Macroeconomics Answers

Calculate 1) GDP at MP

(Rs. '000)

2,000

40

560

500

100

60

200

60

2) NNP at FC

1. Consumption of fixed capital

2. Employer's contribution to social security schemes

3. Rent

4. Interest

5. Profits

6. Royalty

7. Wages and salaries

8. Net indirect taxes

9. Net factor income from abroad

(Crores)

34

30

10

20

25

5

170

38

(-) 3

Estimate National Income using Expenditure method from the

following data:

Particulars. (Crores)

1. Opening stock.

2. Closing stock.

3. Consumption of fixed capital

4. Private final consumption expenditure

5. Net exports

6. Net factor income from abroad

7. Compensation of employees paid by general government

8. Direct purchases of non - durable goods from abroad

by general government

9. Net purchases of goods and services by general government

in the domestic market

10. Net domestic capital formation

11. Net indirect taxes

50

60

10

500

(-) 25

10

100

10

100

160

150

In the tiny island nation of Bongo, the nation’s wealth is broken down as follows: 50 percent is cash in checking and savings accounts, 25 percent is housing, and 25 percent is stock holdings. Last year, Bongo experienced an inflation rate of 25 percent, and housing prices and stock prices each increased by 10 percent. Explain what happened to real wealth in Bongo last year, and how this change in real wealth helps explain the downward slope of the aggregate demand curve.

5. White House officials often exude more confidence than they actually feel about future prospects for the economy. Why might this be a good strategy? Are there any dangers inherent in it?

4.Suppose the government announces it will pay for half of any new investment undertaken by firms. How will this affect the investment demand curve?

3. Suppose local governments throughout the United States increase their tax on business inventories. What would you expect to happen to U.S. investment? Why?

2. If saving dropped sharply in the economy, what would likely happen to investment? Why?

The text defines the Malthusian trap as: “A point at which the world is no longer able to meet the food requirements of the population, and starvation becomes the primary check to population growth.” In other words, population will outpace food production.

Discuss whether you believe this trap has been avoided for the next 100 years. Consider government policies (like China’s one-child policy), the use of genetically engineered crops, social patterns of family size, and environmental factors.

Please answer in 200 words or more.

2. If saving dropped sharply in the economy, what would likely happen to investment? Why?

3. Suppose local governments throughout the United States increase their tax on business inventories. What would you expect to happen to U.S. investment? Why?

4. Suppose the government announces it will pay for half of any new investment undertaken by firms. How will this affect the investment demand curve? 

The circular flow model for goods and services is where … .

a. the households sell their factors of production to the factor market where they are purchased by firms

b. firms consume goods and services offered on the goods market

c. firms combine factors of production and produce goods and services

d. goods and services are offered for sale on the factor market

[1] Only a.

[2] Only a and c.

[3] Only a, c and d.

[4] Only d