ECO550 Assessment 6

1. Given the following data:
   Year 1               Year 5
   Consumption                                         600                 960
   Investment                                           134                340
   Property Income earned overseas              75                  120
   Property income paid overseas                  95                  95
   Subsidies                                               55                 110
   Indirect Taxes                                         85                150
   Exports                                                   80               150
   Imports                                                  105               125
   Depreciation                                            70                  90
   Government Spending                               280                270
   Calculate for both years:
   - GDP at market prices
   - GNP at market prices
   - GNP at factor cost
   - Net National Product
   - National Income
2. Given the following information:
   TRILLIONS OF DOLLARS
   Personal consumption expenditures $3.0
   Net private domestic investment 1.4
   Depreciation 0.2
   Government purchases of goods and services 2.0
   Exports 0.5
   Imports 0.3
   Foreign factor income 0.1
   - Compute the GDP
   - Compute the net exports
3. Using the information in the following table, answer the following questions:

Component Number of people

(millions)

Total population 246

Working-age population 207

Labor force 139

Employed 133

Unemployed 6

• What is the unemployment rate?
  
  

- What is the labor force participation rate?

4) Consider the following graph, and determine the equilibrium level of income algebraically.

(AE = Total Spending, AP = Total Production or Total Output)

(Hint: The equilibrium level exists where AE = AP. Graphically, this is expressed at the point of intersection between the AE and AP curves. In this problem, consumption spending is the only component of AE. Therefore, equilibrium exists where the expenditures function intersects the AP curve (the 45 degree line).

5) Using demand and supply analysis, answer the following questions. What are the effects on the exchange rate between the British pound and the Japanese yen from:

a. An increase in Japanese interest rates

b. An increase in the price of British goods

c. An increase in British interest rates

6) Consider a country that initially consumes 100 pairs of shoes per hour, all of which are imported. The price of shoes is $40 per pair before a ban on importing them is imposed. Use a graph to explain what happens to the price of shoes and the quantity of shoes consumed after a total ban on imports.

7) Use figure 2 below to answer to the following question:

Indicate where the economy is located if aggregate output is above the level of planned spending and if aggregate output is above the equilibrium level of output.

8) Use the graph to indicate where the economy is located if the interest rate is below the equilibrium level and people are holding less money than they desire.

9) Consider the following data for the United States and Switzerland:

GDP Deflator Switzerland GDP Deflator United States Market Exchange Rate

1980 85.7 76.0 2.49 francs/$

1990 113.4 119.6 2.12 francs/$

Compute the real exchange rate for 1980 and 1990.

(Real exch. rate = (exch. Rate*U.S. price index)/foreign price index)

10) Suppose that the economy starts at equilibrium and the mpc = 0.75. What would be the effect of a $300 increase in government spending once all the rounds of the multiplier process are complete?

To calculate the change in equilibrium output, the following expression could be used:

DY = D G (1/ 1-mpc)

Price: $20.57

Solution: The downloadable solution consists of 11 pages, 957 words and 4 charts.
Deliverable: Word Document