CHAPTER 21 (tracking us economy)

1. (National Income Accounting) Identify the component of aggregate expenditure to which each of the following belongs: a. A U.S. resident’s purchase of a new automobile manufactured in Japan b. A household’s purchase of one hour of legal advice c. Construction of a new house d. An increase in semiconductor inventories over last year’s level e. A city government’s acquisition of 10 new police cars.

a. Net exports b. Consumption c. Investment d. Investment e. Government purchases •
2. (National Income Accounting) Define gross domestic product. Determine whether each of the following would be included in the 2007 U.S. gross domestic product: a. Profits earned by Ford Motor Company in 2007 on automobile production in Ireland b. Automobile parts manufactured in the United States in 2007, but not used until 2008 c. Social Security benefits paid by the U.S. government in 2007 d. Ground beef purchased and used by McDonald’s in 2007 e. Ground beef purchased and consumed by a private U.S. household in 2007 f. Goods and services purchased in the United States in 2007 by a Canadian tourist • Gross domestic product is the market value of all final goods and services produced in a country during one year by resources located in that country.
a. No, this production occurred outside U.S. borders
b. Yes, this current production is treated as inventory investment
c. No, these are transfer payments
d. No, this is an intermediate good
e. Yes, this is a final good, used for consumption
f. Yes, these are U.S. exports

3. (National Income Accounting) Explain why intermediate goods and services usually are not included directly in GDP. Are there any circumstances under which they would be included directly?

• Intermediate goods and services are further