ATW108 Tutorial Question: Chapter 27-Measuring Domestic Output and National

Income

1. Which of the following are included in this year’s GDP? Which are excluded?
Explain your answers.

a. Interest received on an AT&T corporate bond.

b. Social Security payments received by a retired factory worker.
c. Unpaid services of a family member who painted the family home.
d. Income of a dentist from the dental services she provided.
e. A monthly allowance a college student receives from home.
f. Money received by Josh when he resells his nearly brand-new Honda automobile to
Kim.
g. The publication and sale of a new college textbook.
h. An increase in leisure resulting from a 2-hour decrease in the length of the workweek,
with no reduction in pay.
i. A $2 billion increase in business inventories.
j. The purchase of 100 shares of Alphabet (the parent company of Google) stock.

2. Below is a list of domestic output and national income figures for a certain year.
All figures are in billions. The questions that follow ask you to determine the
major national income measures by both the expenditures and the income
approaches. The results you obtain with the different methods should be the
same.
a. Using the above data, determine GDP by both the expenditures and the income
approaches. Then determine NDP.
b. Now determine NI in two ways: first, by making the required additions or subtractions
from NDP; and second, by adding up the types of income and taxes that make up NI.
c. Adjust NI (from part b) as required to obtain PI.
d. Adjust PI (from part c) as required to obtain DI.

3. Suppose that this year’s nominal GDP is $16 trillion. To account for the effects of
inflation, we construct a price-level index in which an index value of 100
represents the price level 5 years ago. Using that index, we find that this year’s
real GDP is $15 trillion. Given those numbers, we can conclude that the current
value of the index is:

a. higher than 100.

b. lower than 100.
c. still 100.