Assignment

Part A.

1- Consider the following economy:

a) Calculate the Nominal GDP for each year

b) Calculate the real GDP for each year using 2012 as the base year

c) Calculate the GDP deflator for each year.

2- For the table below: GDP deflator = 108.9

a) Calculate the amount of Real Exports X.
b) Calculate the RealGDP (Y = C + I + G + NX).

I= Y- C - G

Y = $4800 + I + $2150 + -$775

c) Calculate the amount of investment I

I= Y- C - G

d) Fill out the rest of the table for nominal values.

Note that NX = net exports= exports - imports

3- Annual growth rates

GDP (2010)= 35,000 ; GDP ( 2011) = 34,900;GDP (2012) = 35,750 GDP (2013) = 37,000; GDP (2014)= 38,000 ; GDP (2015)= 38,000;

a) Calculate the annual growth rate between 2010-2011.

b) Calculate the annual growth rate between 2010-2012

c) Calculate the annual growth rate between 2013-2015.

d) Calculate the annual growth rate between 2014 and 2015.

4- Calculate the missing terms: Use the formulafor the annual growth rate and apply the properties of the LN (Natural Log) function (or simply use the formula that is already given in the formula sheet).

1- g =1.55 XZ= 1500 v = 5 calculateXt =?
2- g =3.25 Xt= 500 XZ = 600calculate v = ?
3- g =1.15Xt= 900 v = 4 calculate XZ= ?

Part B

1. Consider the following economy

C_a = 1800 - 15 R;c= 0.65 ;T_a = 1,750 ; t = 0 ; I_P = 20(150 - R ) ; G = 2,100 ; X = 1,800 ; NX = -1,275. Assume nx = 0.

a) Compute the marginal propensity to save
b) Calculate the amount of imports for this country
c) Compute the multiplier
d) Derive the equation of the autonomous spending and compute its value for R = 3.25
e) Derive the IS curve and compute its value for R= 3.25.

2. Consider the following economy

C = C_a +0.80 (Y - T); C_a = 500 - 25R ; T = 300 + 0.245 Y; I_P = 1800 - 35 R ; G = 1800; NX = 750 - 0.08 Y.

a) What are the values of the autonomous net export NXa and the autonomous taxes Ta (hint: see the formulas and compare)
b) Compute the multiplier
c) Derive the equation of the autonomous spending.
d) Derive the equation of the IS curve
e) Compute the values of the A_P and Y_IS for r =17/4
f) Compute the values of the C_a, C, T, I_P, and NX for income Y = 20,000 and R = 4.25. Is this country a net importer or net exporter?

3. Consider the following economy

C_a= 1,780; c = 0.55; T = 1400 + 0.175 Y; I_P = 1800; G = 1600; NX = 750 - 0.0075 Y.

a) What is the value of the autonomous Tax Ta (Hint: see the formula and compare)
b) Compute the value of the multiplier
c) Derive the equation of the autonomous spending and calculate its value.
d) Derive the equation of the IS curve and calculate its value.
e) Compute the value of the new IS when government spending increases by 155. What is the difference between the two IS values?

4. Consider the following economy:

C_a = 10 (32.5 - 1.5R); c = 17/20 ;T = 240 + (3/20) Y; I_P = 10 (12.75 - 2.5 R) ; G = 2,500; NX = 800 - 0.08 Y.

a) What are the values of the autonomous net exports and autonomous Tax Ta (Hint: see the formula and compare)
b) Compute the value of the multiplier
c) Derive the equation of the autonomous spending
d) Find the equation of the IS curve
e) Graph the autonomous Spending using the points for R = 2, 4, 6, 8, 10, 12, 14, 16, 18, 20, 25, 30 (Excel will be best).
f) From e, graph the IS curve.