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