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Macroeconomics Assignment-1

The document provides instructions for a macroeconomics assignment with 6 problems: 1. Compare macroeconomic problems and policies in developed and developing countries with examples. 2. Calculate national, private, and public savings and equilibrium interest rate for a closed economy model, and explain changes with an output increase. 3. Compute value added at different stages of production and GDP for a simple Ethiopian economy, and tax revenue with a 15% VAT. 4. Determine how a transaction between a US farmer, refinery, and Canadian bottler affects US and Canadian GDP and GNP. 5. Calculate and interpret GDP, GNP, NNP, national income, personal income, disposable income

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Beza Getachew
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334 views2 pages

Macroeconomics Assignment-1

The document provides instructions for a macroeconomics assignment with 6 problems: 1. Compare macroeconomic problems and policies in developed and developing countries with examples. 2. Calculate national, private, and public savings and equilibrium interest rate for a closed economy model, and explain changes with an output increase. 3. Compute value added at different stages of production and GDP for a simple Ethiopian economy, and tax revenue with a 15% VAT. 4. Determine how a transaction between a US farmer, refinery, and Canadian bottler affects US and Canadian GDP and GNP. 5. Calculate and interpret GDP, GNP, NNP, national income, personal income, disposable income

Uploaded by

Beza Getachew
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Assignment on Macroeconomics Theory I (Econ 211)

Instruction: Solve and analyze the following Problems by showing necessary steps (30%).
1. Compare and contrast about macroeconomics problems, the corresponding objectives
and policies in developed and developing countries by giving practical examples

2. Suppose the closed economy model is given by:

Y=C+I+G
Y = 400, C = 40 + 0.8 (Y-T), I = 100- 10r, G = 120, T = 80 + 0.1Y
Where, Y is the value of total output
C Is the value of personal consumption
I is the value of private investment
G is the value of government expenditure
T is the value of tax
Note: that all values are in million USA dollars
A. Calculate national saving, private saving and public saving
B. Determine the equilibrium interest rate
C. Suppose that output increases to 500. Considering values from (A) and (B)
Explain (in terms of saving & Investment) the reason for the interest rate
change
D. What caused the change in private savings? Why did public savings change?

3. A farmer from southern region of Ethiopia grew and “Isuzu” load of organs and sold it to
a local firm for 5000 birr. The firm took the orange into juice making company and sold
in for 12,000 birr. The company processed the juice and sold all the juices produced to
the final consumers for birr 27,000. The final consumers used the whole juice for
themselves
Then compute
A. The value added by the farmer
B. The value added by the local firm
C. The value added by company
D. The value added by the final consumers
E. The GDP of this simple economy
F. The total tax revenue collected by the government, if the government imposes a
value added tax of 15% to be imposed on the value added amount at each stage.

4. An American farmer sells a truckload of sugarcane to an American sugar refinery for


$250. The refinery extracts the sugar form the sugarcane and sells it to Coca-Cola for
$400. Coca-cola uses the sugar in its bottling plant in Toronto-Canada and the resulting
Cola is sold in Canada for $650.
A. How does this transaction affect USA’s GDP and GNP?
B. How does it affect the Canadian GNP and GDP?

Submission date: April 18-21, 2016 UU, AA Ethiopia Page 1


Assignment on Macroeconomics Theory I (Econ 211)

5. Given the following hypothetical data for country X, calculate and interpret:
A. GDP (gross domestic product)
B. GNP (gross national product)
C. NNP (net national product)
D. NI (National Income
E. PI (personal income)
F. D (personal disposable income)
G. National saving, Public saving & private saving

Items Value in million US dollar($)


Personal consumption 3000
Net Private domestic Investment 2000
Government purchase 4000
Depreciation 500
Import 2000
Export 1500
Indirect business tax 1000
Subsidy 200
Corporate tax 250
Retained earning 300
Social security contribution 500
Transfer payment 100
Net interest 200
Personal income tax 500
Other personal obligations 100
Factors payment to abroad 2000
Factors income received from aboard 2500

6. Suppose there is a necessary gar of $200 billion in an economy and the MPC is 0.75. As a
result, the government decides to fill the output gap by using fiscal policy. Then:
A. Should government increase or decrease its spending, G? why
B. By how much should the Gov’t affect its expenditure to fill the stated output gap?
C. Calculate the change in output or income due to change in G
D. Should government increase or decrease tax, T? Why
E. By how much should the government affect tax to fill the stated output gap?
F. Calculate the change in output or income due to change in T.

Submission date: April 18-21, 2016 UU, AA Ethiopia Page 2

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