Instructor: Marco Del Negro
Economia V, Spring 2000
PROBLEM SET 1
1) (Abel Bernanke question 3 pg.56)
For each of the following transactions, determine the contribution to the
current year's GDP. Explain the effects on the product,
income and expenditure accounts.
a) On Janaury 1 you purchase 10 gallons of gasoline at $1.40 per gallon.
The gas station purchased the gasoline the previous week at a wholesale
price (transportation included) of $1.30 per gallon.
b) Colonel Hogwash purchases a Civil War-era mansion for $1,000,000. The
broker's fee is 6%.
c) A homemaker enters the work force, taking a job that will pay $20,000
over the year. The homemaker must pay $8,000 over the year for professional
child care services.
d) The Japanese build an auto plant in Tennesse for $100,000,000, using
only local labor and materials. (Hint: The auto plant is a capital
good produced by Americans and purchased by the Japanese.)
e) You are informed that you have won $3,000,000 in the New Jersey State
Lottery, to be paid to you, in total, inmediately.
f) The New Jersey State government pays you an additional $5,000 fee to
appear in a TV commercial publicizing the state lottery.
g) Hertz Rent-a-Car replaces its rental fleet by buying $100,000,000 worth
of new cars from General Motors. It sells its old fleet to a consortium of
used-car dealers for $40,000,000. The consortium resells the used cars to
the public for a total of $60,000,000.
2) (Abel Bernanke question 4 pg.57) You are given the following data on an economy.
Gross national product
1000
Government purchases of goods and services
200
Government deficit
50
National saving
200
Investment
150
Net factor payments from abroad
25
Find the following, assuming that government investment is zero.
a. Consumption
b. Private Saving
c. Disposable income
d. Gross domestic product
e. Net exports