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ECON672 Global Economics Problem Set 2 GDP
1. In Country x, these 4 goods are produced and used in the “basket of goods” for inflation calculation. What is the overall rate of inflation between 2018 and 2019 if the weight of each goods in the basket in 2019 remains the same as in of 2018?
Year 2018
|
Goods |
A |
B |
C |
D |
|
Price $ |
8 |
9 |
4 |
2 |
|
Quantity |
1000 |
400 |
600 |
1000 |
Year 2019
|
Goods |
A |
B |
C |
D |
|
Price $ |
9 |
6 |
8 |
3 |
2. Country Y has 3 productive sectors: Farming, Manufacturing and Retailing.
- Manufacturers produce goods each year value total $500. They sell $400 to Retailers and $100 directly to household and government consumption.
- Retailers buy goods for $400 from Manufacturers and buy $50 from Farmers.
- Retailers sell goods for final consumption of household for $500.
- Manufacturers buy goods value $200 from Farmers.
- Farmers also sell $100 of their output to the household for consumption.
- Farmers sell nothing directly to the government.
- Farmers have their own inputs for their agricultural production (such as seeds, fertilizers) so they do not buy anything from Manufacturers or Retailer.
1. What is the value-added of each sector?
2. What is the Total GDP of Country Y?
3. The national income account of Country Z in 2019 is as follows:
|
Expense Type |
Value in Z$ Billion |
|
Total Consumption |
418 |
|
Investment |
158 |
|
Government Spending |
125 |
|
Total Exports |
151 |
|
Total Imports |
156 |
3.1. What is its Nominal GDP in 2019?
3.2. If in 2020, Consumption rises by 10% but output only rises by 5% while investment and government spending both increase by 3%, what will happen to the gap between Total Exports and Total Imports? Explain the reason for this.
4. Choose the BEST answer for the following questions.
4.1. Which of the following is included in the investment component of GDP?
a. spending to build new houses
b. spending to build new factories
c. spending on business equipment such as welding equipmentd. All of the above are included in the investment component of GDP.
4.2. After the break out of COVID 19, governments of many states in the United States raised expenditures to increase health checking and facility sanitaion at airports. The related- purchases of goods and services are
a. not included in GDP since they do not represent production.b. not included in GDP since the government collects taxes to pay for them.c. included in GDP since government expenditures on goods and services are included in GDP.d. included in GDP only to the extent that the federal government, rather than state or local governments, paid for them.
a. U.S. net exports decrease and U.S. GDP decreases.b. U.S. net exports are unaffected and U.S. GDP decreases.c. U.S. net exports are unaffected and U.S. GDP is unaffected.d. U.S. net exports decrease and U.S. GDP is unaffected.