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reprioritisation of spending, part from an IMF loan and part from new debt issued in the local bond
market. Some have suggested that the Reserve Bank should simply print the money. Apply the
augmented Philips curve policy lesson to the suggestion that the SARB prints the money. Make use of
graphs and explain what the impact might be on output and inflation.
Required:
Using a clearly labeled diagram, show the relevant budget line and indifference curve indicating the equilibrium position of the consumer.
A. As wealth increases, spending decreases.
B. Consumption spending is a volatile component of total spending.
C. The link between real consumption and real income is determined by the marginal propensity to consume.
D. In South Africa, government spending is the biggest component of aggregate spending C+I+G+X-M.
Indicate whether each of the following is counted in Ghana’s gross domestic product for the year 2010. Explain each of your answers.
a. The value of a used textbook sold through an online auction in 2010
b. Rent paid in 2010 by residents in an apartment building built in 2000
c. Commissions earned in 2010 by a stockbroker
d. The value of automobiles produced in 2010 entirely in South Korea by a firm fully owned by Ghanaian citizens
e. The sale of bonds in a stock market
Let: C = consumption, Ip = investment spending (as a function of price level), G = government spending, Tx = tax revenue, Yd = after-tax income, Assume for a given closed economy:
C=100 + 0.9 Yd – 20P
Ip= 400 – 40P
G=300
T=100
Moreover, aggregate supply curve for this economy is defined by the following equation:
P=1.41 + 0.0001Y
a.According to the investment equation (Ip= 400 – 40P) as overall price level in the economy increases investment spending decreases. How could you explain this situation? Please use graphs to elaborate your answer.
b. Find the equilibrium level of overall price and aggregate output in this economy. What would be the value of consumption and investment spending at this equilibrium?
spending, Tx=tax revenue, Yd=after-tax income, a given closed economy:
C=100+0.9Yd–20P
Ip=400–40P
G=300
T=100
Moreover, the aggregate supply curve for this economy is defined by the following equation:
P=1.41+0.0001Y
1Find the equilibrium level of the overall price and aggregate output in this
economy. What would be the value of consumption and investment spending at this
equilibrium?
2How would the equilibrium aggregate output and price level change if
government spending increases to Gnew=400? What would be the value of consumption
and investment spending at this new equilibrium?
3Compare equilibrium values of investment spending and consumption you find
in parts(2)and(1). How would you explain the changes? Elaborate your answer for both
investment and consumption.
SECTOR VALUE OF OUTPUT PURCHASES FROM OTHER FIRMS
Agriculture 300 160
Manufacturing 200 150
Services 150 120
Required:
(i) Compute the gross domestic product (GDP) and explain the method used and why.
(ii) Given that: depreciation = 90, indirect taxes = 70, subsidies = 30, payments to factors of production from abroad = 20, payments to foreign factors = 40.
Compute:
1) Gross national product (GNP) at market prices.
2) Net national product (NNP) at market prices.
3) Net national product (NNP) at factor cost.
4) Net domestic product (NDP) at factor cost
