Hanoi University of Sicence and Technology
School of Economics and Management
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MACROECONOMICS
1. Economic growth rate and Inflation rate of a contry Z in the period year t – (t+ 6) are as follows:
Criteria Year t t+1 t+2 t+3 t+4 t+5 t+6
Economic growth rate (%) 6.8 6.9 7.1 7.3 7.8 8.4 8.2
Inflation rate CPI (%) -0.3 3.9 3.2 7.7 8.3 7.5
a. Given real GDP of year t is 31.2 billion USD. Calculate real GDP of followig years.
b. Identify price level of each year (compared to the based year t. Suppose CPIt = 100)
c. After 6 years, how many time does price level increase?
2. The following table showns national indicators of country Z:
Criteria Year t t+1 t+2
Economic growth rate (%) 8,0 9,5 2,4
GDP Deflator 250 275 260
Given real GDP of year (t – 1) is 3,020 billion USD
a. Calculate real GDP of following years.
b. Calculate nominal GDP of following years
c. Calculate inflation rate of each year.
3. Given following data:
Unit: Billion USD
1 Gross national product (market price) 496.6
2 Indirect tax 75
3 Depreciation 54.8
4 Net income from abroad 5.6
5 Government subsidy 5.9
a. Calculate: GDP market price and factor price.
b. Net national product as market price and factor price
c. Net national income.
4. Given national account of an simple econmy as follows:
Unit: Million USD
1 Depreciation (De) 350
2 Wage and salary (w) 5.000
3 Interest (i) 500
4 Fixed asset rent (r) 50
5 Profit (π) 450
6 Private investment (I) 750
7 Consumption (C) 5.600
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Indicate how to calcultate GDP and net national product (NNP) by different approaches based
on above data.
5. Given the following data of a closed economy:
Unit: Billion USD
1 Indirect tax 35
2 Disposable income 5.100
3 Net direct tax (Td – TR) 900
4 Consumption 4.600
5 Investment 500
6 Governemt spending 935
a. Indicate different ways to calculate gross domestic product based on these data.
b. Net national product and net national income as market price and factor price.
6. Given the following data of the national system account:
Unit: Billion USD
1. Government consumption: 2,204,405
2. Salaries and other remunerations of employees: 14,434,928
3. Enterprise profit: 5,454,909
4. Household final consumption: 22,153,557
5. Indirect Tax: 2,924,188
6. Depreciation of fixed assets: 1,657,238
7. Export of goods and services: 6,698,776
8. Investment to increase fixed assets: 2,816,971
9. Import of goods and services: 9,567,118
10. Subsidy for consumption: 164,672
11. Net income from foreign assets: 9,619
12. Statistical error:
Calculate the indicators: GDP, GNP, NNP at market prices and at factor price by two approaches:
income approach and consumption approach.
7. Given that the gross domestic product (GDP) (calculated at the market price of year t) of year
(t+1) is 380,623 billions USD, year (t+2) is 384,966 billions USD and year (t+3) is 400,999
billions USD. The goss domestic products caculted at the current price of the year t is 355,329
billions USD. The price index of year (t+1) is 103.5; year (t+2) is 108.5; year (t+3) is 200.
Calculating following indicators for the period year of t – (t+3):
a. Growth rate of nominal GDP.
b. Growth rate of real GDP.
c. Growth rate of price level.
8. Given the following data of the national system account:
Unit: Billion USD
1. Household spending on goods and services: 293,569
2. Government subsidies: 5,883
3. Rent payment for fixed assets: 27,464
4. Net income from foreign assets: 5,619
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5. Government expenditure on goods and services: 91,847
6. Taxes on consumer goods: 75,029
7. Company profit: 77,458
8. Depreciation of fixed assets: 45,918
9. Difference in inventory: 4,371
10. Fixed purchased assets: 88,751
11. Export of goods and services: 108,533
12. Salaries and wages: 292,392
13. Import of goods and services: 125,194
14. Other input accounts: -2,708
Calculate the indicators: GDP, GNP, NNP at market prices and by two approaches: income
approach and consumption approach.
