Session 1 Solutions Macroeconomics.pdf - Session 1 Solutions 1 Company A Sales Purchases 100-80 Company B GDP under flow of Product Cost Earnings GDP if

Session 1 Solutions Macroeconomics.pdf - Session 1...

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ECO 320 Macroeconomics Fitzsimons & Co. Eurl [email protected] Course notes to assist non Anglophone students. They are not to be copied or distributed outside this course. These notes are intended merely to supplement private study. Reference must be made to the course textbook Frank and Bernanke Macroeconomics , McGraw Hill 4th edition 2009; also excellent: Mankiw N.G. and Taylor M.P. Economics (Thomson Learning, Second Edition 2011). Also recommended: Samuelson and Nordhaus Macroeconomics , McGraw Hill Irwin 19th edition 2009 Session 1 Solutions 1. Company A Company B GDP under flow of GDP if B buys all from A Product Cost/ Earnings Product Cost/ Earnings Sales 100 125 Purchases -80 -100 Profit 20 25 100+125= 225 100+80+20+25= 225 125* 80+20+25= 125* * Only final goods and services should be counted 2. Year 1 Year 2 GDP growth Bushels of corn sold Nominal Real Sales 1000 @ $1 1010 @ $2 102% 1% 3. An economy's income must equal its expenditure, since every transaction has a buyer and a seller. Thus, expenditure by buyers must equal income by sellers. GDP measures these two things: total income of the economy, and total expenditure on the econom
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