# How Well Do You Know Me?

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Homework #1 Answers ECO 310 20 points possible 1 National Income Accounting (15 points) Consider an economy that produces and consumes bread, coﬀee, and automobiles. In the following table, we have data for two diﬀerent years. The ﬁrst 2 questions refer to this table. Year 2007 Year 2008 \$20,000 \$21,000 \$1.25 \$1.50 \$2.00 \$2.10 100 120 100,000 115,000 400,000 380,000 Price of 1 Automobile Price of 1 loaf of Bread Price of 1 cup of Coﬀee Number of Automobiles Produced Number of Cups of Coﬀee Produced Number of Loaves of Bread Produced 1. Using the year 2007 as the base year, compute the following statistics for each year: nominal GDP, real GDP, the GDP deﬂator (a Paasche price index) and the CPI (a Laspeyres price index). For the CPI,…show more content…
Thus GDP is \$6. 2 Calculating GDP (5 points) Go to the BEA website (http://www.bea.gov) and reconstruct TABLE 2, titles ”Spending Components of Nominal GDP” using more recent data. The information you need can be found in TABLE 1.1.5 of the NIPA tables. This table will allow you to reconstruct GDP using the spending approach. Use the most recent quarter that is available. Answer: Here are the updated numbers up to the second quarter of 2009. 3 Table 2: Spending Components of Nominal GDP Component Billions US\$ % Total Nom. GDP Total Nom. GDP 14,143.3 100.0% Consumption (C) 9,996.6 70.7% Durable Goods 1,011.0 7.2% Nondurable Goods 2,180.2 15.4% Services 6,805.3 48.1% Gross Investment (I) 1,558.6 11.0% Nonresidential Fixed 1,387.3 9.9% Residential Fixed 346.2 2.4% Inventory Investment --175.0 --1.2% Government Purchases (G) 2,926.8 20.7% Federal Government 1,137.0 8.0% State and Local Government 1,789.8 12.7% Net Exports (X-M) -338.7 -2.4% Exports 1,492.2 10.6% Imports -1,830.8 -12.9%