Macroeconomics Homework 3

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11-24-12
Macroeconomics
Homework 3 Questions
1. Intermediate goods are unfinished goods used in producing a final good or used up in the production process, which is a good produced for final consumption. Running shoes, watches, textbooks and sunscreen lotion are all final goods because they typically would not be used to make any other good they’re all finished goods for an end consumer. Cotton fibers, and lumber are intermediate goods which would be purchased for the production of a final good. For example cotton fibers could be used for the production of clothing, and lumber for the production of homes or furniture. Coal could be a final good if used by a household or and intermediate good if used in the production process for example production of steel.
2. (a) Interest on an AT&T bond. Included- This is an income received by the bondholder for the services derived by the corporation for the loan of money and income is counted in GDP.
(b) Social security payments received by a retired factory worker. Excluded- Because this is a transfer payment from taxpayers for which no service is rendered in this year.
(c) The unpaid services of a family member in painting the family home. Excluded- Because it’s not a market transaction. If a payment is made it will be within the family.
(d) The income of a dentist from the dental services provided. Included- This is a payment for a final service. You cannot pass on a tooth extraction.
(e) The monthly allowance a college student receives from home. Excluded– Because this is simply a private transfer payment, a transfer of income from one individual to another where no transaction in the market occurs. (f) The money received by Josh when he resells his current-year-model Honda automobile to Kim. Excluded- The production of the car had already been counted during the time of the initial transaction.
(g) The publication and sale of a new college textbook. Included- The textbook is newly produced for final

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