Macroeconomic Data for a Country in 2012
Question 1 – 10 marks The table lists some macroeconomic data for a country in 2012. Item | Billions of dollars | Wages paid to labour | 850 | Consumption expenditure | 1,100 | Profit, interest and rents | 340 | Investment | 170 | Government expenditure | 310 | Net exports | −54 | (a) Calculate the country’s GDP in 2012. (1 mark) (b) Explain the approach (expenditure or income) that you used to calculate GDP. (1 mark)
An economy produces only apples and oranges. The base year is 2011, and the table gives the quantities produced and the prices. Quantities | 2011 | 2012 | Apples | 70 | 95 | Oranges | 85 | 110 | | | | Prices | 2011 | 2012 | Apples | $0.75 | $1.10 | Oranges | $0.50 | $1.00 | (c) Calculate nominal GDP in 2011 and 2012. (1 mark) (d) Calculate real GDP in 2011 and 2012 expressed in base-year prices. (2 mark)
The tables describe an economy’s labour market and its production function in 2010. Real wage rate
(dollars per hour) | Labour hours supplied | Labour hours demanded | | Labour
(hours) | Real GDP
(2005 dollars) | 80 | 45 | 5 | | 5 | 425 | 70 | 40 | 10 | | 10 | 800 | 60 | 35 | 15 | | 15 | 1,125 | 50 | 30 | 20 | | 20 | 1,400 | 40 | 25 | 25 | | 25 | 1,625 | 30 | 20 | 30 | | 30 | 1,800 | 20 | 15 | 35 | | 35 | 1,925 | (e) What are the equilibrium real wage rate, the quantity of labour employed in 2010, labour productivity and potential GDP in 2010? (1 mark) (f) In 2011, the population increases and labour hours supplied increase by 10 at each real wage rate. What are the equilibrium real wage rate, labour productivity and potential GDP in 2011? (2 mark) (g) In 2011, the population increases and labour hours supplied increase by 10 at each real wage rate. Does the standard of living in this economy increase in 2011? Explain why or why not. (2 mark)
Answer
(a) GDP = C + I + G + (X –M) = 1,100 + 170
An economy produces only apples and oranges. The base year is 2011, and the table gives the quantities produced and the prices. Quantities | 2011 | 2012 | Apples | 70 | 95 | Oranges | 85 | 110 | | | | Prices | 2011 | 2012 | Apples | $0.75 | $1.10 | Oranges | $0.50 | $1.00 | (c) Calculate nominal GDP in 2011 and 2012. (1 mark) (d) Calculate real GDP in 2011 and 2012 expressed in base-year prices. (2 mark)
The tables describe an economy’s labour market and its production function in 2010. Real wage rate
(dollars per hour) | Labour hours supplied | Labour hours demanded | | Labour
(hours) | Real GDP
(2005 dollars) | 80 | 45 | 5 | | 5 | 425 | 70 | 40 | 10 | | 10 | 800 | 60 | 35 | 15 | | 15 | 1,125 | 50 | 30 | 20 | | 20 | 1,400 | 40 | 25 | 25 | | 25 | 1,625 | 30 | 20 | 30 | | 30 | 1,800 | 20 | 15 | 35 | | 35 | 1,925 | (e) What are the equilibrium real wage rate, the quantity of labour employed in 2010, labour productivity and potential GDP in 2010? (1 mark) (f) In 2011, the population increases and labour hours supplied increase by 10 at each real wage rate. What are the equilibrium real wage rate, labour productivity and potential GDP in 2011? (2 mark) (g) In 2011, the population increases and labour hours supplied increase by 10 at each real wage rate. Does the standard of living in this economy increase in 2011? Explain why or why not. (2 mark)
Answer
(a) GDP = C + I + G + (X –M) = 1,100 + 170