MACRO HW.docx - Andreissa IUP2017071 Number 3 a NDP since we do not have depreciation I will assume the Depreciation is about 10 of the GDP

# MACRO HW.docx - Andreissa IUP2017071 Number 3 a NDP since...

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Andreissa IUP2017071 Number 3 a. NDP, since we do not have depreciation, I will assume the Depreciation is about 10% of the GDP NDP = GDP Depreciation NDP= 6,000 – 600=5400 b. Net exports = Y-C-I-G 6000-4000-800-1100= 100 NET EXPORT=100 c. Government taxes minus transfers T=G+BS=1100+30=1130 d. Disposable personal income YD=Y-T= 6000-1130=4870 e. Personal Savings S=YD-C= 4870-4000= 870 Number 4 a. How large is saving? SAVING= DISPOSABLE INCOME – CONSUMPTION S=5100-3800= 1300 SAVINGS=1300 b. How large is investment? INVESTMENT= SAVINGS INVESTMENT= 1300 c. How large is government spending? GOVERNMENT SPENDING= G+GOVERNMENT BUDGET DEFICIT GDP= C+I+GE+NT 6000=3800+1300+G-100 (BECAUSE OF TRADE DEFICIT) G=1000 GOV. SP.=1000+200= 1200 #### You've reached the end of your free preview.

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Unformatted text preview: Number 5 OUTPUT= LABOR PAYED+CAPITAL PAYMENTS+PROFIT OUTPUT= 6 B + 2 B + 0 = 8 B OUTPUT = 8 BILLIONS Number 6 a. What is the value of output in this economy (i.e., nominal GDP) The total income of the economy will include only the value of the final goods (of bread in our case), so the total income of the economy is Y = 2*1 million = Rs. 2 million. b. How much value is added to the flour, yeast, sugar, and salt when the bakers turn them into bread? As we don't count the value of intermediate goods (flour, yeast, sugar, salt), then the value added to the flour, yeast, sugar &amp; salt when the bakers turn into bread is zero....
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