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Chapter 8: Q.20 (page 188)

In Table 8-1, what is the total dollar amount that is added to the nation's gross domestic product? Why?

Short Answer

Expert verified

The total dollar amount that is added to the nation's gross domestic product is $20trillion.

Step by step solution

01

Introduction

The GDP is the cash worth of every last great and administration delivered inside the domestic region of the country. In a roundabout stream, the all-out financial worth of labour and products and the pay got by individuals are equivalent so we can take one of the sums. The all-out worth of labour and products is generally equivalent to the pay got by individuals.

02

Explanation

The total dollar amount that is added to the nation's gross domestic product is trillion. It is the all-out cash worth of every single last great and administration that are delivered inside the homegrown area of the country.

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Most popular questions from this chapter

Look back at Table 8-3, which explains how to calculate real GDP in terms of 2009constant dollars. Change the base year to2007. Recalculate the price index, and then recalculate real GDP-that is, express column4of Table 8-3 in terms of 2007dollars instead of 2009dollars.

How do you suppose that differing levels of government business regulations and varying levels of enforcement of those regulations might affect the size of the underground economy? Explain your reasoning.

Consider the diagram below, and answer the following questions.

a. What is the base year? Explain.

b. Has this country experienced inflation or deflation since the base year? How can you tell?

Suppose that early in a year, a hurricane hits a town in Florida and destroys a substantial number of homes. A portion of this stock of housing, which had a market value of \(100 million (not including the market value of the land), was uninsured. The owners of the residences spent a total of \)5 million during the rest of the year to pay salvage companies to help them save their remaining belongings. A small percentage of uninsured owners had sufficient resources to spend a total of \(15million during the year to pay construction companies to rebuild their homes. Some were able to devote their own time, the opportunity cost of which was valued at \)3 million, to work on rebuilding their homes. The remaining people, however, chose to sell their land at its market value and abandon the remains of their houses. What was the combined effect of these transactions on GDP for this year? (Hint: Which transactions took place in the markets for final goods and services?) In what ways, if any, does the effect on GDP reflect a loss in welfare for these individuals?

Each year after a regular spring cleaning, Maria spruces up her home a little by retexturing and repainting the walls of one room in her house. In a given year, she spends \(25on magazines to get ideas about wall textures and paint shades, \)45on newly produced texturing materials and tools, \(35on new paintbrushes and other painting equipment, and \)175on newly produced paint. Normally, she preps the walls, a service that a professional walltexturing specialist would charge \(200to do, and applies two coats of paint, a service that a painter would charge \)350to do, on her own.

a. When she purchases her usual set of materials and does all the work on her home by herself in a given spring, how much does Maria's annual spring texturing and painting activity contribute to GDP?

b. Suppose that Maria hurt her back this year and is recovering from surgery. Her surgeon has instructed her not to do any texturing work, but he has given her the go-ahead to paint a room as long as she is cautious. Thus, she buys all the equipment required to both texture and paint a room. She hires someone else to do the texturing work but does the painting herself. How much would her spring painting activity add to GDP?

c. As a follow-up to part (b), suppose that as soon as Maria bends down to dip her brush into the paint, she realizes that painting will be too hard on her back after all. She decides to hire someone else to do all the work using the materials she has already purchased. In this case, how much will her spring painting activity contribute to GDP?
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