9. Nominal GDP of the year t is 3,305 billion USD and that of the year (t-1) is 3,073 billion USD.
The GDP deflator index of year t is 215.3 and that of year (t-1) is 206 (based year is year t0).
Please identify:
a. Real GDP of the year (t-1), year t based on the price of year t0.
b. GDP growth rate of year t compared to year (t-1)
c. Increase in price level of year t compared to year (t-1)
10. Suppose, a closed economy with a government and the government budget is in balance. If
the government wants to increase its spending by 10 billion USD and to ensure there is no
budget deficit, the government will simultaneously increase tax revenue by 10 billion USD.
What will happen to equilibrium output? (Assume, taxes are independent on income).
11. Assume that in a simple economy, planned consumption expenditure is 150, planned
investment is 50, and total output value is 210. Calcultate:
a. Total planned expenditure.
b. Unexpected inventory
c. Total savings.
d. Please predict what the behavior of manufacturers will be in the near future?
12. Assume a simple economy with a consumption function of C = 0.7Y. Planned investment is 45.
a. What is equilibrium output?
b. If the actual output produced is 100, what unexpected things will happen?
c. Graph the aggregate demand curve (or PE curve) based on the 450 line
13. Assuming a simple economy and the planned investment is 150, people decide to increase
their saving rate from 30% to 50% of their income. This means that the consumption function
changes from C = 0.7Y to C = 0.5Y.
a. How does the equilibrium level of output change?
b. How will aggregate demand (or planned expenditure) and savings change as output
changes?
c. Use an investment-savings diagram to represent equilibrium output. Show the level of
saving and investment at each equilibrium level of output.
14. In a closed economy. Suppose equilibrium output is 1,000; consumption is 800, and
investment is 80.
a. Calculate government spending on purchases of goods and services.
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b. If the marginal propensity to consume from national income is 0.8 and investment
increases by 50, what is the new equilibrium level of output?
c. Assuming the desired equilibrium level of output is 1,200, how should the government
adjust spending on goods and services to achieve this level of output?
15. A closed economy has an output value of 350 billion USD. The net tax rate set by the
government is 20% of the output value. Consumption accounts for 70% of disposable
income YD. Investment is 60 billion USD, government spending is 50 billion USD.
a. Determine the indicators: disposable income, consumption, savings and taxes
corresponding to the above output.
b. Determine aggregate demand and equilibrium output level of the economy.
c. Calculate the government budget deficit corresponding to the equilibrium level of output.
d. Suppose people reduce savings and MPC = 0.8, what indicators change and by how much?
16. Suppose the economy's equilibrium output is 2,000; consumption is 1,400; investment is 400
and MPC is 0.8. Let's calculate:
a. Government spending on goods and services.
b. The new equilibrium level of C, I, G and Y (total income) when investment increases by
100.
c. The new equilibrium level of C, I, G, and Y when government spending increases by 100.
17. In an open economy. Given that the marginal propensity to consume from national income is
0.8 and the marginal propensity to import is 0.4.
a. Suppose investment increases by 100, how will the equilibrium level of output and net
exports change?
b. Suppose exports increase by 100 instead of investment, how will the trade balance
change?
18. In an open economy. Given that the marginal propensity to consume is 0.8 and the marginal
propensity to import is 0.2. The net tax rate is 20% of total income.
a. Suppose investment increases by 100, how will the equilibrium level of output and net
exports change?
b. Suppose exports increase by 150, how will equilibrium output and trade balance change?
c. If government spending increases by 80, how will output and the government budget
change?
19. In the economy, there is a consumption function C = 0.7YD + 10; Investment I = 60;
Disposable income YD = 0.8Y; Government spending G = 40; value of exported goods and
services X = 20; marginal propensity to import MPM = 0.1.
a. What is the state of the government budget and the equilibrium level of output?
b. To balance the government budget, what must be the tax rate?
c. What is the current state of the trade balance? Trade balance occurs when what is
output?
