Sukkur Institute of Business Administration

Assignment # 1

Class: BBA-II Section: A,B &C Course: Principles of Macro Economic

Teacher: Ashfaque Ali Gilal Due Date: 26-01-2013

Note: Precise answers in own words supported with Graphs and examples will highly be
appreciated

Transfer Payments $54 Interest Income $150 Depreciation $36 Wages $67 Investment (I) $124
Business Profits $200 Indirect Taxes $74 Rental Income $75 Net Export $18 Net Factor payment $12
Government Purchases (G) $156 Household Consumption (C) $304

Question:1: Consider the above information in table and calculate;

(a) GDP with income and expenditure approach.(b) GNP (c) NNP(d) Current Account Balance
(e) National Income (f) National Saving (g) Private saving (h) Govt: Saving

Question: 2: Consider the following tables showing the information of economy in Base & Current
years.

Base Year

Item Quantity Price

Apple 3000 $2
Banana 6000 $3
Orange 8000 $4
Current Year

Item Quantity Price

Apple 4000 $3
Banana 14000 $2
Orange 32000 $5

(a) Calculate the Nominal GDP in Base & current year and what is nominal growth rate?
(b) Calculate the Real GDP in Base & Current year and what is real growth rate?
 Sukkur Institute of Business Administration
(c) Calculate the GDP deflator in base year and current year. What percent prices have been
increased in current year as compare to base year?

Question :3: ABC Computer Company has a $20,000,000 factory in Silicon Valley. During the
current year ABC builds $2,000,000 worth of computer components. ABC's costs are labor,
$1,000,000; interest on debt, $100,000; and taxes, $200,000. ABC sells all its output to XYZ
Supercomputer. Using ABC's components, XYZ builds four supercomputers at a cost of $800,000
each ($500,000 worth of components, $200,000 in labor costs, and $100,000 in taxes per computer).
XYZ has a $30,000,000 factory. XYZ sells three of the supercomputers for $1,000,000 each. At
year's end, it had not sold the fourth. The unsold computer is carried on XYZ's books as an
$800,000 increase in inventory.

a . Calculate the contributions to GDP of these transactions, showing that all three approaches give
the same answer.

b. Repeat part (a), but now assume that, in addition to its other costs, ABC paid $500,000 for
imported computer chips.

Question : 4: You are given the following information about an economy:

Gross private domestic investment = 40

Government purchases of goods and services = 30
Gross national product (GNP) = 200
Current account balance = -20
Taxes = 60
Government transfer payments to the domestic private sector = 25
Interest payments from the government to the domestic private sector = 15 (Assume all interest
payments by the government go to domestic households.)
Factor income received from rest of world = 7
Factor payments made to rest of world = 9

Find the following, assuming that government investment is zero:

a. Consumption
b. Net exports
c. GDP
d. Net factor payments from abroad
e. Private saving
f Government saving
g. National saving