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Page 210 1a. No. Purchases of used goods are not included. b. Yes. An addition to inventories represents investment. c. Yes, Purchases by a household represent consumption. d. Yes. Interest on a private business’s debt is included in interest income e. Yes. This expenditure represents a government purchase. f. No. Financial transactions are not included. g. No. Government transfer payments are not included. h. Yes. This purchase represents an export. 2a. The expenditure-based estimate of GDP is $162 billion [= $85 b. + $35 b. + 43 b. + ($14 b. – 15 b.]. b. The income-based estimate of GDP is $194 billion [= $76 b. + $38 b. + 17 b. + $29 b. + $25 b. + ($35 b. - $26 b.)]. c. The statistical discrepancy is $16 billion, found by taking the difference between the two GDP estimates [$32 billion = $194 b. - $162 b.] and then dividing by two [= ($32 billion/2)]. d. The economy’s GDP is halfway between the two estimates, or $178 billion [= $162 b. + $16 b. = $194 b. - $16 b.]. e. This economy’s depreciation is $9 billion, found by deducting net investment ($26b.) from gross investment ($35b.). Page 215 1a. Per capita GDP in terms of the country’s own dollars is $39 167 [= ($235 billion/6 million)]. b. Per capita GDP in terms of US dollars is $21 933 [= ($235 billion/6 million) x 0.56]. c. Per capita GDP in terms of PPP-adjusted US dollars is $23 500 [= ($235 billion/6 million) x 0.60]. d. Because the PPP-adjusted US-dollar value of the country’s currency is higher than the unadjusted US dollar value, prices in this country are lower than in the United States. Once this difference in the price levels in the two countries is taken into account, the purchasing power of this country’s income, as shown by per capita GDP in PPP-adjusted US dollars, is higher than is shown by the unadjusted per capita GDP in US dollars. 2a. A country’s GNP is higher than GDP when the country’s residents have significant holdings of foreign financial assets that exceed foreigners’ holdings of the country’s own financial assets. This means that there is a net inflow of financial investment income. b. Yes, the country’s citizens benefit, since incomes in the country exceed the country’s production. |