Problem Sheet 1 Macroeconomics

Problem Sheet 1

1. Consider the following national income figures;

Wages= 855

Rental income=27

Profits =26

Corporate profits=105

Proprieters’s income=93

Social Security tax=101

Personal taxes=170

Transfer payments=134

Net ınterest=60

Depreciation=119

İndirect taxes=135

Consumption= 800

Goverment spending=250

Exports=300

Imports=250

 Find GDP, National Domestic Product (NDP), Net Investment (NI), National Income (NI), Personal Income (PI), Disposable Income (DI)

b) What can you say about GNP

Income GDP=factor costs+indirect taxes+depreciation

İncome approach GDP= wages+profits+rental income+corporate profits+proprieter’s income+indirect taxes+depreciation

GDP=855+27+26+105+93+135+119

GDP=1360

Expenditure GDP=C+I+G+X-M

GDP=800+250+I+300-250

1360=1100+I

Gross I=260

Net Investment= Gross ınvestment-depreciation

Net Investment= 260-119

Net Investment=141

NDP= GDP-depreciation

NDP= 1360-119

NDP= 1241

National Income= NDP-indirect taxes

National Income= 1241-135

National Income=1106

Personal Income= National Income- social security tax + transfer payments + net interest

Personal Income= 1106- 101+134+60

Personal Income= 1199

Disposable Income=Personal Income-personal taxes

Disposable Income= 1199-170

Disposable Income= 1029

2. Below the hypothetical data for a market basket of goods  in year 1 and year 2 for an economy.

1. compute the expenditures for year 1.

Market Basket For year 1 (base year)

Products	Quantity	Price (dollars)	Expenditures (dollars)
Toys	3	10	30
Pencils	5	2	10
Books	7	5	35
Total	75

2. Compute the expenditures for year 2

Market Basket For year 2

Products	Quantity	Price (dollars)	Expenditures (dollars)
Toys	3	11	33
Pencils	5	3	15
Books	7	6	42
Total	90

3. Find the GDP price index for year 2.

Price index = ( 90 / 75 )*100  = 120

3. In the table below are nominal GDP figures for three years and the price indices. For each of the three years. First fill in the blanks

Year	Nominal GDP	Price Index	Real GDP	Growth rate
1929	104	121	85,95
1933	56	91	61,5
1939	91	100	91

a)      Which of the three years appears to be the base year?   1993

b)      Between 1929 and 1933 the economy experienced inflation or deflation, why.

Deflation

c)      Between 1933 and 1939 the economy experienced inflation or deflation, why.

Inflation

4. GDP in an economy is 3,452 billion dollars. Consumer expenditures are 2,343 billion, government purchases are 865 billion dollars and gross investment is 379 billion dollars. Net exports are:

a)      + 93 billion dollars.

b)      +123 billion dollars.

c)      -45 billion dollars.

d)     -135 billion dollars.