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1. Would it be possible for an increase in taxation to decrease the gross domestic product measured in the U.S.? Why or why not?
2. Adam's Ribs in downtown Chicago buys $10,000 worth of beef ribs, $25,000 worth of pork ribs, and $8,000 worth of napkins each month. Are these purchases included in the calculation of gross domestic product? Explain your answer.
3. Using the expenditure approach, calculate GDP using the following data.
Item
Amount in dollars (billions)
Total Consumption
9,600
Consumption of Durable Goods
1,600
Consumption of Non Durable Goods
2,800
Consumption of Services
3,200
Total Investment
3,750
Fixed Investment
1,000
Government purchases of Goods & Services
2,675
Government Transfer Payments
450
Exports
800
Imports
900
GDP Equals=
4. (a) What is the importance of measuring per capita GDP?
(b) How do pollution and crime affect GDP?
5. What is the underground economy? How does it affect GDP calculations? Provide three examples of underground economy transactions.
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