PROBLEMS AND APPLICATIONS 1. What components of GDP (if any) would each of the following transactions affect? Explain. a. Uncle Henry buys a new refrigerator from a domestic manufacturer. fro th yo c....

Extracted text: PROBLEMS AND APPLICATIONS 1. What components of GDP (if any) would each of the following transactions affect? Explain. a. Uncle Henry buys a new refrigerator from a domestic manufacturer. fro th yo c. D b. Aunt Jane buys a new house from a local builder. c. The Jackson family buys an old Victorian house from the Walker family. d. You pay a hairdresser for a haircut. e. Ford sells a Mustang from its inventory to the Martinez family. f. Ford manufactures a Focus and sells it to Avis, the car rental company. g. California hires workers to repave Highway 101. h. The federal government sends your grandmother a Social Security check. i. Your parents buy a bottle of French wine. j. Honda expands its factory in Ohio. 20 6. Cons bars. price and t 5 bar: a. W ye b. W c. W d. W fro e. W de Fill in the blanks: 2. f. In Real GDP Nominal GDP GDP Deflator ar (base year (in 2000 (in current pa Year dollars) dollars) 2000) 7. Cons 1970 3,000 1,200 1980 5,000 60 Year 1990 6,000 100 2014 2000 8,000 1994 2010 15,000 200 a. W be 2020 300 10,000 20,000 50,000 2030 10 The government purchases component of GDP does not include spending on transfer payments such as Social Security. Thinking about the definition of GDP, explain why transfer payments are excluded. 3. b. W be C. W pr d. W As the chapter states, GDP does not include the value of used goods that are resold. Why would including such transactions make GDP a less informative mea- 4. pr e. W sure of economic well-being? 19 f. W Below are some data from the land of milk and honey. 5. lo TPTP Price Quantity Price Quantity of Honey 8. Revis of Honey Year of Milk of Milk by th. 100 quarts $1 $2 50 quarts 2016 a nev releas 100 2017 200 2018 100 200 4 nomi a. Compute nominal GDP, real GDP, and the GDP deflator for each year, using 2016 as the base year. b. Compute the percentage change in nominal GDP, real GDP, and the GDP deflator in 2017 and 2018 nomi 9. A far: $100. sells Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, o 494 PART VIII THE DATA OF MACROECONOMICS