You have been employed as the chief economist for the economy UWI Land. The head statistician has provided you with the following information:
Compensation of Employees 900 | Consumption of goods 850 |
Corporate profits 400 | Rent Income 125 |
Factor income paid to the world 325 | Consumption of services 475 |
Factor Income received from the world 170 | Residential investments 350 |
Indirect taxes 775 | Non-residential investments 525 |
Subsidies 125 | Government Expenditure 925 |
Imports 700 | |
Net interest 75 | Exports 300 |
Proprietors income 300 |
Calculate UWI Land’s
Question 2 (Activity 7.1)
Suppose production and prices of food and clothing (the only two goods produced in this economy) in 2006 and 2007 are as follows: (base year = 2006)
Year | Quantity of Food | Price of Food | Quantity of Clothing | Price of Clothing |
2006 | 20 | $15 | 15 | $5 |
2007 | 60 | $18 | 30 | $6 |
Calculate:
(i) nominal and real GDP in 2006 and 2007,
(ii) the GDP deflator
(iii) the growth rate in real output.
Question 3
(i) Calculate the value added at each stage of production
(ii) Calculate the contribution to GDP from the good
Question 4
Classify each of the following as a movement along or a shift of the production function and provide a justification for your choice.
(i) An increase in the number of machines used in production
(ii) An increase in the population growth rate
(iii) A new technological innovation
(iv) The government invests in a new entrepreneurship training program
(v) The government implements major reforms to make it easier to transact business
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