods	$120

Refer to the Table above to answer the following questions. Be sure to show all of your calculations.

What was country As GDP?

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What was country As consumption?

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What was country As investment?

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What were country As government purchases?

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What were country As exports and imports? What was the net export?

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5) Calculate how much each of the following items is worth in terms of today's dollars using 180 as the price index for today.

a. In 1925, the CPI was 18 and the price of a movie ticket was $0.30.

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b. In 1930, the CPI was 14 and a cook earned $20 a week.

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c. In 1940, the CPI was 16 and a gallon of gas cost $0.20.

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