sProblem 1
Use the national income data in the table below, compute (a) GDP, (b) NDP, and (c) NI using the expenditure approach.
National Income Accounting Data | Amount (billions) |
Compensation of Employees | $2684 |
U.S. Exports of goods and services | 551 |
Consumption of fixed capital | 480 |
Government purchases | 925 |
Taxes on production and imports | 122 |
Net private domestic investment | 233 |
Transfer payments | 12 |
U.S. imports of goods and services | 1674 |
Personal Taxes | 81 |
Net foreign factor income | 4 |
Personal consumption expenditures | 3012 |
Statistical discrepancy | 0 |
Problem 2
Compare a $100,000 median family income in 1980 to the same income in 1990, 2000, and 2010. What are the differences in the available products? What are the differences in the quality of those products? Considering this, in which of those years would you rather live? Why?
Problem 3
Assume that the consumption schedule for a private open economy is such that consumption C = 20 + 0.80Y. Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 40, G =20 and Xn = 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig + G+ Xn.
Problem 4
Using the hypothetical economy data in the table below, calculate the aggregate demand and supply, as well as its price level.
Amount of Real GDP Demanded,
Billions |
Price Level
(Price Index) |
Amount of Real GDP Supplied,
Billions |
$360 | 600 | $1000 |
520 | 500 | 820 |
600 | 400 | 600 |
840 | 300 | 400 |
1020 | 100 | 300 |
Then address the following: