Miss
Part B – Macroeconomics – Worth 10% of total assessment:
Answer any five (5) of the following questions. Each question is worth 10 marks.
Question 9:
An economy is currently in equilibrium and the following figures refer to elements in its national accounts:
$ billion
Consumption (total) 60
Investment 5
Government expenditure 8
Imports 10
Exports 7
a) What is the current equilibrium level of GDP? (1 mark)
b) What is the level of injections? (1 mark)
c) What is the level of withdrawals? (1 mark)
d) Assuming that tax revenues are $7 billion, what is the value of savings? (1 mark)
e) If GDP now rises to $80 billion and, as a result, the consumption of domestically produced goods rises to $58 billion, what is the MPCd? (i.e. marginal propensity to consume domestic goods) (2 marks)
f) What is the value of the multiplier? (2 marks)
g) Given an initial level of GDP of $80 billion, assume that spending on exports rises by $4 billion, spending on investment rises by $1 billion, while government expenditure falls by $2 billion. By how much will GDP change? (2 marks)
Question 10:
a) Which of the following are final goods and services and which are intermediate goods and services? Please explain why in your answer. (4 marks – 1 mark each)
i) A windscreen purchased by a motor vehicle spare parts supplier;
ii) A new bulldozer to be used by a construction company;
iii) A household cleaning service purchased by a family from a domestic cleaning service company;
iv) Coking coal
b) An economy produces final goods and services with a market value of $800 billion in a given year, but only $750 billion worth of goods and services is sold to domestic or foreign buyers. Is this nation’s GDP $800 billion or $750 billion? Explain your answer. (2 marks)
c) Explain why a new truck sold for use by a transport company is a final good, even though it is a fixed investment (capital)
Answer any five (5) of the following questions. Each question is worth 10 marks.
Question 9:
An economy is currently in equilibrium and the following figures refer to elements in its national accounts:
$ billion
Consumption (total) 60
Investment 5
Government expenditure 8
Imports 10
Exports 7
a) What is the current equilibrium level of GDP? (1 mark)
b) What is the level of injections? (1 mark)
c) What is the level of withdrawals? (1 mark)
d) Assuming that tax revenues are $7 billion, what is the value of savings? (1 mark)
e) If GDP now rises to $80 billion and, as a result, the consumption of domestically produced goods rises to $58 billion, what is the MPCd? (i.e. marginal propensity to consume domestic goods) (2 marks)
f) What is the value of the multiplier? (2 marks)
g) Given an initial level of GDP of $80 billion, assume that spending on exports rises by $4 billion, spending on investment rises by $1 billion, while government expenditure falls by $2 billion. By how much will GDP change? (2 marks)
Question 10:
a) Which of the following are final goods and services and which are intermediate goods and services? Please explain why in your answer. (4 marks – 1 mark each)
i) A windscreen purchased by a motor vehicle spare parts supplier;
ii) A new bulldozer to be used by a construction company;
iii) A household cleaning service purchased by a family from a domestic cleaning service company;
iv) Coking coal
b) An economy produces final goods and services with a market value of $800 billion in a given year, but only $750 billion worth of goods and services is sold to domestic or foreign buyers. Is this nation’s GDP $800 billion or $750 billion? Explain your answer. (2 marks)
c) Explain why a new truck sold for use by a transport company is a final good, even though it is a fixed investment (capital)