19Which of the following does NOT count towards GDP A A comp

19.Which of the following does NOT count towards GDP? A. A company replacing machinery that wore out last year B. The government spending money to build a new highway C. A houseshold purchasing a new television D. A household sellig their old used car to a friend Table 7.\'1 Time t+1 400 2 6 25 100 Time Change 300 2 P housing Q housing P food Q food P education Q education Nominal GDP Real GDP (t prices) Real GDP (t +1 20 150 1000 rices 20. Using the information in Table 7.1, the percentage change in nominal GDP 0 %, and the percentage change in Real GDP using t prices is IS A. +25, +17.5 B. +12, +25 C. +25, +12 D. 0, +17.5

Solution

19 Option D
A household selling their old used car is not counted towards GDP

20. Option A

Nominal GDP in time t = 1000
Nominal GDP in time (t+1) = 400*2 +6*25+100*3 = 800 + 150 + 300 = 1250
Using information in table 7.1, the percentage change in nominal GDP = (1250 - 1000)*100/1000 = +25%

Real GDP in period t with t-year prices = 1000

Real GDP in period t with (t+1) year prices = 300*2 + 25*5 +150*3 = 600+125+450 = 1175

%change in real GDP = (1175-1000)*100/1000 = 175*100/1000 = +17.50%