TD1sol - Macroeconomics 1. Master APE. 2009-2010 Prof....

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Unformatted text preview: Macroeconomics 1. Master APE. 2009-2010 Prof. Xavier Ragot / T.A : Eric Monnet Answers 1 Questions Provide detailed answers to the following simple questions, using your class mate- rial. a) Identify the following transactions within the main elements of expenditure : consumption, investment, government expenses, net exports. i.Boeing sells an aircraft to the US Air Force. ii.Boeing sells an aircraft to the French Air Force. iii. Airbus sells an aircraft to Air France. iv.Boeing sells an aircraft to Bill Gates. v. Airbus builds an aircraft which will be sold next year. vi. Airbus increases Mr. X 's salary. Mr. X purchases a car. vii. Airbus purchases a car to be used by Mr. X . viii. Due to a big recession, one third of the whole output of an economy is not sold this year. i.From the point of view of US National Accounts, G. ii.From the point of view of US National Accounts, X; from the point of view of France National Accounts, M and G. iii. From the point of view of France National Accounts, I (lets assume that Airbus is only French). iv. From the point of view of US National Accounts, C if Bill Gates uses it for personal purposes. v. From the point of view of France National Accounts, I (change in inventories). 1 Macroeconomics 1. Master APE. 2009-2010 Prof. Xavier Ragot / T.A : Eric Monnet vi. From the point of view of France National Accounts, C. vii. From the point of view of France National Accounts, I. viii. I. b) Consider the following identities: Y ≡ C + I + G + X- M Y ≡ Y D + ( T- TR ) Y ≡ C + S + ( T- TR ) where C = consumption, I = investment, G = government expenditures, X- M = net exports, Y D = disposable income, TR = transfers, S = savings, T = taxes. Derive the following expression and interpret: S- I ≡ ( G + TR- T ) + ( X- M ) Do these identities shed light on countries' macroeconomics situation you may know ? The third identity gives C ≡ Y- S- T + TR Replacing C in the rst identity gives the result. The rst bracket on the right hand side is the public sector de cit. G + TR is government expenditures (remember that public wages are included in public expenditure) plus transfers. T is government revenue. X- M refers to net exports. This identity says then that the excess of private savings over investment must be equal to public de cit plus trade balance surplus. The private sector has three alternatives to use its savings: it can lendsurplus....
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This note was uploaded on 01/12/2011 for the course ECO 010023 taught by Professor Mrraggillpol during the Fall '09 term at Paris Tech.

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TD1sol - Macroeconomics 1. Master APE. 2009-2010 Prof....

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