ECN1033 MACROECONOMICS DECEMBER
2015/2016
ASSIGNMENT 1
The data below shows the value of economics activities of a country in 2014
Items RM (Million) Items RM (Million)
Consumption expenditure 250 Dividend 4
Exports 60 Corporate profits 45
Government consumption 75 Personal interest income from 35
and investment government and households.
Net private domestic 100 Subsidies 5
investment
Personal income tax 60 Receipts of factor income from 4
abroad
Imports 50 Payment of factor income to 5
abroad
Depreciation 50 Indirect taxes 20
Social insurance payment 35 Transfer payment 15
Based on the above information calculate the:
a. Gross Private Domestic Investment
b. Net export
c. Gross Domestic Product
d. Gross National Product
e. Net National Product
f. National Income
g. Personal Income
h. Disposable Personal Income
SUBMIT ON 27 JANUARY 2016 (WEDNESDAY)
1
ECN1033 MACROECONOMICS DECEMBER
2015/2016
ASSIGNMENT 1
The data below shows the value of economics activities of a country in 2014
Items RM (Million) Items RM (Million)
Consumption expenditure 250 Dividend 4
Exports 60 Corporate profits 45
Government consumption 75 Personal interest income from 35
and investment government and households.
Net private domestic 100 Subsidies 5
investment
Personal income tax 60 Receipts of factor income from 4
abroad
Imports 50 Payment of factor income to 5
abroad
Depreciation 50 Indirect taxes 20
Social insurance payment 35 Transfer payment 15
Based on the above information calculate the:
i. Gross Private Domestic Investment
j. Net export
k. Gross Domestic Product
l. Gross National Product
m. Net National Product
n. National Income
o. Personal Income
p. Disposable Personal Income
SUBMIT ON 27 JANUARY 2016 (WEDNESDAY)
2
ECN1033 MACROECONOMICS DECEMBER
2015/2016
ANSWER SCHEME
Chapter 2: National Income Accounting
a. Gross Private Domestic Investment
= Net private domestic
+ Depreciation
investment
=100 +50
=150
b. Net export
=Export−import
=60−50
=10
c. Gross Domestic Product
=C+I +G+ ( X−M )
=250+100+75+10
=435
d. Gross National Product
=GDP + Net Factor Income
From
Abroad
=435 + ( 4−5 )
=434
e. Net National Product
=GNP−Depreciation
=434−50
=384
f. National Income
=NNP−tax+subsidies
=384−20+5
=369
g. Personal Income
=NI+transfer payment + personalInterestIncomefromGovt∧HH −( corp Pr ofit−Div )−socialInsPmt
=369+15+35−( 45−4 ) −35
=343
h. Disposable Personal Income
=PI−PI Tax
=343−60
=283
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ECN1033 MACROECONOMICS DECEMBER
2015/2016
QUESTION 2
The following schedule shows the national income data for a economy in the year 2009.
Items RM (Million)
Construction 17321
Manufacturing 138809
Agriculture 39992
Mining and gas 40246
Banking and insurance 61210
Wholesale and retail 69498
Other services 31580
Taxes on expenditure 650
Factor payment abroad 7800
Capital consumption 360
Factor payment from abroad 6600
Based on the above information calculate the:
a) Gross Domestic Product at market price
b) Gross Domestic Product at factor cost
c) Gross National Product at market price
d) Net National Product at market price
e) National Income
4
ECN1033 MACROECONOMICS DECEMBER
2015/2016
QUESTION 3
The following schedule shows the national income data for an economy in the year 2005.
ITEMS RM (million)
Transfer payments 456
Subsidies 30
Employment Provident Fund 325
Capital consumption allowance 110
Corporate Taxes 40
Dividends 52
Exports 366
Government Expenditure 633
Imports 571
Indirect Taxes 401
Investment 582
Consumption 1705
Receipts of factor income from the rest of the world 45
Personal Income Taxes 392
Payments of factor income to the rest of the world 72
Compute:
a) Gross Domestic Product at Market Price
b) Gross National Product at Factor Cost
c) National Income
d) Personal Income
e) Disposable Personal Income
5
ECN1033 MACROECONOMICS DECEMBER
2015/2016
QUESTION 4
The economy of the Banana Republic produces three types of goods. The following table shows
the quantities and the prices for those goods.
