Part I Consider the following hypothetical data for the US economy in 2012 (all

Question

Part I

Consider the following hypothetical data for the US economy in 2012 (all amounts are in trillions of dollars).

Consumption

11.0

Indirect business taxes

.8

Depreciation

1.3

Government spending

2.8

Imports

2.7

Gross private domestic investment

3.0

Exports

2.5

a)     Based on the data, what are the GDP, NDP, and NI?

b)    Suppose that in 2013, exports fall to $2.3 trillion, imports rise to $2.85 trillion, and gross private domestic investment falls to $2.25 trillion. What will the GDP be in 2013, assuming that other values do not change between 2012 and 2013?

c)     Note that according to the fictitious data in (b), depreciation (capital consumption allowance) exceeds gross private domestic investment in 2013. How would this affect future US productivity, particularly if it were to continue beyond 2013?

Part II

Now, consider the following table for the economy of a nation whose residents produce four final goods.

2011

2012

Goods

Price
($)

Quantity

Price
($)

Quantity

Computers

1,000

10

800

15

Bananas

6

3,000

11

1,000

Televisions

100

500

150

300

Cookies

1

10,000

2

10,000

Assuming a 2012 base year:

d)    What is the nominal GDP for 2011 and 2012?

e)     What is the real GDP for 2011 and 2012?

Consumption

11.0

Indirect business taxes

.8

Depreciation

1.3

Government spending

2.8

Imports

2.7

Gross private domestic investment

3.0

Exports

2.5

Explanation / Answer

a) (9873 - 9269) / 9269 = 6.5%

b) (118 - 113) / 113 = 4.4%

c) 9269 / 1.13 = 8203 (since base year deflator = 100)

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