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Exercises - Topics 1-7

The document contains information and questions about 5 exercises related to macroeconomic concepts: 1) The first exercise provides economic data for 4 industries in an economy from 2016-2018 and asks questions about calculating nominal GDP, real GDP, CPI, economic growth rates, inflation rates, and changes in real income per capita. 2) The second exercise asks whether a father's salary increased or decreased from 1990 to present day based on provided CPI data. 3) The third exercise asks about the effects of investment tax credits for green technology on interest rates and the quantity of funds exchanged in the loanable funds market. 4) The fourth exercise provides a hypothetical savings scenario and asks about expected after-tax real

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106 views1 page

Exercises - Topics 1-7

The document contains information and questions about 5 exercises related to macroeconomic concepts: 1) The first exercise provides economic data for 4 industries in an economy from 2016-2018 and asks questions about calculating nominal GDP, real GDP, CPI, economic growth rates, inflation rates, and changes in real income per capita. 2) The second exercise asks whether a father's salary increased or decreased from 1990 to present day based on provided CPI data. 3) The third exercise asks about the effects of investment tax credits for green technology on interest rates and the quantity of funds exchanged in the loanable funds market. 4) The fourth exercise provides a hypothetical savings scenario and asks about expected after-tax real

Uploaded by

Thu Phương Phạm
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 PDF, TXT or read online on Scribd
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Exercise 1

Following is the information about an assumed economy:

Bien Hoa Sugar Kinh Do Biscuits Hanoi bus BMV car


Year Price Quantity Price Quantity Price Quantity Price Quantity
2016 9 110 18 100 70 30 120 9
2017 10 110 20 95 71 25 125 10
2018 9 120 21 95 72 27 130 10
Suppose that three fourths of the sugar are used to produce biscuits. The base year is 2016.

1. Calculate nominal GDP of 3 years.


2. Calculate real GDP of 3 years.
3. Calculate CPI of 3 years.
4. Calculate DGDP of 3 years.
5. Calculate economic growth rate of 2017 and 2018.
6. Calculate inflation rate of 2017 and 2018.
7. Suppose that the annual population growth rate is 1 percent. How would real income per capita
change in 2018 compared to 2017.

Exercise 2

My father’s salary in 1990 was 15,000,000 dong and now it is 30,000,000 dong. Knowing that the CPI in 1990
was 105 and this year’s CPI is 185, is my father’s salary higher or lower now than it was in 1990? If yes,
estimate how much his salary has changed (as a percentage).

Exercise 3

Suppose that investment tax credit is offered to newly-established firms applying green technology. Use the
model of loanable funds to explain what would happen to interest rate and the quantity of funds exchanged
in the market.

Exercise 4

Suppose you deposited $100 million in a bank account enjoying an interest rate of 10 percent. You then
expected about an inflation rate of 3 percent. The interest from saving is taxed at a rate of 5 percent.

1. What do you expect the after-tax real interest rate to be?


2. If actual inflation rate is 4 percent, what will after-tax real interest rate be? Will you gain or loss from
this deal? Why?

Exercise 5

Suppose that in a hypothetical economy people hold cash at a rate of 20 percent of deposits, the reserve
requirement is 20 percent of deposits, and monetary base is $6,000 billion.

1. What is the money multiplier?


2. What is the money supply?
3. What should the central bank do in the open market if it wants to increase the money supply by $40
billion? Illustrate graphically.
4. How should the central bank change the reserve to deposit ratio to increase the money supply by
$40 billion? Illustrate graphically.

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