Homework: GDP and Economic Growth
1. Gross Domestic Product equals $1.2 trillion. If consumption equals $690 billion, investment equals $200 billion, and government spending equals $260 billion. Do the country's exports exceed their imports? Explain.
2. Explain whether each of the following are included in the United States 2015 GDP.
a) Unsold inventories of shoes from 2014
b) Saudi Arabia purchases $20 million of automobiles from the U.S.
c) Ford purchases tires from Good Year used for the production of new trucks.
4. Interest rates rise in the United States relative to its major trading partners. Explain the likely impact on the value of the dollar, net exports, and GDP in the United States.
5. Brazil has a Nominal GDP of R$27 Trillion Real. The exchange rate is R$3.2 (Brazilian Real) per US$1 (U.S. Dollar). A Big Mac costs US$5.30 in the United States and US$5.10 in Brazil.
a) What is the GDP of the Brazilian Real expressed in U.S. dollars?
b) Is the Real under or overvalued? Explain as it relates the cost of living measured in terms of a Big Mac.
c) What is the GDP adjusted for Purchasing Power Parity in Brazil expressed in US dollars?