. What are the three approaches to calculating GDP

2. How are final goods different from intermediate goods?

3. Why are all business sales, when added together, different from GDP?

4. What are the three approaches to calculating GDP (two of which are more commonly used than the third)?

5. What are the four categories of GDP?

6. What category would a new car purchased by the local police department be included in?

7. What business activity is not included in GDP?

8. What U.S. government agency compiles GDP data?

9. Why do countries with high GDP per capita tend to have longer life expectancies?

10. Below is a list of figures for a given year. All figures are in billions. Using the data below, determine GDP by the expenditures approach. Show your calculations. (10 points)

Personal consumption expenditures $700
Imports 70
SNAP payments 25
Changes in business inventory -8
Social Security payments to retirees 30
Federal government non military expenditures 35
New residential construction 36
Federal government expenditures on military 45
Business domestic investment in equipment 74
State government expenditures 87
Exports 65

C = C + I + G + Xn
C =

11. Which of the following are included in GDP? Indicate “Yes” if included and “No” if not included. (1 point each)

a. _____ ___ Social Security payments to retirees.

b. ________ The money you receive for selling your textbook to a book buyer.

c. ________ The allowance you receive from your family each month.

d. _________ The price Fred receives for selling his car to Mary.

e. _________ The rent you pay on your apartment.

f. __________ The purchase of an antique clock.

g. _________ The sale of your textbook by the publisher.

h. _________ The purchase of 100 shares of Ford stock by you.

i. _________ The purchase of a life insurance policy.

j. _________ The $2,000 increase in a company’s business inventory.

k. _________ A $500 unemployment benefit payment.

l. __________ A $600 iPhone 6 purchased by Ted.
1. What does the CPI measure and how is it created?

2. Which of the following has a greater effect upon the CPI, a 10% increase in the price of milk, or a 10% increase in the price of a diamond ring and why?

3. Why is the CPI in New York City higher than the CPI in Little Rock?

4. In 1969, when I began working for the Teletype Corporation as an industrial engineer, my salary was $6,000 per year. Using the Bureau of Labor Statistics website calculator, calculate the value of my salary in 2015 dollars.

5. Over a long period of time, the price of a candy bar rose from $0.20 to $1.20. Over the same period, the consumer price index rose from 150 to 300. Adjusted for overall inflation, how much did the price of the candy bar change?

6. Suppose you graduate from Arkansas Tech University and get your dream job. Congratulations! After 1 year, your supervisor calls you into her office for your annual evaluation and salary review. She congratulates you on being a wonderful employee and tells you your annual salary will be increased from $41,500 to $43,500. She says, “a $2,000 increase is a good raise”. You really like your supervisor, but you wonder whether or not you have been given a ‘good raise’. So, you access the bls.gov website and find that the CPI over the past year has increased from 223.5 to 236.2. Did you get a ‘good raise’? Why or why not? Show your calculations to support your answer.

7. What does the PPI measure and how is that different from the CPI?

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