Clothes Fabric Cotton
Year Price Quantity Price Quantity Price Quantity
(RM) (RM) (RM)
2012 15.00 583 8.00 867 3.00 1,521
(Base Year)
2013 15.60 621 9.00 806 4.30 1,401
2014 19.00 470 10.00 808 5.00 1,115
Assuming that the base year is 2012, calculate:
a. Real GDP for the years 2012, 2013 and 2014.
b. Nominal GDP for the years 2012, 2013 and 2014.
c. GDP Deflator for the years 2012, 2013 and 2014.
d. The inflation rate from 2013 to 2014.
6
ECN1033 MACROECONOMICS DECEMBER
2015/2016
QUESTION 1
Assume that the country of Gotham produced only three types of goods. The table below shows
the information on quantity and price for each good:
Books Marker Pen Stapler
Year Price (RM) Quantity Price (RM) Quantity Price (RM) Quantity
2012 30.00 1020 10.00 950 4.00 610
2013 32.00 1550 11.00 1400 5.00 740
2014 40.00 3740 12.00 1960 6.00 920
Based on the information given above, calculate:
a. Nominal GDP for 2013 and 2014.
b. Real GDP for 2013 and 2014 using 2012 as a base year.
c. GDP deflator for 2014.
QUESTION 2
Year Quantity Price (RM) Nominal GDP Real GDP GDP Deflator
2009
10 18.00 180 180 100
(Base Year)
2011 23 25.00
2012 29 32.00
2013 50 45.00
a. Complete the table above. (Round your answer up to 2 decimal points)
b. Calculate inflation rate for 2013 and 2012. (Round your answer up to 2 decimal points)
7
ECN1033 MACROECONOMICS DECEMBER
2015/2016
QUESTION 1
a. Nominal GDP for 2013 and 2014.
2013 2014
= (32×1550) + (11×1400) + (5×740) = (40×3740) + (12×1960) + (6×920)
= 49,600+15,400+3,700 = 149,600+23,520+5,520
= 68,700 = 178,640
b. Real GDP for 2013 and 2014 using 2012 as a base year.
2013 2014
= (30×1550) + (10×1400) + (4×740) = (30×3740) + (10×1960) + (4×920)
= 46,500+14,000+2,960 = 112,200+19,600+3,680
= 63,460 = 135,480
c. GDP deflator for 2014.
Nominal GDP
= Real GDP × 100
178,640
= 135,480 × 100
= 131.86%
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ECN1033 MACROECONOMICS DECEMBER
2015/2016
QUESTION 2
a.
Nominal GDP
Year Quantity Price (RM) Real GDP
GDP Deflator
2009
(Base 10 18.00 180 180 100
Year)
2011 23 25.00 575 414 138.89
2012 29 32.00 928 522 177.78
2013 50 45.00 2250 900 250
b. Calculate inflation rate for 2013 and 2012. (Round your answer up to 2 decimal points)
2013
GDP Deflator 2013−GDP deflator 2012
= × 100
GDP defaltor 2012
250−177.78
= × 100
177.78
= 40.62%
2012
GDP Deflator 2012−GDP deflator 2011
= × 100
GDP defaltor 2011
177.78−138.89
= × 100
138.89
= 28%
9
ECN1033 MACROECONOMICS DECEMBER
2015/2016
FINAL EXAMINATION MAY SESSION 2014/2015
QUESTION 1 : 15 MARKS
The following schedule shows the national income data for an economy in the year 2005.
ITEMS RM (million)
Transfer payments 315
Subsidies 28
Social Insurance Payments 238
Depreciation 105
Corporate Taxes 35
Undistributed Corporate Profits 49
Exports 133
Government Purchases 448
Imports 147
Indirect Taxes 371
Private Investment 490
Personal Consumption Expenditure 1377
Receipts of factor income from the rest of the world 22
Personal Income Taxes 392
Payments of factor income to the rest of the world 43
Compute:
a) Gross domestic product at market price.
(3 marks)
b) Gross national product at factor cost.
(3 marks)
c) National income.
(3 marks)
d) Personal income.
(3 marks)
e) Disposable personal income.
