1. For each of the following transactions, identify whether or not it would be included in GDP:
a. An accountant receives payment for preparing a client's personal income tax return.
b. An owner of a Canada Savings Bond is paid interest on this bond.
c. A business buys a new piece of production equipment.
d. A student is paid for shovelling a neighbour's sidewalk.
e. An unemployed carpenter receives an employment insurance payment.
f. A town council hires a contractor to do paving work on the town's roads.
g. A newspaper publisher buys newsprint to add to its inventories of supplies.
h. An electronic hobbyist sells a used computer to a friend.
i. A fisher receives a government subsidy to help relocate to a larger community.
j. A Canadian business sells medical equipment to a Japanese hospital.
k. A wealth-holder sells 1000 shares issued by a Canadian corporation.
l. A home-owner repairs his own leaking roof.
2. The data in the table apply to a hypothetical country, Metrica, during 2012.
Metrica's National Accounts (2012, In $ billions)
|
corporate profits
|
55
|
|
exports
|
68
|
|
Wages and salaries
|
546
|
|
Net investment income to the rest of the world
|
8
|
|
Gross investment
|
157
|
|
Government purchases
|
184
|
|
Personal Consumption
|
490
|
|
Interest Income
|
43
|
|
Imports
|
27
|
|
Depreciation
|
79
|
|
Proprietors' incomes and rents
|
56
|
|
Statistical discrepancy
|
?
|
a. Use the data to find income-based and expenditure-based estimates ofMetrica's GDP.
b. By how much is Metrica's capital stock expanding or contracting in 2012?
c. What is Metrica's GNP? Is it higher or lower than its GDP?
3. The table below gives data on Student A's monthly purchases during 2011 and 2012. Student A's Monthly Purchases
Prices Quantities Consumed per month
(2011 )(2012)(2011 ) (2012)
Hotdogs $1.50 $1.60 3 2
Cans of cola .75 .70 16 18
Chocolate bars 1.00 1.00 7 7
Magazines 3.50 4.50 3 2
DVD rentals 3.00 2.75 2 3
a. Calculate the value of Student A's 2011 shopping basket using 2011 prices. What are the item weights associated with this shopping basket?
b.Calculate the value of Student A's 2011 shopping basket using 2012 prices. If 2011 is used as the base year, what is the 2012 value of Student A's price index?
4. The table shows output and prices during 2012 in an economy that produces only two goods-sweatshirts and bags of chips.
Finding the GDP Deflator
Output in 2012 Prices in 2012 Prices in 2011
Sweatshirts 4 $22.00 $16.00
Bags of chips 50 1.80 1.50
a. What is the total value of the economy's output in 2012 valued in 2012 prices?
b. What is the total value of the economy's output in 2012 valued in 2011 prices?
c. On the basis of your answers to a and b, calculate the value of the GDP deflator in 2012 if 2011 is treated as the reference year.