Principles Of Macroeconomics Practical Questions:1.) What components of GDP (if any) would each of the following transactions affect? Explain. a. A family buys a new refrigerator b. John buys a new house

1.) What components of GDP (if any) would each of the

following transactions affect? Explain.

a. A family buys a new refrigerator

b. John buys a new house

C. Yaw buys a bag of rice

d. China repaves its Highway

e. You buy a pair of Italian shoes

2. Explain the distinction between GDP measured at current

prices and GDP measured at constant prices

3. Why is transfer payment regarded as a negative tax?

4. Suppose the GDP of a country is zero. Does this mean that

there was no productive activity in the country? Explain

your answer.

5. Which of the following will you precluded from calculating

GDP of Ghana?

a. Drug dealer sells GHS10,000 worth of cocaine

b. GCB constructs a new office complex

c. You buy a GHS5000 worth of second-hand car

d. bonuses to cocoa farmers

SOLUTIONS

1. 

a. The family buying a new refrigerator would affect the consumption component of GDP as it is a personal expenditure on a durable good.

b. John buying a new house would affect the investment component of GDP as it is a purchase of a fixed asset.

c. Yaw buying a bag of rice would affect the consumption component of GDP as it is a personal expenditure on a non-durable good.

d. China repaving its highway would affect the government spending component of GDP as it is a govern government expenditure

e. You buying a pair of Italian shoes would affect the consumption component of GDP as it is a personal expenditure on a non-durable good. And Import component

2. 

GDP measured at current prices refers to the nominal(measured at a current price ) value of all goods and services produced within a specific period, while GDP measured at constant prices refers to the real value of goods and services produced within a specific period adjusted for inflation. The distinction between the two measures is that GDP measured at current prices reflects the effects of inflation and rises and falls in prices, while GDP measured at constant prices reflects changes only in the number of goods and services produced by using the base year.

3. 

Transfer payments are regarded as negative taxes because they are payments made by the government to individuals or entities without the receipt of any goods or services in return. Transfer payments, such as welfare or unemployment benefits, act as a form of income redistribution by transferring income from those who pay taxes to those who do not. In essence, transfer payments are a form of negative tax because they reduce a person's tax obligation by providing them with additional income.

4. 

No, a zero GDP does not necessarily mean that there was no productive activity in the country. GDP is simply a measure of the total value of goods and services produced within a specific period. If production remained constant in the current period compared to the previous period, then GDP would be zero due to the absence of real economic growth. However, there could still be productive activity in the country that is simply not captured by GDP.

5.

 a. Drug dealing is an illegal and illicit activity that is not included in the calculation of GDP.

b. Constructing a new office complex by GCB is included in the calculation of GDP as it is an investment.

c. Buying a second-hand car is not included in the calculation of GDP as it is not a newly produced good or service.

d. Bonuses to cocoa farmers are not included in the calculation of GDP as it reflects or operates as a transfer payment