Answers to Practice Problems:
1) Here's what you should have recorded:
a) Yes
b) No
c) No
d) No
e) No
f) Yes
g) No
h) Yes
i) Yes
2. Remember that GDP only counts Newly created or bought items. Here's what you should have recorded:
Consumption: Total= $11,470
Durables: $1,300 Mortgage Payment, $670 Lease Value of Vehicle
Services: $4,500 Legal Fees
Non-durables: $5,000 Food Purchase
Investment: Total = $154,500
Inventory: $78,000 New Polo Inventory;
Residential: $100,000 Construction Costs of Newly Built Apartments,
Fixed: $0.00
– Depreciation Expense of $23,500
Government: Total= $4,960,000
Tax Collection $6,000,000:
Purchases: $1,000,000 Highway Construction, New Military Missiles: $40,000
Budget Surplus of $4,960,000
Net Exports: Total= -100,000
Exports- $900,000- Imports of $1,000,000
Trade Deficit of ($100,000)
NET GDP = $5,025,970
3. Remember that GDP only counts Newly created or bought items. Here's what you should have recorded:
Consumption: Total= $2700
Durables: $1,770 Washer & Dryer
Services: $700 Massage Therapy
Non-durables: $230 Food Purchase
Investment: Total = $12,965,000
Inventory: $0
Residential: $60,000 Value on a New Manufactured Home Finished and Shipped,
Fixed: $13,000,000 Construction Costs of New Baseball Stadium
– Depreciation Expense of $95,000
Government: Total= $-400,000
Tax Collection $500,000:
Purchases: $900,000 New Military Uniforms
Budget deficit of $-400,000
Net Exports: Total= $10,000
Exports- $400,000- Imports of $390,000
Trade Surplus of ($10,000)
NET GDP = $12,577,700