Macroeconomics Answers

The following data relates to the market value of economic transactions for the three main sectors of your country’s economy.

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. (2 Marks)

(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. (1 Mark)

2) Net national product (NNP) at market prices. (1 Mark)

3) Net national product (NNP) at factor cost. (1 Mark)

4) Net domestic product (NDP) at factor cost (1 Mark)

2) [3 points] Suppose an economy is initially at its long-run equilibrium and aggregate demand increases. How do price level, real GDP and nominal wage rate change in the short run?


3) [3 points] What happens to real GDP and the price level when oil prices rise in the short run? Assume that initially the economy is at its long-run equilibrium.


4) [3 points] What happens to real GDP and the price level, if the country receives a positive demand shock and a negative supply shock simultaneously? Discuss only the short run equilibrium. Assume that initially the economy is at its long-run equilibrium.


5) [3 points] Explain how a recessionary gap would still be eliminated even if the government and the central bank do not intervene.

1) Candiland is a closed economy, that does not trade with the rest of the world. Their autonomous consumption expenditure is $80 million, and the marginal propensity to consume is 0.5. Investment spending is constant at $100 million, and government expenditure is constant at $80 million. There are no income taxes.

a) What is the autonomous aggregate expenditure i.e. AE0?
b) What is the slope of the aggregate expenditure i.e. AE1?
c) What is the size of the multiplier in this economy?
d) What is the value of aggregate planned expenditure when real GDP is $800 million?
e) What can you say about the inventories when real GDP is $800 million?
f) What is the economy's equilibrium aggregate expenditure?
g) If a stock market boom increases autonomous consumption expenditure to $100 million, how would the equilibrium aggregate expenditure change?

If you buy a new car, the entire purchase is counted as consumption in the year in which you make the transaction. Explain briefly why this is in one sense an “error” in national income accounting. (Hint: How is the purchase of a car different from the purchase of a pizza?) How might you correct this error?
How is housing treated in the National Income and Product Accounts? Specifically how does owner occupied housing enter into the accounts? (Hint: Do some Web searching on “imputed
rent on owner occupied housing.”)

1. Calculate the equilibrium level of income if C = R100 million + 0,8Y and Ī = R125 million.[5

6. UK’s real GDP was 1 360 trillion pounds [£] in 2009 and 1 434 trillion pounds in 2010. UK’s population was 191.5 million people in 2009 and 193.3 million in 2010.
Calculate.
a. the economic growth rate.[3]
b. The growth rate of real GDP per person [5]
c. The approximate number of years it takes for real GDP per person in the UK to double if the 2010 economic growth rate and population growth rate are maintained.[4]

bought in 2010. The average household spent $60 on juice and $30 on cloth in 2009 when the price of juice was $2 a bottle and the price of cloth was $5 a meter. In the current year, 2010, juice is $4 a bottle and cloth is $6 a meter.
Calculate
a. CPI per basket [3] and
b. the inflation rate[3].

Can determination of foreign exchange rate be found by change in demand or supply method i.e. without changing price? Plz give the solution of this answer also if it can be determined without this chge in price

Y=C+I+G+Xn+Md
C=a+bYd
I=¢Y-Li
Xn=to-mYd
Md=M1+M2Y
Yd=Y-Tx+Tr
Tx=T#+KY
G=Go
I=g+fY
Establish the structural equation

Suppose that the government increases tax and government purchases by equall amount what happens to the interests rate and investment in reponse to this balance budget changes