Consider the simple macro model with a constant price level and demand-determined output. Suppose the level of actual national income is less thandesired aggregate expenditure. In this case...a. Inventories will build up, causing national income to rise.b. National income may increase or decrease, depending on therelative sizes of the average propensity to consume and theaverage propensity to save.O c. National income will fall, because desired expenditures are lessthan actual expenditures.d. There will be no change in national income because only actualexpenditure is relevant.e. Shortages of goods and reductions in inventories will causeproducers to increase output and national income to rise.e table below shows the total output and prices for an economy thatoduces only two goods, potatoes and oil. Data is provided for the years008 and 2018.Potatoes ($/ Oil ($ /barrel)Potatoeskkg)Oil (barrels) kg)551000110020085014201865660If 2008 is the base year, the GDP deflator in 2018 was..a. 85.7b. 159.1C. 59.1d. 100.0e.131.66Suppose that in 2018, ABC Corporation produced $6 million worth ofnatural gas pipes but only sells $5 million worth. Is the remaining $1 millicof unsold pipes part of GDP for 2018?a. Yes, since changes in inventories are part of consumptionexpenditures.O b. No, since they are part of the economy's output only when sold.c. No, since changes in inventories are part of actual investment.O d. Yes, since they are part of the economy's output in 2018.e. No, since they are added to existing inventories.

1. Consider a simple macro model with a constant price level and demand - determined output . Given…

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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List the key simplifying assumptions of the traditional macro model concerning: The forms of capital included in the model The sectors of the economy Who in the economy produces and invests
Consider a simple economy that produces only three goods. Assume that all goods produced are consumed in same period (no inventories). Following table provides information on price and quantity produced and consumed of each of three goods: 2021 2021 2022 2022 Price Quantity Price Quantity Good 1 25 25 40 33 Good 2 45 45 60 35 Good 3 80 50 90 45 Calculate nominal and real GDP for both years using 2021 as the base year. Then calculate inflation rate derived from the GDP deflator and real GDP growth between 2021 and 2022. Calculate Consumer Price Index (CPI) for each year using share of consumption of each product in 2021 as a weight. Then find CPI inflation rate between 2021 and 2022. Is this inflation rate different from GDP deflator inflation rate? Discuss reasons for differences, if any. True, false or uncertain? Above results show that GDP deflator is worse than CPI for measuring changes in average prices in economy. Comment
The following table shows macroeconomic data for a hypothetical country. All figures are in billions of dollars. Billions of Dollars Gross private domestic investment 120 Depreciation 35 Exports 60 Imports 55 Government spending 130 Personal consumption expenditures 325 Indirect business taxes (net of subsidies) 20 Personal taxes 90 Employee compensation 380 Corporate profits and FICA contributions 80 Rental income 25 Net interest 35 Proprietors' income 5 Transfer payments and other income 65 Using the expenditure or income approach, GDP for this country was $ billion. Complete the following table by calculating national income, personal income, and disposable personal income for this country. (Note: Be sure to enter your figures in billions of dollars.) Billions of Dollars National Income Personal Income Disposable Personal Income
Consider the basic Macroeconomic model involving: Private sector consumption: C = co+c1(Y-T); Y = GDP, T = Taxes Tax function: T = to+t1Y Business sector investment: I = io+i2r, r=interest rate Government spending: G = Go Exports: X = xo+x1x; x = Exchange rate of the dollar Imports: M = mo+m1Y+m2x; x = Exchange rate (a) Identify and explain the parameters: co, t1, i2, and m2. (b) Solve this model for the equilibrium GDP (Y*).
Why is GNI* (Modified) used as an estimate of national output in Ireland and explain the policy implications that arise from this.
In the first quarter of 2020, US real GDP declined about 9%, due to the economics shocks from the Covid 19 virus. If prices were completely flexible, and this means all prices, both inputs (such as labor), as well as output prices, what would you think would have been the drop in GDP? If prices are completely fixed, would the drop in GDP be greater or less than the flexible case? Why? If the Expenditure method of accounting for GDP, has to equal the Income Side, and the economy overproduces a particular item, say automobiles, the income side will also be higher, workers will buy the extra cars with extra income and the economy can gyrate indefinitely higher? Why or why not?
Consider the following data for a particular economy:GDPmp = 950Private consumption = 750Gross investment = 100Net investment = 80Exports = 250Imports = 300Net Indirect taxes = 50Net external income = 100Balance of transfers with the Rest of the World = 50Private savings = 300Calculate:a) NNPbp (Net National Product). b) Current balance. Interpret the result obtained.
Consider the national income model:Y = C + I0 + G0 + (X0 − M) … … . . … . (1)C = a + byd, (a > 0,0 < b < 1) … … . (2)Yd = Y − T … … … … … … … … … … … . . . (3)T = T0 + ty … … … … … … … … … … … . . (4)M = M0 + my … … … … … … … … … … . . (5)Where: (T) = taxes, (t) = income tax rateIdentify: 4/ Behavioral equations.5/ Definitional equation.6/ Constants., give the Economic meaning of them.7/ Coefficients. give the Economic meaning of them.
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Assume that a economy holds two factors of production, human capital managed by native-born workers and low skilled employees. If large migration of low skilled migrants occurs, how will the influence the aggregate GDP of the native population?

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Consider the simple macro model with a constant price level and determined output. Suppose the level of actual national income is less than