QUESTION 1
(i) Given the following annual information about a hypothetical country
in 2022, answer questions a. through f.:
Personal consumption expenditures
Personal taxes
Exports
Depreciation
Government purchases
Gross private domestic investment
Imports
Millions of Dollars
$180
10
50
30
145
90
75
a. Which method would you use to calculate GDP based on the data
above? (1 Mark)
b. What is the value of GDP? (2 Marks)
c. What is the value of net domestic product? (1 Mark)
d. What is the value of net investment? (1 Mark)
e. If the opening capital stock was $35 million in 2022 what would be the
closing capital stock? (2 Marks)
f. What is the value of the balance of trade? (1 Mark)
(ii) Define the term gross domestic product. (2 Marks)
(iii) If a country's GDP is $2,700,000 and its population 20,000 what is the
GDP per capita? (1 Mark) NB: GDP per capita = GDP/Population
(iv) If GDP in nominal prices is $3,600 and GDP in real prices is $2,900
what is the value of the GDP deflator or GDP price index? NB GDP
Deflator or GDP price index = GDP at Market Prices/Real GDP * 100. (1
Mark)
(v) The macroeconomy is expected to exhibit cycles similar to a wave
where there will be ups and downs. True or False (1 Mark)
(vi) Based on what we know about what took place during the great
depression, the impact of the covid 19 pandemic is similar in some respects
since we had plenty unemployment especially in the tourism
industry. True or False (1 Mark)
(viii) A country that spends more on capital goods will experience higher
economic growth in the long run than a country that spends more on
consumer goods all things equal because those capital goods can produce
even more capital and consumer goods. True or False (1 Mark)
