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the household
the firm
the government, and
the rest of the world.
2.
3.
Price Index
Nominal GNP
Real GNP
1.00
3,170
3,170
1.10
3,205
2,914
1.15
3,450
3,000
1.20
3,560
2,966
1.30
4,230
3,254
4230 - 3560
3560
= 19%
3254 - 2966
2966
= 9.7%
Expenditure Approach
The expenditure approach is the only method
used by the free world in calculating national
output (GNP and GDP).
Expenditure Approach
1.
GDP = C + I + G + (X M)
where:
GDP = Gross Domestic Product
C = Private Consumption
I = Private Investment
G = Government Expenditure
2.
Expenditure Approach
3. NNP = GNP TDE
Where:
NNP = Net National Product
TDE = Total Depreciation Expense
in the economy
for the year in consideration
4. NI = NNP VAT
Where:
NI = National Income
VAT= Value Added Tax
Expenditure Approach
5.
6.
DI = PI PTX
Where:
DI = Disposable Income
PTx = Personal Taxes
7.
PSY = DI PS
Where:
PSy = Personal Savings
PS = Personal Spending
y = Represents Income (Symbol for Income)
Exercise 2.1
1.
2.
3.
4.
5.
6.
Exercise 2.2
Choose the letter of the hypothetical graph that represents the given
situation.
_____ 1. Aggregate demands for households
_____ 2. Different components of aggregate demand
_____ 3. Decrease in aggregate demand because of monetary policy that
pushes households to save because interest have increased
_____ 4. Increase of investment opportunities
_____ 5. Changes in price of private consumption
_____ 6. Income in export of our agricultural products to foreign markets
_____ 7. The effects of 91 incident to private investment
_____ 8. The effects of inflation rate increase
_____ 9. Government spending behavior when revenue target is not met
_____ 10.
Imposition of customs duties on imports
Exercise 2.3
The GDP Deflator Analysis
Read and understand the case. This is a case of a hypothetical carrot and potato economy. You can
present your answer in a table form so that you can track the differences of values and you will know the
values for substitution.
Given: Year: 2001, 2002, and 2003
Prices:
Exercise 2.3
Requirements:
1. Prepare nominal GDP table.
2. Prepare real GDP table.
3. Prepare consumer index price table.
4. Prepare the computation of inflation rate for 2002 and 2003.
Exercise 2.4
Classify whether the given situations fall on Consumption,
Investment, Government Spending, Import or Export.
1. Transfer payment such as Health Insurance of Retirees
2. Construction of Mababaw na Ilog Bridge
3. 3.8 million tons of mangoes for a Mexican Company
4. Night vision goggles for soliders in Basilan
5. Purchase of different electronics of Mr. and Mrs. Casal
6. Monthly pension for Mr. Magaling and Ms. Matulin
7. Repair of North Diversion Road
8. Operation and maintenance of PGH
9. Salaries of public school teachers
10. Allotment of OFW children from parents abroad
Exercise 2.5
Make use of the table on next page to plot your GDP accounts for 2002. Assume that all
transactions are within 2002.
Given:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
RP said Cathay Pacific charged $ 4,300 for the fare expenses of Philippine Olympic delegates.
Gregorio who is a farmer of Pangasinan bought a tractor worth 18,500 from an importer.
Sec. Angelo Reyes bought two warplanes worth $ 2.1 M.`
Grace is BPI teller who received 11,500 as mid year bonus and bought a DVD worth 10,800
Non-Trade, an importing company collected $ 65,000 from Yuki Enterprise.
Quarterly allowance of Jarr for her school needs which is 2,750 when she was 1st year ASC
student in2000
Mando earns 12,000 a month as a masseur and spends it all
for his need.
P.GMA pays Paulo Cabral 560,000 for the official wardrobe used in local and international
functions.
Agricultural subsidies for Negros farmers affected by typhoon Gloring worth 6,758,250
Consultancy Fee for the evaluation of the 25 years program of the Department of Tourism was
paid to TPI in the amount of $ 20 M, which will be charged in four equal payments starting 2002.
Exercise 2.6
Compute for the GDP deflator, CPI, and
Inflation rate based on the following data give.
Construct the necessary table to set an orderly
computation.
Chocnut
Belekoy
Y 1995
1.25
1.75
Y 2000
25% more
.25 more
Y 2001
.15 more
35% more
Q 1999
1,250
Q 540
Q 2000
25% more
Q 100%
Q 2001
5% less
Q plus 10
Exercise 2.6
Base for real GDP is 1999
Base for CPI is 1999
Base for inflation is 1999
Exercise 2.7
1.
2.
When the expenditure approach is used to measure0 GDP, the major components of GDP
are _________________.
a.
b.
c.
d.
3.
Assume that between 2000 and 2008, nominal GDP increased from 5 trillion to 8.3 trillion
and that the price index rose from 100 to 140. Which of the following expresses GDP for
2000 in terms of 2008 prices?
a.
b.
c.
d.
5.93 trillion
7 trillion
8.3 trillion
11.63 trillion
Exercise 2.7
4.
a.
b.
c.
d.
Which of the following would not be counted as part of this years GDP?
The paint you buy to paint your house
The government bond you receive as a birthday present
The purchase of an IBM computer (produced during the year) by the U.S. Government
The purchase wheat (produce during the year by a Kansas farmer) by the Russian Government
5.
a.
b.
c.
d.
6.
Which of the following best describes the difference between gross domestic product and gross national
product?
GDP measures output produced within domestic borders, while GNP measures output produced by
domestic citizens.
GDP measures output produced by domestic citizens within domestic borders, while GNP measures all
output produced within domestic borders.
GDP measures output produced by domestic citizens, while GNP measures output produced within
domestic borders
GDP measures all output produced within domestic borders, while GNP measures output produced by
domestic citizens within domestic borders
a.
b.
c.
d.
Exercise 2.7
7.
a.
b.
c.
d.
8.
a.
b.
c.
d.
Exercise 2.7
9.
a.
b.
c.
d.