Question #1: (Expenditure Approach to GDP): You have the following ...

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Question #1: (Expenditure Approach to GDP): You have the following annual information about a hypothetical country

BILLIONS OF DOLLARS (USD)
PERSONAL CONSUMPTION EXPENSES 200
PERSONAL TAXES 50
EXPORTS 30
DEPRCIATION 10
GOVERNMENT PURCHASES 50
GROSS PRIVATE DOMESTIC INVESTMENT 40
IMPORTS 40
GOVERNMENT TRANSFER PAYMENTS 20

Based on the information in the above table calculate (show how to calculate)
a. The value of GDP
b. The value of net domestic product
c. The value of net investment
d. The value of net exports

Question #2: (MPC AND MPS): If consumption increases by $12 when real income increases by $15 billion. (show how to calculate)
a. What is the value of MPC?
b. What is the relationship between MPC and MPS?
c. If what MPC rises, what happens to MPS?

Question #3:
(show how to calculate)

YEAR CPI
1985 107.6
1986 109.6
1987 113.6
1988 118.13
1989 124.0
1990 130.7
1991 136.2
1992 140.3
1993 144.5
1994 148.2
1995 52.4
1996 156.9
1997 160.5
1998 163

a. Compute the inflation rate for each year 1986-1998 Hints: for 1986 (109.6-107.6/107.6)x100=1.86%
b. What is inflation? Which years of inflation
c. What is deflation and in which year or years did deflation occur?
d. What is disinflation and in which year did disinflation occur?
e. What is hyperinflation? Was there hyperinflation in any year ?

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Question #1
Based on the information in the above table calculate (show how to calculate)

a. The value of GDP
Y= C + I +G +(X-M)
GDP= Y= $200 + $40 + $50 +($30 – $40)= $280

b. The value of net domestic product
NDP = GDP – depreciation
NDP= $280 - $10 = $270...

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