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Handout 1 Key - = $20 million Net factor payments from...

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Econ 3140 Fall 2009 Handout #1 Answer Key 1. (a) Average labor productivity: Year 1: 8000 700 = 80 7 ; Year 2: 9000 800 = 90 8 ; growth rate = °± 90 8 ² = ± 80 7 ²³ ° 1 = ° 0 : 016 = ° 0 : 16% (b) In°ation rate: ± 9 8 ² ° 1 = 0 : 125 = 12 : 5% (c) Unemployment rates: Year 1: 70 770 = 0 : 091 = 9 : 1% ; Year 2: 100 900 = 0 : 111 = 11 : 1% 2. Using GDP = C + I + G + NX , GDP = 500 + 150 + 100 + 40 = 790 , and GNP = GDP + NFP , since GNP = 800 ) NFP = 800 ° 790 = 10 . 3. GNP is output by citizens, which equals $15 million + $7 million = $22 million. GDP is output produced in the country, which equals $15 million (hay) + $5 million (domestic banjo playing)
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Unformatted text preview: = $20 million. Net factor payments from abroad represent the di/erence between GNP and GDP ; this is the $2 million paid for banjo playing in other countries. Net exports are $4 million (hay sold abroad) minus $6 million (soda pop imports) = & $2 million. (Note that banjo playing abroad is not part of GDP, so it is not part of net exports either) The current account balance is net exports + net factor payments = & $2 million +$2 million = 0 1...
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