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assignment_1.docxASSIGNMENT 1
PRINCIPLES OF MACROECONOMICS 1202
Summer 2017
Assigned: May 25th, 2017
Due: June 6, 2017
Instructions:
· Answer all the questions
· Late assignment will not be accepted.
· You may submit the assignment in a group of up to four students. Make sure you indicate clearly the names and IDs on the cover page of the assignment.
Question 1
A. Go to the Statistics Canada website ( http://www.statcan.ca) and print the nominal/real GDP for at least 5 years; Income and Expenditure Approach. Make sure that they are equal.
B. Comment briefly on the components of the Canadian GDP expenditure approach
Question 2 :
The table below provides some national income figures. All figures are in millions of dollars.
Government purchases of goods and services $58.5
Indirect taxes less subsidies 29.0
Personal income taxes 41.5
Wages and employee compensation (including personal income taxes) 165.5
Interest on the public debt 15.5
Consumption expenditure 168.4
Exports 90.9
Capital consumption allowance (depreciation) 33.5
Imports 93.3
Gross investment 67.2
Net interest income 19.0
Statistical discrepancy (expenditure side) 0.2
Business profits before taxes 45.1
Statistical discrepancy (income side) –0.2
Calculate the following values. (Show your calculations)
A. GDP from the income side
B. GDP from the expenditure side
C. Assuming that net payments to foreigners had been $8 million, calculate the value of GNP
D. Net domestic income at factor cost
Question 3
Consider the following statistics for a hypothetical lassies faire and closed economy (i.e., no government and no foreign trade.) All values reported are in real terms.
|
Income Y |
Desired Consumption (C) |
Desired Saving (S) |
Desired Investment (I) |
Desired Expenditure (AE |
|
200 |
200 |
|
100 |
|
|
|
275 |
25 |
100 |
|
|
400 |
|
50 |
100 |
|
|
500 |
425 |
|
100 |
|
|
600 |
|
100 |
100 |
|
|
700 |
575 |
|
100 |
|
|
|
600 |
150 |
100 |
|
|
900 |
725 |
|
100 |
|
A. Complete the table.
B. What is the value of the marginal propensity to consume? Marginal propensity to save? Marginal propensity to spend? Explain.
C. What is the equilibrium level of national income? Explain.
D. Do you detect any relationship between the desired saving, investment, and the equilibrium level of national income?
E. Suppose the desired investment spending drops to 50. What would happen to the equilibrium level of national income, consumption and saving? Explain.
F. Suppose the desired investment spending increases now to 150. What would happen to the equilibrium level of national income, consumption and saving? Explain.
Question 4
Assume that people only consume 3 different goods. The following table shows the prices and quantities of each good consumed in 2006, 2007, and 2008.
|
Year |
Price of A |
Quantity of A |
Price of B |
Quantity B |
Price of C |
Quantity C |
|
2006 |
$6 |
300 |
$7 |
125 |
$9 |
100 |
|
2007 |
7 |
450 |
6 |
150 |
11 |
125 |
|
2008 |
8 |
800 |
5 |
175 |
14 |
150 |
A. Calculate nominal GDP in each of the three years.
B. Calculate Real GDP in each of the three years, using 2006 as the base year.
C. Using the real GDP figures calculated in (b) above, calculate annual growth rate of output for years 2007 and 2008.
D. Calculate the GDP deflator for each of the three years using 2006 as the base year.
E. Calculate the CPI (consumer price index) for 2006, 2007 and 2008 using 2006 as a base year.
F. Comment briefly on the movement of prices over the three years as indicated by CPI and GDP deflator
