1. What components of GDP (if any) would each of the following transactions affect? Explain. a. A family buys a new refrigerator. b. Aunt Jane buys a new house. c. Ford sells a Mustang from its inventory. d. You buy a pizza. e. Your parents buy a bottle of French wine. f. Honda expands its factory in Marysville, Ohio. 2. Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 3 bars and the price is $4. In year 2, the quantity produced is 4 bars and the price is $5. In year 3, the quantity produced is 5 bars and the price is $6. Year 1 is the base year. a. What is nominal GDP for each of these three years? b. What is real GDP for each of these years? c. What is the GDP deflator for each of these years? d. What is the percentage growth rate of real GDP from year 2 to year 3? e. What is the inflation rate as measured by the GDP deflator from year 2 to year 3? 3. Below are some data from the land of milk and honey. Price of Quantity of Price of Quantity of Year Milk Milk Honey Honey 2010 $1 100 quarts $2 50 quarts 2011 $1 200 $2 100 2012 $2 200 $4 100 a. Compute nominal GDP, real GDP, and the GDP deflator for each year, using 2010 as the base year. b. Compute the percentage change in nominal GDP, real GDP, and the GDP deflator in 2011 and 2012 from the preceding year. For each year, identify the variable that does not change. Explain in words why your answer makes sense. c. Did economic well-being rise more in 2011 or 2012? Explain.