Introduction to Economics - II (Midterm)
1. Suppose that the autonomous investment increases by 200 billion in the company. Assuming that the marginal income tax rate (t) is 10%, marginal propensity to consume is (mpc) 90% and marginal propensity to import (m) is 6 %. Having this information:
a) Calculate marginal propensity to spend out of national income
b) Calculate the size of multiplier
c) Calculate the change in national income
2. Assume that national income is at its equilibrium level. Suppose the government has decreased income tax rates. Show and explain how this can affect national income equilibrium level.
3. You are given the following annual data for an economy:
|
wages and salaries |
140 |
indirect taxes |
15 |
|
interest |
30 |
consumption expenditure |
130 |
|
rent |
50 |
investment expenditure |
90 |
|
profit |
30 |
government expenditure on goods |
50 |
|
imports |
70 |
government transfer payments |
5 |
|
exports |
60 |
depreciation |
3 |
|
income taxes |
30 |
net factor income form abroad |
4 |
|
|
|
subsidies |
5 |
a) GDP at market prices by using expenditure method
b) GDP at factor cost by using income method
c) GNP at market prices
d) Net domestic income at factor cost
e) Disposable income at factor cost
4. Do you think national income statistics are good indicator of a country's standard of living?
5. Short answer questions:
a) What are the main costs of inflation?
b) What is economic growth?
c) What is unemployment?
d) Suppose that the general price level was 1500 at the end of 1997 and it was 2250 at the end of 1998. What is the inflation rate for 198
e) Define marginal propensity to save and average propensity to consume.