# Unit III Macro Economics Homework

See attached. Must be 3-4 Pages1. Income Approach to GDP. How does the income approach to measuring GDP differ from the expenditure approach? Explain the meaning of value added and its importance in the income approach. Consider the following data for the selling price at each stage in the production of a 5lbd bad of flour sold by the grocer. Calculate the final market value: Stage of Production Sale Price Farmer .30 Miller .50 Wholesaler 1.00 Grocer 1.50 2. Expenditure Approach to GDP Given the following annual info about hypothetical counter answer a-d Billions of dollars Personal consumption expenditures \$200 Personal taxes 50 Exports 30 Depreciation 10 Government purchases 50 Gross private domestic investment 40 Imports 40 Government Transfer payments 20 a. What is the value of GDP b. What is the value of net domestic product? c. What is the value of net investment? d. What is the value of net exports? 8. Consumer Price Index Calculate a new consumer price index for the data in the follow exhibit. Assume the current year prices of Twinkies, fuel oil and cable are .95/package, 1.25/gall, and 15.00 per month. Calculate the current years cost of the market basket and the value of the current years price index. What is this year’s percentage change in the price level compared to the base year? Product Quantity in market Price base Cost of basket in base year current yr price Cost of basket current year Twinkies 365 packages .89/pkg 324.85 .79 288.35 Oil 500 gal 1.00/gal 500.00 1.50 750.00 Cable 12 mo. 30/mo. 360.00 30.00 360.00 1184.85 1398.35 9. Consumer Price Index Given the following data what was the value of consumer price index in the base year? Calculate the annual rate of consumer price inflation in 2013 in each of the following: a. CPI =200 in 2012 and 240 in 2013 b. CPI = 150 in 2013 & 175 in 2013 c. CPI = 325 in 2012 and 340 in 2013 d. CPI = 325 in 2012 & 315 in 2013 3. Aggregate demand and supply How do aggregate demand and supply curves differ from market curves? 6. Supply-Side Economics. One supply side measure introduced by the Reagan administration was a cut in income tax rates. Use an aggregate demand/aggregate supply diagram to show what effect was intended. What might happen if such a tax cut?