Problem
A. Assume that you have a job working as a buyer for a major department store. Salary is $100,000 per year as well as another $15,000 in benefits. The economy slips into a recession and you are laid off. After looking for a similar position with similar pay for several months you finally take a job waiting tables in a local restaurant making $36,000 per year including tips. Obviously, this is not the job you wanted but must settle for just to pay basic bills. Once you take this job should you be counted as part of an economic recovery from the recession? Explain reasoning.
B. Would you rather live in a period of inflation (plentiful jobs but hugely inflated prices, loss of value for the dollar) or deflation (very high unemployment, low spending, declining prices, but a higher value of the dollar)? Explain your answer in detail by pointing out the positives and negatives of each.
C. Computer software before 1999 was treated as an intermediate good and not counted in GDP. Since 1999 it has been classified as a final good and considered a part of investment (I). Tax consultants (H & R Block) use computer software to prepare individual income taxes. Discuss a) why in this case it is an intermediate good and should not be counted in GDP and b) why it should be considered investment and should be counted in GDP.
D. Should fringe benefits provided by your employer (health care, dental, contributions to your retirement plan) be counted in GDP? Why or why not (explain in detail).
E. GDP per person in the US is among the highest in the world meaning income per person is among the highest in the world. Does that imply that everyone in the US is living comfortably? Explain answer.