Brandi Oxendine

MBA 6008

Unit 5 Economic Problems

Chapter 25 Problem

4. To the right is a list of domestic output and national income figures for a certain year. All figures are in billions. The questions that follow ask you to determine the major national income measure by both the expenditures and the income approaches. The results you obtain with the different methods should be the same.

Personal Consumption expenditures |
$245 |

Net Foreign factor income |
4 |

Transfer payments |
12 |

Rents |
14 |

Consumption of fixed capital (depreciation) |
27 |

Statistical discrepancy |
8 |

Social Security contributions |
20 |

Interest |
13 |

Proprietors’ income |
33 |

Net exports |
33 |

Dividends |
11 |

Compensation of employees |
16 |

Taxes on production and imports |
223 |

Undistributed corporate |
18 |

Personal taxes |
21 |

Corporate income taxes |
26 |

Corporate profits |
19 |

Government purchases |
56 |

Net private domestic investment |
33 |

Personal Saving |
20 |

A. Using the above data, determine, GDP by both the expenditures and the income approaches. Then determine NDP.

B. Now determine NI in two ways: first, by making the required additions or subtractions from NDP; and second, by adding up the types of income and taxes that make up NI.

C. Adjust NI from (part B) as required to obtain PI

D. Adjust PI (from part C) as required to obtain DI.

Chapter 27

4. If the CPI was 110 last year and is 121 this year, what is this year’s rate of inflation? In contrast, suppose that the CPI was 110 last year and is 108 this year. What is this year’s rate if inflation? What term do economics use to describe this second outcome?

Chapter 29

8. Assume that the consumptions schedule for a private open economy is such that consumption

C=50+0.8Y. Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig= 30 and Xn=10 Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y=C+Ig+Xn.

A. Calculate the equilibrium level of income or real GDP for this economy.

B. What happens to equilibrium Y if Ig changes to 10? What does this outcome reveal about the size of the multiplier?

Chapter 30

3a. Suppose that the aggregate demand and aggregate supply schedules for a hypothetical economy are as shown in the following table:

Amount of Real DP Demanded GDP Demanded, Billions |
Price Level (Price Index) |
Amount of real GDP Supplied, Billions |

$100 |
300 |
$450 |

20 |
250 |
400 |

300 |
200 |
300 |

400 |
150 |
200 |

500 |
100 |
100 |

A. Use the data above to graph the aggregate demand and aggregate supply curves. What are the equilibrium price level and the equilibrium level of real output in this hypothetical economy? Is the equilibrium real output also necessarily the full-employment real output?

Subject | Business |

Due By (Pacific Time) | 08/14/2015 12:00 am |

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