Chapter 8: Q.22 (page 188)
In Problem 8-21, what is the net investment?
The net investment is
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Consider the diagram below, and answer the following questions.
a. What is the base year? Explain.
b. Has this country experienced inflation or deflation since the base year? How can you tell?
Each year after a regular spring cleaning, Maria spruces up her home a little by retexturing and repainting the walls of one room in her house. In a given year, she spends
a. When she purchases her usual set of materials and does all the work on her home by herself in a given spring, how much does Maria's annual spring texturing and painting activity contribute to GDP?
b. Suppose that Maria hurt her back this year and is recovering from surgery. Her surgeon has instructed her not to do any texturing work, but he has given her the go-ahead to paint a room as long as she is cautious. Thus, she buys all the equipment required to both texture and paint a room. She hires someone else to do the texturing work but does the painting herself. How much would her spring painting activity add to GDP?
c. As a follow-up to part (b), suppose that as soon as Maria bends down to dip her brush into the paint, she realizes that painting will be too hard on her back after all. She decides to hire someone else to do all the work using the materials she has already purchased. In this case, how much will her spring painting activity contribute to GDP?
Describe the circular flow of income and output.
Which of the following are production activities that are included in GDP? Which are not?
a. Mr. King performs the service of painting his own house instead of paying someone else to do it.
b. Mr. King paints houses for a living.
c. Mrs. King earns income from parents by taking baby photos in her digital photography studio.
d. Mrs. King takes photos of planets and stars as part of her astronomy hobby.
e.
f. Mr. Ho spends
g. Mrs. Ho receives a Social Security payment.
h. Ms. Hernandez makes a
i. Mr. Langham sells a used laptop computer to his neighbor.
In Table 8-1, what is the total dollar amount that is added to the nation's gross domestic product? Why?
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