East West University Department of Economics

East West University
Department of Economics
Spring 2013.

Course Title: Principles of Macroeconomics ECO102 Gazi Quamrul Hasan

Assignment 01

1. Write short notes on 1) Gross Domestic Product 2) Real GDP 3) GDP deflator 4) Consumer Price Index 5) GDP calculation in income method 6) GDP calculation in expenditure method 7) GDP calculation in production method 8) Procedure of value addition 9) Difference between CPI and GDP deflator 10) Consumption function

2. Draw circular flow of income for 1) Closed economy with out government and capital market 2) Open economy with government and capital market

3. Discuss with numerical example 1) In a closed economy budget deficit equals the gap between private savings and investment 2) In an open economy if government wants to increase investment keeping budget deficit constant then import must be increased and/or export must be decreased.

4. Given Y=C+Io+Go C=Co+cYd Yd=Y-T T=To+tY a) Find out equilibrium level income Y*, consumption C* and Tax T* b) If Co=25, c=0.6, Io=20, Go=15, To=3, t=0.2 then find out values of Y*, C*and T* and show equilibrium using Keynesian cross diagram

5. The following table provides information on the quantity and price of the commodities produced in a closed economy during 2 consecutive years | 1989 | 1990 | | Production (units) | Price($) | Production (units) | Price($) | Food | 150 | 50 | 140 | 45 | Clothing | 200 | 25 | 210 | 20 | Machinery | 100 | 20 | 110 | 25 | Building | 125 | 150 | 150 | 140 | Education | 75 | 30 | 100 | 35 |

Assuming that these are the only final commodities produced in the economy find out 1) Nominal and real GDP at 1989 prices and comment. 2) GDP deflator for 1990 using 1989 as base year 3) GDP growth rate for 1990

6. You had the national income accounts of your country written in ink on a piece of paper. You spilt coffee on the paper and smudged some of the figures. You could retrieve only the following information: | $ billion | GDP | 360 | Government purchases of goods and services | 40 | Transfer payments | 75 | Consumption Expenditure | 200 | Investment expenditure | 105 | Exports | 125 | Budget deficit | -5 |
The library is closed and you need the following data for your assignment (1) Household saving (2) Imports
Can you find them from the information you could retrieve?

* Last date of submission: Midterm day. * This assignment needs to be submitted individually. * Do not use graph papers. Draw them free hand and label them properly.

Good Luck