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    expenditures/GDP

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    I have attached a study sheet with some basic calculations about expenditures and GDP as well as income. Just need some help figuring out the problems.

    1. Consider the following hypothetical data for the US. Economy (in billions of dollars).

    Durable Goods Consumption $ 497
    Nondurable Goods Consumption 1, 301
    Services Consumption 2,342
    Business Fixed Investment 566
    Residential Fixed Investment 224
    Inventory Investment 7
    Federal Government Purchases 449
    State and Local Government Purchases 683
    Exports 640
    Imports 670
    Excess of GNP over GDP 7
    Depreciation 658
    Indirect Business Taxes 551
    Corporate Profits 387
    Social Insurance Contributions 556
    Net Interest 442
    Dividends 162
    Government Transfers to Individuals 837
    Personal Interest Income 694
    Personal Tax and Non-tax Payments 645

    a. Calculate

    (1) consumption expenditures
    (2) investment expenditures
    (3) government purchases
    (4) the trade balance (or net exports)
    (5) GDP.

    b. Calculate

    (1) net national product
    (2) (national) income
    (3) personal income
    (4) disposable income

    2. Consider the following data for a simple economy with only two goods, bread and automobiles. In the following table are data for two different years:

    2005 2007

    P Q P Q

    Autos $20,000 60 $30,000 100

    Bread $5 700,000 $25 500,000

    a. Using the year 2005 as the base year, compute the following statistics for the year 2007:

    (1) nominal GDP
    (2) real GDP
    (3) the GDP deflator (a Paasche index)
    (4) the CPI (a Laspeyres index)

    b. Calculate the inflation rate between 2005 and 2007 using both the GDP deflator and the CPI. Compare your answers.

    3. Suppose you were a senator writing a bill to index Social Security to inflation. Which index would you use, the GDP deflator or the CPI? Why? (this problem has nothing to do with #2).

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    Solution Summary

    Calculate the inflation rate.

    $2.19