1 Suppose GDP is 800 billion taxes are 150 billion private saving is 50 billion

1 suppose gdp is 800 billion taxes are 150 billion

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1. Suppose GDP is \$800 billion, taxes are \$150 billion, private saving is \$50 billion, and public saving is \$20 billion. Assuming this economy is closed, calculate consumption, government purchases, national saving, and investment. 2. Use a graph representing the market for loanable funds. Please illustrate and explain what would happen to interest rates and investment under the following circumstances. a) a government goes from a budget surplus to a deficit b) the government introduces a program that provides investment incentives to small businesses c) the government introduces a change in tax laws which encourages Canadians to save more 3. Use a diagram of the labour market to support your answer. Show the effect of an increase in the minimum wage on the wage paid to workers, the number of workers supplied, the number of workers demanded, and the amount of unemployment. What are some reasons as to why employers might want to keep wages higher? Which theory is this referring to? 4. A small nation of 10 people loves baked goods. All that these 10 people produce and consume are muffins and cake, in the following amounts. MUFFINS CAKE Quantity Price Quantity Price 2011 (base year) 10 \$40 30 \$10 2012 12 \$60 50 \$12 a) Calculate the CPI in 2012. b) Calculate the GDP deflator in 2012.

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Ana Vukadin ECON 1002 E c) What is the difference between using CPI, versus the GDP deflator as a measurement of prices? 5. The graph below demonstrates some data from the land of milk and honey. YEAR PRICE OF MILK QUANTITY OF MILK (L) PRICE OF HONEY QUANTITY OF HONEY (L) 2008 (base year) \$1 100 \$2 50 2009 \$1 200 \$2 100 2010 \$2 200 \$4 100 a) Calculate nominal GDP, real GDP, and the GDP deflator for each year. b) What is the difference between nominal GDP, real GDP, and the GDP deflator? 6.Which of the following problems in the construction of the CPI might be illustrated by each of the following situations? Explain. a)The invention of the iPad b)The introduction of air bags in cars c)Increased personal computer purchases in response to a decline in the price d)More scoops of raisins per package of Raisin bran e)Greater use of fuel-efficient cars after gasoline prices increase 7. Give 4 different examples where a country’s GDP would increase, but the standard of living would decrease.

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