1. The following are components of national product and national income for a country:
|
Items
|
Billions of Dollars
|
|
Consumption of goods and services
|
500
|
|
Corporate Income taxes
|
30
|
|
Corporate retained earnings
|
30
|
|
Depreciation allowances
|
90
|
|
Exports
|
210
|
|
Government expenditures on goods and services
|
200
|
|
Government Net Income transfers to Households
|
70
|
|
Gross Fixed Investment
|
150
|
|
Imports
|
210
|
|
Indirect taxes net of subsidies
|
100
|
|
Interest on government debt
|
15
|
|
Interest paid by producers in the production and service sectors
|
20
|
|
Net income from abroad
|
10
|
|
Non-cash Labour income
|
20
|
|
Personal income taxes
|
90
|
|
Rent of building and equipment
|
30
|
|
Total corporate profit
|
75
|
|
Total earned Labour income( including self employed wages, Supplementary labour income and Farmers income)
|
530
|
|
Total non-Corporate Profit (income from nonfarm unincorporated business)
|
25
|
|
Variation in the stock of inventories
|
10
|
Using the figures given in the previous table, answer the following questions. Justify your answers.
a) (i) Calculate total government expenditures?
(ii) Calculate total government revenues
(iii) Is the government running a surplus, deficit, or balanced budget?
b) (i), calculate GDP via the expenditures approach.
(ii) Calculate National Income
c) Calculate National Income via the income approach. Does this match with your answer to question (b) (ii)?
d) Explain why your answers to questions c) and b (ii) should match each other.
e) What is the usefulness for economic policy of estimating GDP using the expenditure approach?
f) (i) Calculate personal income
(ii) Calculate disposable income
(iii) Calculate personal savings
2. True false or uncertain? Justify your answer using the data and concepts of chapter 16 of the lecture notes
"A negative inflation rate is good because lower prices are good for consumers and most economists and policy makers agree that we should have a low inflation rate"
3. Read chapter 16 of the lecture notes: "Characteristics of the Canadian Economy". Please do not copy from the notes. Make up your own answer after reading and turning off your computer or closing your textbook.
a. What is the difference between the nominal interest rate and the real interest rate?
b. What is the Phillips curve?
c. Based on the Canadian evidence, is it true that a higher inflation rate is associated with a higher growth rate of real GDP?
d. The government of the United Sates is concerned about the high unemployment rate in the US, which reached 9.8% in October 2009. Based on the previous experience in Canada, should the governments of the US cause an increase of the inflation rate in order to reduce the unemployment rate to its "natural" level of 4%?