MEASUREMENT OF EQUILIBRIUM LEVEL OF

NATIONAL INCOME
QUESTION 1
GIVEN THE FOLLOWING INFORMATION ABOUT THE OPEN ECONOMY
OF COUNTRY X

GDP = $ 1,000 million
G = $ 100 million
C = $850 million
X = $100 million
T = $50 million
IM = $ 125 million

a)Investment spending?
b) Private savings?
c) Budget balance?
d) Capital Inflow?
e) Relationship among the four?
QUESTION 2
GIVEN THE FOLLOWING INFORMATION ABOUT THE OPEN ECONOMY OF
COUNTRY X

Government purchases of goods and services : $100
Taxes : $100
Consumer Spending : $650
Wages, profit, interest, rent : $750
Exports : $20
Imports : $20

a)What is the value of GDP in Country X?
b) What is the value of net exports?
c) What is the value of disposable income?
d) Does the total flow of money out of households the sum of taxes paid
and consumer spending equals of the total of money into households?
e) How does the government of Country X finance its purchases of goods
and services?
QUESTION 3

QUESTION 4
a. Assuming that no intermediate inputs are used other than the ones named, what is the
value added at each stage of production Stage 1-5?

b. Using the value added approach, what is the total contribution to the GDP of this chain
of production?

c. Using the expenditure approach, what is total contribution to the GDP of this good?
Explain why the number you got in part c is (or is not) the same as that from part b.
QUESTION 5
The small economy of the United States of Sustainability has only three
companies: a bicycle manufacturer, a wind energy producer, and an organic
cheese company. The only costs these companies have are the cost of their
inputs and wages. Assume theres no rents, no depreciation, and no net income
payments from the foreign sector. Assume all the output is sold to consumers as
final goods. The companies profits = Value of output (total revenues) total
costs.

a. Calculate the GDP of the United States of Sustainability using the income
approach.
b. Calculate the GDP of the United States of Sustainability using the spending
approach.
c. Calculate the GDP

BICYCLE WIND ENERGY ORGANIC CHEES
COST OF INPUTS $0 $0 $0
WAGES $50 $75 $25
VALUE OF OUTPUT
(TOTAL REVENUES)
$100 $150 $50
QUESTION 6
Assume a simple economy produces only two goods, corn and wheat.
In the first year 100 bushels of corn are produced, and sold for $3 a
bushel. Also in the first year, 50 bushels of wheat are produced, and
sold for $5 a bushel. In the second year, 110 bushels of corn are
produced, and sold for $3.50, while 55 bushels of wheat are produced,
and sold for $5.50.
a. Calculate the nominal GDP in year 1 and 2.
b. Calculate the growth rate of nominal GDP between years 1 and 2.
c. Using the constant-dollar approach:, calculate the real GDP in year 1
and 2. Take year 1 as the base year.
d. Calculate the growth in real GDP between years 1 and 2 (with year 1
as the base year).
e. Calculate a constant weight price index for the second year, using
the first year as the base.
f. What is the growth rate of prices (inflation rate) from the first to the
second year?
QUESTION 7
Given the difference between
Gross Domestic Product and
Gross National Product
for a given economy:
a) Provide an interpretation
for the numbers of the
following Table:
b) In your country, which
would you want to be
bigger, GDP, or GNP? Why?
QUESTION 8
QUESTION 9
QUESTION 10
1. Calculate consumer spending.

2. Calculate private investment spending.

3. Calculate net exports.

4. Calculate government purchases of
goods and services and investment
spending.

5. Calculate gross domestic product.

6. Calculate consumer spending on
services as a percentage of total consumer
spending.

7. Calculate exports as a percentage of
imports.

8. Calculate government purchases on
national defense as a percentage of federal
government purchases of goods and
services.


QUESTION 11
Below is a simplified circular-
flow diagram for the economy
of Utopia.

1. What is the value of GDP.

2. What is the value of net
exports?

3. What is the value of
disposable income?

4. Does the total flow of money
out of householdsthe sum of
taxes paid and consumer
spendingequals the total
flow of money into
households?



QUESTION 12
1. Define money
2. List function of money
3. Calculate M1 and M2
QUESTION 13
1. Calculate the number of workers employed in each of the regions in March 2007
and March 2008. Use your answers to calculate the change in the total number of
workers employed between March 2007 and March 2008.

2. For each region, calculate the growth in the labor force from March 2007 to March
2008.

3. Compute unemployment rates in the different regions of the country in March
2007 and March 2008.

4. What can you explain about the rise in unemployment rates over this period? Was
it caused by a net loss in the number of jobs or by a large increase in the number of
people seeking jobs?

QUESTION 14
a) Define labor force. For each
year find the labor force.
b) Define the term "discouraged
workers". For each year find the
number of discouraged workers.
c) Define the labor-force
articipation rate. Calculate it for
each year.
d) Calculate the unemployment
rate for each year.


THANK YOU. . .