(3 marks)
10
ECN1033 MACROECONOMICS DECEMBER
2015/2016
ANSWER SCHEME
a) Gross Domestic Product at Market Price
GDPMP= C + I + G + (X-M)
= 1377 + 490 + 448 + (133-147)
= RM2301
b) Gross Domestic Product at Factor Cost
GDPFC = GDPMP + Subsidies – Indirect Taxes
= 2301 + 28 – 371
= RM1958
c) Gross National Product at Factor Cost
GNPFC = GDPFC + Net Factor Income from Abroad
= 1958 + (22-43)
= RM1937
d) National Income
NI = GNPFC – Depreciation
= 1937-105
= RM1832
e) Personal Income
PI = NI + Transfer Payment-EPF- Corporate Taxes - Undistributed Corporate
Profits
= 1832 + 315 – 238 – 35 – 49
= RM1825
f) Disposable Personal Income
DPI = PI - Personal Income Taxes
= 1825 – 392
= RM1433
11
ECN1033 MACROECONOMICS DECEMBER
2015/2016
Chapter 2: National Income Equilibrium
QUESTION 1
Consumptio
Disposable Income Saving APC APS MPC MPS
n
0 -40 - - - -
50 -20
100 0
150 20
200 40
250 60
a. Complete the schedule above.
b. Derive the consumption and saving function based on the above information.
c. Show the consumption and saving schedules graphically and locate the breakeven level of
income.
d. What happen to saving when disposable income is less than RM100?
QUESTION 2
Given a 3-sector economy where:
Consumption = RM400 + 0.5Yd
Investment = RM950
Government Expenditure = RM800
Tax = RM 300
(All values are in RM Million)
a. Calculate the equilibrium income level for this economy using AD-AS approach.
b. Find the total savings at the equilibrium income level.
c. Suppose tax is now T = 0.2Y,
i. Derive the new consumption function.
ii. Using Leakage-Injection approach, determine the new equilibrium level of
income and draw the graph to locate the new equilibrium income.
iii. Find new equilibrium income when investment increasing by RM50 million.
12
ECN1033 MACROECONOMICS DECEMBER
2015/2016
QUESTION 3
National Income Consumption Saving
(Y) (C) (S)
(RM million) (RM million) (RM million)
300 -50
400 -25
500 0
600 25
700 50
800 75
900 100
1000 125
a. Complete the table above.
b. Calculate the marginal propensity to consume (MPC) and marginal propensity to save
(MPS).
c. Construct consumption function if the autonomous consumption is RM100.
d. Calculate the equilibrium national income if the amount of investment is RM140 million.
e. Using the multiplier concept, what is the new equilibrium income for this two-sector
economy if the consumption decreasing by RM50 million?
QUESTION 4
Given a 3-sector economy where:
Consumption = RM200 + 0.8Y
Investment = RM150
Government Expenditure = RM200
Tax = RM100
(All values are in RM Million)
a. Calculate the equilibrium income level for this economy using AD-AS approach.
b. Find new equilibrium income when government expenditure increasing by RM150 million
using the multiplier concept.
c. Suppose tax is now T = 0.5Y.
i. Derive the new consumption function.
ii. Using Leakage-Injection approach, determine the equilibrium level of income.
13
ECN1033 MACROECONOMICS DECEMBER
2015/2016
ANSWER SCHEME
Chapter 2: National Income Equilibrium
QUESTION 1
Consumptio
Disposable Income Saving APC APS MPC MPS
n
0 40 -40 - - - -
50 70 -20 1.4 -0.4 0.6 0.4
100 100 0 1.00 0 0.6 0.4
150 130 20 0.87 0.13 0.6 0.4
200 160 40 0.8 0.2 0.6 0.4
250 190 60 0.76 0.24 0.6 0.4
a. Complete the schedule above.
b. Derive the consumption and saving function based on the above information.
C = 40 + 0.6Yd S = -40 + 0.4Yd
c. Show the consumption and saving schedules graphically.
C
Y = AD
C = 40 + 0.6Yd
40
National Income
S 100
S = -40 + 0.4Yd
National Income
100
-40 Breakeven income
d. Locate the breakeven-level of income. What happen to saving when disposable income is
less than RM100?
