Question

1. er5%) The filowing flows ofmooey (in $ be)took place in "a imaginary economy iast year. 45 247 249 475 245 25 240 Taxes paid on profits 65 From the data above, caleulate the GDIP for this economy. Explain which approach you sod to make the С5%) You." given the following d 2. fr.oou try X s economy: ndex EL 88.0 From the given data, a) Prove which is the base year b) Fill in the missing values (Show calcularions. in the alues in the table below Employed (m

Answer 1

1. According to the expenditure approach, the aggregate expenditure of the economy is sum of expenditure by all sectors in the economy, that is consumer, firm, government and foreigners. The GDP by expenditure approach is given as GDP C+I+G+(X-M) From the table: 475 tion Expenditure (C) Gross private domestic investment (I) 300 Government Expenditure (G) Export (X) Imports (M) 315 249 260 1599 Therefore, the gross domestic product is $1599 bn.

2. a) _Cost of market basket in current year Cost of market basket in base year x100 The price level of the base year is 100. Because, at the base year cost of market basket is From the table the price level of year 2011 is 100. Then the base year is 2011. b) The real GDP is nominal GDP expressed in base year prices. The formula for real GDP is Real GDP- Nomianl GDIp Price level x100 The GDP growth rate is given as GDP -GDP. 브× 100 GDP-

Using the formulas, the table is completed as Real Nomina Price GDP GDP change Year GDP Index 65 2009 88 73.86364 2010 74.955 95 78.9 15.32% 100 2011 80 80 6.73% 82 104.9936 2012 78.1 2.50% Calculation Nomianl GDP Real GDP Price level 78.9 × 100--х 100-74.955 95 level-Hoamacop" 100- 78100 1049936 Nomianl GDP 100 65 100-73.86364 78.1 Real GDIP Price level Real GDP for base year is same as nominal GDP. Then for 2011 Real GDP is 80 . From the labor market statistics, the followings are formulas Labor Force-Employed+Unemployed Unemplyed ×100 Unemployemnt rate- Labor force Using the formulas, the table is completed as 2010 2011 2012 Population 125 127.5129 Labor Force 75 78.5 Employed Unemployed Unemployment rate 69.1 70.68671.4 5.96.3147.1 8.54%|82 9.04%