20. In an economy, the marginal propensity to consume MPC = 0.7; Minimum consumption
equals 20; investment is 50. Government spending is 30 and exports are 30, marginal
propensity to import is 10%. The government collects a tax of 20% of output.
a. Calculate the economy's equilibrium output.
b. If the marginal propensity to save is 0.2, how does equilibrium output change?
c. The government increases planned expenditure by an amount of 10 and to encourage
production, the tax rate was reduced to 10%. Determine the current government budget
and trade balance.
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21. Suppose a simple economy has a planned investment of 300. The population increases its
savings rate from 20% to 30%.
a. How will the equilibrium level of output, total consumption expenditure, and saving
change? Know that the minimum level of consumption does not change and is equal to 150.
b. Suppose, there is government participation in the economy and government’s tax rate is
20% and government spending is 200, what is the current government budget? To have a
budget balance, what must the tax rate be?
c. If the economy has relationship with foreign countries, the value of exported goods is 100
and the marginal propensity to import MPM = 0.1, what is the trade balance? What is the
economy's equilibrium level of output?
22. Suppose the required reserve ratio for commercial banks is 10% of deposits. People hold cash
in circulation equal to 20% of their deposit. The amount of cash (monetary base) is 20 trillion
USD.
a. Calculate the money supply in case commercial banks do not have excess of cash reserves.
b. Assuming commercial banks have a surplus of unloanable money equal to 3% of deposits,
what is the money supply level?
c. When the Central Bank performs open market operations and sells government bonds worth
2 trillion USD, how does the money supply change?
23. Assuming the public holds cash equal 40% of their bank deposits, commercial banks decide to
keep 5% of deposits in cash to meet customers’ demand. The amount of cash is 12 trillions
USD
a. What is the money supply?
b. How will the money supply change if the Central Bank imposes a cash reserve ratio of 10%.
c. If the Central Bank raises the discount rate and Commercial banks decide to hold an
additional 5% of their deposits in cash, how will money supply change?
d. How much will the money supply change if the Central Bank conducts open market
operations and reduces cash by 1 trillion USD?
24. Given hypothetical data about the balance sheet of the commercial banking system (Unit:
trillion USD)
Asset Liability
Reserve : 500 Deposit: 3,000
Gov. Bond: 2,500
a. Suppose, reserve ratio of commercial bank is 1/6 of deposit and the cash ratio of public is
4. Calculate the following indicators:
• Monetary multiplier
• Monetary base
• Money supply
b. Suppose the Central Bank buys bonds from the commercial banking system worth 2,500
(billions USD) and the commercial banking system lends all excess reserves. Calculate
the following metrics:
• Monetary base
• Money supply
• Cash outside the bank (cash in circulation)
• Checkable deposits
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• Actual reserves of commercial banks
• Total loan amount of the commercial banking system
25. The monetary market is characterized by the following parameters:
(M/P)d = kY – hi; Y = 6,000 billion USD; k = 0.2; h = 5; MS/P = 70 billion USD. P = 1
a. Determine the equilibrium interest rate.
b. Draw the corresponding monetary market graph
c. Suppose income decreases by 100 billion USD. Determine the new equilibrium interest
rate
d. Describe the change in the money market when income decreases in part c.
26. Money demand function: (M/P)d= 1,000 – 100R
In which: R is the interest rate (%). The money supply is equal to 1,000 and the price level is
equal to 2.
a. Draw a graph of money supply and money demand.
b. What is the equilibrium interest rate?
c. Assuming the price level remains unchanged, what happens to the equilibrium of interest
rate if the money supply increases from 1,000 to 1,200?
d. If the Central Bank wants to raise interest rates to 7%, what level of money supply must
be?
27. How do the following factors affect the real money demand and the interest rate in the
monetary market?
+ Increase real income
+ Increases the opportunity cost of holding money.
+ Optimistic about the future
+ Reduce price level
+ Increases the uncertainty of future transactions
+ An increase in the monetary base due to central bank ‘s OMO activity
+ Increase costs for bond trading transactions
+ Increase bond interest rates
Illustrate your answers by graphs.