Breakeven income shows on the graph above. When disposable income is less than
RM100, consumption exceeds disposable income and saving is negative or there is
dissaving.
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ECN1033 MACROECONOMICS DECEMBER
2015/2016
QUESTION 2
a. Calculate the equilibrium income level for this economy using AD-AS approach.
Y =C+I+G
Y = RM400 + 0.5(Y-300) + RM950 + RM800
Y = RM2150 + 0.5Y – 150
Y = 2000 + 0.5Y
Y – 0.5Y = RM2000
0.5Y = RM2000
Y = RM4000
b. Find the total savings at the equilibrium income level.
S = -400 + 0.5 (Y-T)
S = - 400 + 0.5 (4000-300)
S = RM1450
c. Suppose tax is now T = 0.2 Yd
i. Derive the new consumption function.
C = 400 + 0.5(Y-0.2Y)
C = 400 + 0.5(0.8Y)
C = 400 + 0.4Y
ii. Using Leakage-Injection approach, determine the new equilibrium level of
income and draw the graph to locate the new equilibrium income.
S+T =G+I
-400 + 0.5(Y-0.2Y) + 0.2Y = 800 + 950
-400 + 0.5(0.8Y) + 0.2Y = 1750
-400 + 0.6Y = 1750
0.6Y = 1750+400
0.6Y = 2150
Y = 2150/0.6
Y = 3583.33
d. Find new equilibrium income when investment increasing by RM50 million.
ΔY = k × ΔI New equilibrium income = RM83.33+ RM3583.33
= RM3666.67
1
ΔY = × ΔI
1−MPC
1
ΔY = × 50
1−0.4
15
ECN1033 MACROECONOMICS DECEMBER
2015/2016
ΔY = 83.33
QUESTION 3
a.
National Income Consumption Saving
(Y) (C) (S)
(RM million) (RM million) (RM million)
300 350 -50
400 425 -25
500 500 0
600 575 25
700 650 50
800 725 75
900 800 100
1000 875 125
b. Calculate the marginal propensity to consume (MPC) and marginal propensity to save
(MPS).
425−350
MPC = MPS = 1 - 0.75
400−3 00
= 0.25
= 0.75
c. Construct consumption function if the autonomous consumption is RM100.
C = a + bYd
= 100 + 0.75Y
d. Calculate the equilibrium national income if the amount of investment is RM140 million.
Y =C+I
= 100 + 0.75Y + 140
= 240 + 0.75Y
Y- 0.75Y = 240
0.25Y = 240
Y = 240/0.25
Y = RM960
e. Using the multiplier concept, what is the new equilibrium income for this two-sector
economy if the consumption decreasing by RM50 million?
1
ΔY = × ΔI New equilibrium income = RM960-200
1−MPC
= RM760
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ECN1033 MACROECONOMICS DECEMBER
2015/2016
1
ΔY = × (-50)
1−0.75
ΔY = 4 × (-50)
= - 200
QUESTION 4
a. Calculate the equilibrium income level for this economy using AD-AS approach.
Y =C+I+G
Y = RM200 + 0.8(Y-100) + RM150 + RM200
Y = RM550 + 0.8Y – 80
Y = 470 + 0.8Y
Y – 0.8Y = RM470
0.2Y = RM470
Y = RM2350
b. Find new equilibrium income when government expenditure increasing by RM150 million.
1
ΔY = × ΔI
1−MPC
1
ΔY = × 150
1−0.8
ΔY = 750
New equilibrium income = RM750+ RM2350
= RM3100
c. Suppose tax is now T = 0.5Y.
i. Derive the new consumption function.
C = 200 + 0.8(Y-0.5Y)
C = 200 + 0.8(0.5Y)
C = 200 + 0.4Y
ii. Using Leakage-Injection approach, determine the new equilibrium level of
income.
S+T =I+G
-200 + 0.2(Y-0.5Y) + 0.5Y = 150 + 200
-200 + 0.2(0.5Y) + 0.5Y = 350
-200 + 0.6Y = 350
0.6Y = 350+200
0.6Y = 550
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ECN1033 MACROECONOMICS DECEMBER
2015/2016
Y = 550/0.6
Y = 916.67
18
