Question

1. Place each of the following transactions in one of the four components of expenditure: (remember it could enter more than one component)

1. Boeing sells an airplane to American Airlines
2. Apple sells a computer to a bakery in Paris, France
3. Amanda buys a computer which is made in China
4. Sue buys dinner at a local restaurant for her family
5. Amazon buys a new software for its company
6. You buy a used computer from a friend
7. General Motors inventories of steel rise by 50,000 tons
8. The government sends your grandmother her monthly Social Security check.
1. You buy 100 shares of Apple stock
10. IBM build a new factory in Massachusetts

2. Suppose the entire economy consists of only two types of products: hot dogs and hamburgers. Sales and price data for these two products for two different years are shown below:

Year	Quantity of hot dogs sold	Price per hot dogs	Quantity of hamburgers sold		Price per hamburgers
2017	200	$2		250	$4
2018	200	$3		500	$4

1. Assuming that all hot dogs and hamburgers are final goods, calculate nominal GDP for 2017 and 2018.
2. Calculate real GDP in 2017 in 2018 dollars
3. Use the relationship between nominal and real GDP to calculate the GDP deflator in 2018 using 2017 prices (i.e. using 2017 as the base year)

Answer 1

a) Export. Boeing selling it's airplane to American airlines is an export. Trade between two countries.

b) Export. Since Apple is a US brand, selling it to France is an export.

c) Import.

D) Consumption. Buying dinner is a consumption expenditure

e) Investment. Amazon purchases this software for further production of goods and services.

f) Not included in GDP as it is a second hand good.

g) Investment. Adding to inventory adds up the inventory investment

h) not included in the GDP. Because social security is a transfer payment

I) Not included in the GDP

j) Investment. Building a new factory is an investment.