Question

(41)Suppose the market value of prostitution in Sweden, a country where prostitution is a legalized is $75 billion a year, a macroeconomist who says that the GDP of her country will increase by $75, 000,000,000 a year is:

(a)Correct

(b)Incorrect

(c)(a) or (b) above

(d)More information needed to respond

                                                               Table#1-National Income Accounts

National Income Accounts	$Billions
Consumption expenditures	$1855
Interest	190
Corporate profit	150
Depreciation	200
Rent	70
Gross domestic investment	1250
Compensation of employees	830
Federal government expenditures	530
State government expenditures	235
Local government expenditures	140
Exports	220
Imports	270

(42)The GDP in Table#1 is equal to:           

(a)$3960b

(b)$5430b

(c)$3420b

(d)$6165b

(43)In Table#1, NDP equals:

(a)$2756b

(b)$3760b

(c)$4320b

(d)$5875b

(44)Which of the following represents the percent share of state government expenditures as a share of aggregate government expenditures in Table#1 above?

(a)7 percent

(b)16 percent

(c)26 percent

(d)None of the above

(45)Which of the following is the monetary value of capital consumption allowances for the economy represented in Table#1 above?

(a)$150b

(b)$1855b

(c)$830b

(d)None of the above

Answer 1

(41) (a)

Illegal goods/services are excluded from GDP. So when an illegal service is legalized, its value will increase by amount of its reported market value.

(42) (a)

GDP = consumption + gross domestic investment + Federal government expenditures + State government expenditures + Loal government expenditures + exports - imports

= 1855 + 1250 + 530 + 235 + 140 + 220 - 270

= 3960

(43) (b)

NDP = GDP - depreciation = 3960 - 200 = 3760

(44) (c)

% share = 235 / (530 + 235 + 140) = 235 / 905 = 0.26 = 26%

(45) (d)

Capital consumption allowance = depreciation = 200