Chapter 7: Q1. (page 151)
In what ways are national income statistics useful?
National income statistics help in measuring the economic performance of a nation, and therefore, is a useful statistic.
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Define net exports. How are net exports determined? Explain why net exports might be a negative amount.
Suppose that this year a small country has a GDP of \(100 billion. Also assume that Ig = \)30 billion, C = \(60 billion, and Xn = − \)10 billion. What is the value of G?
a. \(0
b. \)10 billion
c. \(20 billion
d. \)30 billion
What is the difference between gross private domestic investment and net private domestic investment? If you were to determine net domestic product (NDP) through the expenditures approach, which of these two measures of investment spending would be appropriate? Explain.
Suppose that California imposes a sales tax of 10 percent on all goods and services. A Californian named Ralph then goes into a home improvement store in the state capital of Sacramento and buys a leaf blower that is priced at \(200. With the 10 percent sales tax, his total comes to \)220. How much of the \(220 paid by Ralph is in the national income and product accounts as private income (employee compensation, rents, interest, proprietor’s income, and corporate profits)?
a. \)220
b. \(200
c. \)180
d. none of the above
Suppose that annual output in year 1 in a three-good economy is 3 quarts of ice cream, 1 bottle of shampoo, and 3 jars of peanut butter. In year 2, the output mix changes to 5 quarts of ice cream, 2 bottles of shampoo, and 2 jars of peanut butter. If the prices in both years are \(4 per quart for ice cream, \)3 per bottle of shampoo, and $2 per jar of peanut butter, what was the economy’s GDP in year 1? What was its GDP in year 2?
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