Posted by **AJ Kerin** on Tuesday, September 11, 2007 at 2:27am.

National Accounting (the value of GDP should be the same all along the exercice)

Say that PmQ = 20 (market value of domestic production), J = 5 (imports), FC = 8.5 (total final consumption), IC = 4 (intermediate consumption), IT = 4 (total investment), Δinventories = 2.5 (change in inventories).

1- Value of GDP

a. 12

b. 14

c. 16

d. 18

2- What is the value of exports and the trade balance (net exports)?

a. 1

b. 4

c. 5

d. 6

3- What is the value of all the sources of products? What about the uses?

a. 16, 25

b. 17, 16

c. 20, 20

d. 25, 25

Say that private domestic consumption and public (i.e. government) investment have the following respective value: C = 5, GI = 2.

4- Calculate each component of the expenditure approach to GDP.

a. C = 5, I = 2, G =7, NX = 2

b. C = 5, I = 4.5, G =5.5, NX = 1

c. C = 5, I = 4.5, G =3.5, NX = 3

d. C = 5, I = 5, G =5, NX = 1

Now that you know the preceding, say that:

- The net revenues from abroad (NRA) are equal to 3

- The discrepancy between GDP and NI is due only to consumption of capital (CC = 1) and NRA.

- Wage earners pay half of the indirect taxes. They pay 1.5 of indirect taxes

- Wage earners are responsible for 99% of the private domestic consumption level in the economy

- Subsidies are equal to 1.

- As a whole, there are no net transfers given to households.

- W= 8, Πn = 4, iL = 2, R = 2,

- Direct tax rates are: tΠ = 5%, tiL = 10%, tR = 50%, tw = 20%.

5- What is the value of the GNP?

a. 16

b. 19

c. 21

d. 25

6- What is the value of NI?

a. 18

b. 19

c. 20

d. 21

7- What is the value of indirect taxes (Tind)?

a. 0

b. 3

c. 9

d. 10

8- Calculate national income by using the income sources?

a. 17

b. 18

c. 20

d. 21

9- What is the value of direct taxes (Td)? What is the value of total taxes (T)?

a. 0

b. 3

c. 9

d. 10

10- What is the value of total taxes (T)?

a. 2

b. 4

c. 6

d. 8

11- Excluding transfers, does the government generate a surplus or a deficit?

a. -1

b. -0.5

c. 0.5

d. 2

12- What is the value of disposable income for wage earners?

a. 0.7

b. 2.6

c. 3.2

d. 4.9

13- What is then the value of saving by wage earners (S)?

a. -.05

b. 0

c. 1

d. 1.3

The following may help you (remember that we follow the NIPA definitions, not the book definitions)

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