Answer:
a. Tom purchases a brand new Volkswagen from Germany for his start up ride sharing business for $20,000. He provides ride-sharing services earning him revenues of $40,000. During the course of the year, the Volkswagen depreciates by $2,000. Tom has no other costs.
GDP increases by $20,000:
It will increase $40,000 by the services provided (consumption) but will decrease $20,000 due to the imported car (negative net exports).
b. An army battalion is deployed to the border to repel a threatened Canadian invasion. The soldiers earn wages of $10,000 and use ammunition that the government bought for $5,000. The ammunition was produced using $2,000 of imported steel and 100 hours of work, for which the workers were paid $1,000. Hint: two things are produced in this example, what is the value added for each of them?
GDP increases by $13,000:
Government spending increases by $15,000.
Net imports decrease by $2,000.
c. The government collects $1000 in income taxes from Pam.
GDP doesn't change. Taxes are not included in the GDP
d. Pam earns $4000 for working as a babysitter and pays $1000 in income taxes.
GDP increases by $4,000 (consumption).
