1. The document discusses questions related to national income accounting and the Keynesian model. It provides data for 11 questions related to calculating national income measures like GNP, NNP, GDP, consumption, investment, exports and imports. It also provides structural equations to calculate equilibrium income and the effects of changes in government spending, taxes and money supply in a closed economy.

1. CU-MCom-MEBE-MOD-I-- Select Questions discussed in the Class
Dr. Subir Maitra
Associate Professor of Economics
subirmaitra.wixsite.com/moocs
National Income Accounting:
1. Assume that in a hypothetical economy GNP is Rs. 5000, personal disposable income
(aggregate) Rs. 4100 and the government budget deficit is Rs. 200 Consumption is Rs.
3800 and the trade deficit is Rs. 100. i) What is the size of investment (I)? ii) How large is
government spending (G)
2. You are given the following data in crores of rupees
Govt. and business transfer 15
Indirect business taxes 30
GNP 630
Social security contributions 20
Personal taxes 25
Capital consumption 80
Residential construction 70
Retained earnings 0
Personal consumption expenditure 390
Direct business taxes 40
Calculate the value of NNP, national income, personal income and disposable income.
3. The following is the information from the national income accounts of a hypothetical
country: GDP Rs. 6000
Gross Investment Rs. 800
Net Investment Rs. 200
Consumption Rs. 4000
Government purchase of goods and services Rs. 1100
Government budget surplus Rs. 30
Calculate NDP, Net exports, Government taxes minus transfer, disposable personal
income, personal saving.
4. Assume that GDP is Rs.6000, personal disposable income is Rs.5100, the government
budget deficit is Rs.200, consumption is Rs.3800 and the trade deficit is Rs.100. Find the
values of saving, investment and government spending.
5. For a particular country we have the following data:
GDP at market prices 15000
Exports 3000

2. Imports 5000
Net factor incomes from abroad 2500
Depreciation 3500
Gross Domestic Capital Formation 4500
What is the GNP at market price of this country?
6. Payasia is a closed economy in which only three commodities are produced : milk, rice
and payasam ( made out of milk and rice). In the year 2001, Rs. 1000 worth of rice, Rs.
600 worth of milk and Rs. 800 worth of payasam were produced. Rs. 200 worth of rice
and Rs. 300 worth of milk were used up to produce the payasam that year. Assuming that
Payasia had no stocks of rice and milk at the beginning of the year 2001, what was the
GNP in Payasia in 2001?
7. The following are the complete set of items which are found in the national accounts
statistics of a country for the year 2000 – 01
i) Depreciation Allowances = Rs. 200
ii) Personal (direct) Tax payments = Rs. 250
iii) Indirect Business Taxes = Rs. 200
iv) Corporate (profits) Taxes = Rs. 100
v) Dividend payments = Rs. 50
vi) Undistributed profits = Rs. 50
vii) Government Transfer Payments = Rs. 200
viii) Personal Consumption Expenditure = Rs. 1200
ix) Personal Savings = Rs. 100
Use the above entries to compute a) Personal income; b) Net National Product; c)
National Income; d) Gross National Product; for this country for the year 2000-01.
Simple Keynesian Theory:
8. Suppose that the economy is characterized by the following structural equations:
C = 160 + 0.6 (Y – T); I = 150; G = 150; T = 100.
a) Determine the equilibrium output level. b) If G rises to 250, what is the how
equilibrium level of output? What is the value of the govt. expenditure
multiplier? c) If tax falls to 50, by how much will equilibrium output rise? What is
the value of tax multiplier?
9. Suppose you have the following information about a closed economy:
C = 50 + 0.80 (Y– T); I = 200 ; G = 100

3. a) Find out the equilibrium level of income. b) Suppose G increases to 250 what is
the new equilibrium level of income? c) What level of G is needed to achieve a
target income of 1000?
10. In the simple Keynesian model, assume that the consumption function is given by
C = 200 + 0.75 (Y – T). Planned investment is 100, government purchases and taxes
are both 100.
a. Graph planned expenditure as a function of income.
b. What is the equilibrium level of income?
c. If government purchases increase to 125, what is the new equilibrium income?
d. What level of government purchases is needed to achieve an income of 1,600?
IS-LM Model:
11. Consider the following economy:
The consumption function is given by C = 200 + 0.75 (Y—T).
The investment function is I r = 200 -- 25r. Government purchases and taxes are
both 100. The money demand function is: ( M/P)d = Y –100 r. The money supply M is
1000 and the price level P is 2.
a. Find the equilibrium interest rate r and the equilibrium level of income Y.
b. Suppose that government purchases are raised from 100 to 150. How much
would Y increase if the real interest rate were constant? What are the new
equilibrium interest rate and level of income?
c. Suppose instead that the money supply is raised from 1,000 to 1,200. What are
the new equilibrium interest rate and level of income?