ECON201 Week 8 Questions: Chapter 10 & 11

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Assignment 2 Questions: Chapter 10 & 11
1. National income accounting deals with the aggregate measure of the outcome of
economic activities. The most common measure of the aggregate production in an
economy is Gross Domestic Product (GDP). The table below provides CountryÊnational income accounting. Use this data to answer the following questions.
Transfer Payments
$ 54
Interest Income
$ 186
Depreciation
$ 36
Wages
$ 67
Gross Private Investment
$ 124
Business Profits
$ 274
Indirect Business Taxes
$ 74
Rental Income
$ 75
Net Exports
$ 18
Net Foreign Factor Income
$ 12
Government Purchases
$ 156
Household Consumption
$ 304
a. Calculate the GDP by using the Expenditure Approach Method (1Mark)
b. Calculate the GDP by using the Factor Payment Approach or the Income
Approach Method. (1 Mark)
2. Suppose people consume 3 different goods. The following table shows the prices
and quantities of each good consumed in 2006, 2007, and 2008.
Year
Price of
Pizza
Quantity of Price of
Pizza
Burger
Quantity of
Burger
Price of coffee Quantity of
Coffee
2006
$4
200
$6
125
$8
100
2007
$6
350
$8
200
$9
175
2008
$7
600
$9
350
$ 12
250
a. Calculate nominal GDP in each of the three years. (1.5 Marks)
b. Calculate Real GDP in each of the three years, using 2006 as the base year.
(1.5 Marks)
c. Calculate the rate of inflation for 2007 and 2008 using the GDP deflator as
your price index. Assume that 2006 is still the base year. (2 Marks)
d. Using the quantities from 2006 for your market basket, and 2006 as your base
year, calculate the CPI for 2006, 2007 and 2008. (2 Marks)
e. Using the CPI calculate the rate of inflation. (1 Mark)
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2 discussion questions 150 words each

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