Economics 102
Spring 2003
1. Suppose that your salary has increased in nominal terms but decreased in real terms. Explain exactly what this means. (6 points)
Your nominal income is what
you get paid; your real income is what it buys you. If your nominal income has increased but your real income has
declined, that means that you are getting paid more but it buys you less.
2. a. What has been the average growth rate of real GDP over the last century? (2 points)
3%
b. Approximately what percentage of GDP is accounted for by consumption? (2 points)
2/3 or 67% (or something close
to that)
3. For each of the following, identify whether or not it is counted in GDP. If it is counted, state which category it goes in, and if not, state WHY not. (2 points each)
a. You work in Paris, France as a teacher.
b. You buy a washing machine.
c. You buy some General Motors stock.
d. You buy a house built in 2003.
e. The Village of Geneseo buys some flowers to plant in the fountain on Main St.
f. General Motors produces some cars but has not sold them by the end of the year.
Investment (inventory)
g. Lockheed-Martin (a U.S. company) sells some fighter planes to Saudi Arabia.
h. The U.S. government sends your grandmother a Social Security check.
i. You buy tickets to the Pfish concert from some guy in the parking lot.
j. McDonalds buys some beef to use in hamburgers.
Not counted—intermediate good