Business Economic - Macroeconomic

Topics: Inflation, Gross domestic product, Central bank Pages: 4 (871 words) Published: June 15, 2013
Part B – Macroeconomics

Question 10:

a) Which of the following are final goods and services and which are intermediate goods and services? Please explain why in your answer.

i) A windscreen purchased by a motor vehicle spare parts supplier;

Intermediate goods – by national accounts (GDP) windscreen primary production value has already been accounted. It is being resold at a deflated value as second hand goods.

ii) A new bulldozer to be used by a construction company; Final goods – when a construction company buys and uses a new bulldozer becomes intermediate goods when it is used in the production of their products services in subsequent periods.

iii) A household cleaning service purchased by a family from a domestic cleaning service company; Final good – the resale value of the business contain value added. But it is not previously included in the national accounts.

iv) Coking coal
Intermediate goods – as an ingredient it used into the production of other goods. As iron and steel, steam. Except being sold by exporting.

b) An economy produces final goods and services with a market value of $800 billion in a given year, but only $750 billion worth of goods and services is sold to domestic or foreign buyers. Is this nation’s GDP $800 billion or $750 billion? Explain your answer.

$800 billion is the nation’s GDP for the year. Because GDP includes the market value of final goods and services produced, despite the consequences of whether these products are sold. The unsold products are added to firm’s inventories and included in gross national and domestic investment.

c) Explain why a new truck sold for use by a transport company is a final good, even though it is a fixed investment (capital) used to produce other goods. Should the value of this truck then be added to GDP or should only the goods it transports be included in GDP?

ANS

A new product and produced for the ultimate user...
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