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Economics Base

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Submitted By almaramos27
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Econ 200 Principles of Macroeconomics -
Homework #2 (Total: 20 Points + 5 Extra Credit Points)
Please complete on separate sheets of paper. Due March 11, 2014.

■ I. REVIEW QUESTIONS 1. (5 points) Tony is an attorney at a law firm, and his girlfriend Ursula is a landscaper/gardener. They met while Ursula was providing her landscaping services to Tony. Thanks to her, Tony has a wonderful garden, filled with beautiful blooming flowers year-round. After dating for some time, they decided to tie the knot. Will this event − Tony marrying his landscaper/gardener − lead to a rise, fall or no change in Gross Domestic Product? Explain your answer why or why not. 2. (10 points) Are each of the following included or excluded in this year’s GDP? Explain your reasons for including or excluding each item. If it is included, explain which component of GDP do the different items belong. a. Social security payments received by a retired factory worker. b. Payments for services performed by a dentist. c. The money received by Susan when she sells her economics textbook to a book buyer. d. The monthly allowance a college student receives from home, which is then spent on purchasing textbooks. e. Rent received on a two-bedroom apartment. f. The money received by Luke when he resells his current-year-model Honda automobile to Jim. g. The sale of a college textbook. h. A $2 billion increase in business inventories. i. The purchase of 100 shares of General Motors common stock. j. A resident of Nevada just bought a new single-family home. 3. (Extra Credit: 5 points) According to the New York Times (November 18, 2006), the number of car producers in China is increasing rapidly. The newspaper reports that “China has more car brands now than the United States. . . . But while car sales have climbed 38 percent in the first three quarters of this year, automakers have increased their output

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