Macroeconomics Assignment 1

Assignment #1: Macroeconomics 1020

Chapter 20: Pg. 487 #3, 10, 12, 13, 27

3. In the diagram of question 3, flow B represents consumption expenditure, flow C represents Government expenditure on goods and services, flow D represents investment, and flow E represents the net exports of goods and services.

a) aggregate income = aggregate expenditure

= C + I+ G + (X – M)

= (900 billion) + (300 billion) + (200 billion) + (-70 billion)

= 1330 billion

The value of aggregate income will be $1330 billion.

b) Aggregate income = aggregate expenditure = GDP. Therefore, the value of GDP will be $1330 billion as well.

10. Y = C + I + G + (X – M)

=( $2000) + ($800) + ($400) + (-$200)

= $3000

GDP = net domestic income at factor cost + Indirect taxes less subsides + depreciation

GDP –net domestic income at factor cost – indirect taxes less subsides = depreciation

$2900 - $2500 -$100 = $300

Therefore the GDP calculated through the expenditure approach is $1330 billion. The value of the depreciation is $300.

12. Nominal GDP in 2010:

(quantity of bananas x price of bananas in 2010)+(quantity of coconuts x price of coconuts in 2010)=GDP

(800 x $2) + (400 x $10) =

($1600) + ($4000) =

$5600 is the nominal GDP value in 2010.

Nominal GDP in 2011:

(quantity of bananas x price of bananas in 2011)+(quantity of coconuts x price of coconuts in 2011)=GDP

(900 x $4 ) + (500 x $5) =

($3600) + ($2500) =

$6100 is the nominal GDP value in 2011.

13. Real GDP of 2011 expressed in base year (2010) prices:

(# of bananas x price of bananas in 2010)+(# of coconuts x price of coconuts in 2010)=real GDP

(900 x $2) + (500 x $10)=

($1800) + ($5000) =

$6800 is the real GDP of 2011 expressed in base year (2010) prices.

27.

GDP = wages paid to labour + interest + profit + rents

= ($800) + ($340)

=$1140 is the GDP of Xanadu in 2012.

Chapter 22: Page 539 #1, 7, 8, 23

1.

a) real GDP growth rate = (real GDP in current year-real GDP in previous year)/(real...