28. The commodity and monetary markets of a closed economy are presented in the form of
functions and parameters as follows:
C = C0 + MPC (Y – NT); I = I0 – nR; NT = tY;
In which: C0 = 700; I0 = 400; MPC = 0.8; G = 649; n = 15; t = 0.2. I0 is autonomous
investment (independent on interest rates).
Demand for money: (M/P)d = N + hY – mR; Supply of money MS = 1,200
R is the interest rate; N is the autonomous demand for money; N = 200; h = 0.25; P = 1
a. Establish the IS – LM equation.
b. Determine the equilibrium income and interest rate and draw the graph.
c. Calculate consumption, investment, government spending, and money demand targets.
d. Suppose government spending increases by 50. Determine the new equilibrium income
and interest rate. Draw a graph and show the shifts in the IS and LM curves
e. Ask the same question as question d for the case where the money supply increases by
100.
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29. Suppose the good market and monetary market are represented by the following equations
and figures:
Consumption expenditure: C = 500 + 0.8 (1-0.2)Y
Investment: I = 500 – 15R; Government expenditure is 600.
Money demand is (MP/P) = 0.8Y – 10R; Nominal money supply is 7,000; Price level P = 2
a. Find the IS and LM equations.
b. Calculate the equilibrium output level and interest rate.
c. Calculate the equilibrium output and interest rate with price levels 1.8; 2.2; 2.5. Construct
the macro aggregate demand curve.
d. Write the equation for the macroeconomic aggregate demand curve.
30. Suppose the economy is in long-run equilibrium. The government's goal is to keep prices
stable, accepting variable output. Using fiscal and monetary policies, how can the government
deal with the following situations (illustrated by graph):
a. Private investment increased suddenly
b. Oil prices increased
c. Defense spending decreased
d. Labor productivity decreased.
31. Suppose the government wants to increase investment, but keep the quantity of output
unchanged. In the IS – LM model, what is combination of monetary and fiscal policies that
allows achieving this goal? In the early 1980s, the U.S. government adopted a policy of tax
cut and had a budget deficit, while the Federal Reserve pursued a tightening monetary policy.
What is the synthesis effect of these policies?
32. An economy has a Phillips curve: π = π -1 – 0.5 (u – 0.06).
a. What is the natural unemployment rate?
b. Draw a graph depicting the short-run and long-run relationship between inflation and
unemployment.
c. To cut inflation by 5%, what must unemployment be? Use Okun's law to calculate the
trade-off ratio.
(Okun's Law: % change in real GDP = 3% - 2 x Change in unemployment rate).
33. Good markets: C = 200 + 0.8Y; I = 400 – 20R; G = 700
Monetary market: (M /P) = 2Y + 1,000 - 200R;
d M = 11,000
S
a. Set up the aggregate demand (MAD) equation and draw the graph.
b. Suppose the function of supply curve is : Y = Yn + α (P – Pe)
Given Yn = 5,500; Pe = 1.0; α = 1,000
Draw the aggregate supply curve.
c. Calculate the short-run equilibrium price and output. What is the state of the economy?
d. Let Un = 4% and 1% a change in unemployment leads to a 2% change in output (opposite
side). Calculate the unemployment rate.
e. Suppose the government increases spending by ΔG = 100, how does short-run equilibrium
change? What are the long-run output and price levels?
34. The figure below describes the labor market of an economy:
a. What is the equilibrium real wage?
b. Determine the number of employed people and unemployed people.
c. In this case, what is the natural unemployment rate and the number of involunteer
unemployed people? Suppose real wage is OA.
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d. Determine the number of employed people, unemployed people and involunteer
unemployed people.
e. How does the labor market react?
f. Explain why there is a relationship between the number of employed people and aggregate
supply?
g. What does the fact that the labor market is always in equilibrium mean for aggregate
supply?
W/P
LD LS LF
Number of labor
O D E F G H JK
Figure: Labour market
