Answer  any five (5 ) of the following questions . E ach  question  is  worth 10 marks . Question  9 : [Parts (a) to (g), ½ mark each; parts (h) and (i), 1 mark each; parts (j), (k) and (l), 1.5 marks each] Suppose the following are National Accounts data for a given year for some particular country: Measure / Variable Amount (Billions of Dollars) Consumption of fixed capital  320 Gross private fixed capital formation 785 Government consumption expenditures 585 Government investment expenditures 210 Imports of goods and services 565 Exports of goods and services 690 Household consumption expenditure 3115 Net property and  other income paid overseas 34 Returns to labour 2651 Firm profits 1687 Other factor rentals 482 (a)  Calculate GDP using the Income method:  (b)  Calculate GDP using the Expenditure method at market prices:  (c)  Calculate Gross National Expenditure (GNE):  (d)  Calculate Net Domestic Product (NDP):  (e)  Why might NDP be a better measure of economic performance that GDP: (f)  Calculate Gross National Product (GNP):  (g)  Calculate Net National Product: (h)  Calculate Current Account Balance: (i)  Calculate Gross National Savings: (j)  If tax revenues are $17 Billion for the fiscal year, then what is the value of national savings? (k)  If  mpc d  remains at 0.63 and GDP changes to $4873 billion; then what will the new level of domestic consumption be? (l)  If exports then increase by $4 billion, private sector investment decreases by $3 billion; and government consumption and investment decrease and increase by $3 billion and $4 billion respectively; by how much will GDP change and what will its new value be? Question 10: (a)  Which of the following are  final goods and services and which are intermediate goods and services?  Please explain why in your answer.   (4 marks – 1 mark each) (i)  A windscreen purchased by a motor vehicle spare parts supplier; (ii)  A new bulldozer to be used by a construction company; (iii)  A household cleaning service purchased by a family from a domestic cleaning service company; (iiii)  Coking coal (b)  An economy produces final goods and services with a market value of $8 7 0 billion in a  given year, but only $72 0 billion worth of goods and services is sold to domestic or foreign buyers. Is this nation’s GDP $870 billion or $72 0 billion?  Explain your answer. (2 marks) (c)  Explain why a new truck sold for use by a  mining  company is a final good, even though it is a fixed investment (capital) used to produce other goods.   (2 marks) Should the value of this truck then be added to GDP or should only the goods it transports be included in GDP?   Explain your an swer.   (2 marks) Question  11 :   (a)  Illustrate  and explain  with diagrams the difference between  demand-pull and cost-push  inflation; ( 5 marks total - 1.25  marks for  each diagram and 1.2 5 marks for the explanation) ; (b)  Provide (describe) two (2)  causes  of each type of inflation  (.

1. Answer
any
five (5
) of the following questions
.
E
ach
question
is
worth 10 marks
.
Question
9
:
[Parts (a) to (g), ½ mark each; parts (h) and (i), 1 mark each;
parts (j), (k) and (l), 1.5 marks each]
Suppose the following are National Accounts data for a given
year for some particular country:
Measure / Variable
Amount
(Billions of Dollars)
Consumption of fixed capital
320
Gross private fixed capital formation
785
Government consumption expenditures

2. 585
Government investment expenditures
210
Imports of goods and services
565
Exports of goods and services
690
Household consumption expenditure
3115
Net property and other income paid overseas
34
Returns to labour
2651
Firm profits
1687
Other factor rentals
482
(a)
Calculate GDP using the Income method:
(b)
Calculate GDP using the Expenditure method at market prices:
(c)
Calculate Gross National Expenditure (GNE):
(d)
Calculate Net Domestic Product (NDP):
(e)
Why might NDP be a better measure of economic performance
that GDP:
(f)
Calculate Gross National Product (GNP):

3. (g)
Calculate Net National Product:
(h)
Calculate Current Account Balance:
(i)
Calculate Gross National Savings:
(j)
If tax revenues are $17 Billion for the fiscal year, then what is
the value of national savings?
(k)
If
mpc
d
remains at 0.63 and GDP changes to $4873 billion; then what
will the new level of domestic consumption be?
(l)
If exports then increase by $4 billion, private sector investment
decreases by $3 billion; and government consumption and
investment decrease and increase by $3 billion and $4 billion
respectively; by how much will GDP change and what will its
new value be?
Question 10:
(a)
Which of the following are
final goods and services and which are intermediate goods and
services? Please explain why in your answer.
(4 marks – 1 mark each)

4. (i)
A windscreen purchased by a motor vehicle spare parts supplier;
(ii)
A new bulldozer to be used by a construction company;
(iii)
A household cleaning service purchased by a family from a
domestic cleaning service company;
(iiii)
Coking coal
(b)
An economy produces final goods and services with a market
value of $8
7
0 billion in a
given year, but only $72
0 billion worth of goods and services is sold to domestic or
foreign buyers.
Is this nation’s GDP $870 billion or $72
0 billion? Explain your answer.
(2 marks)
(c)
Explain why a new truck sold for use by a
mining
company is a final good, even though it is a fixed investment
(capital) used to produce other goods.
(2 marks)
Should the value of this truck then be added to GDP or should
only the goods it transports be included in GDP?

5. Explain your an
swer.
(2 marks)
Question
11
:
(a)
Illustrate
and explain
with diagrams the difference between
demand-pull and cost-push
inflation;
(
5 marks total - 1.25
marks for
each diagram and 1.2
5 marks for the explanation)
;
(b)
Provide (describe) two (2)
causes
of each type of inflation
(
5 marks total - 1
.
2
5 marks for
each
demand-pull
cause

6. plus 1.25
marks for
each c
ost-push
cause
)
Question 1
2
:
(a)
Do you think that macroeconomic policy should be designed to
achieve a measured unemployment rate of zero?
Why or why not should this be the case?
(
2.5
marks
, 1.25 marks for each part
)
(b)
How did the classical economists interpret long-run
unemployment?
(2.5 marks)
(c)
How does
structural
and cyclical unemployment differ and how concerned should
policymakers be
about these types of unemployment?

7. (2.5 marks)
(d)
Describe the essential differences between the Keynesian and
monetarist approaches to the workings monetary policy.
Make sure that your explanation includes the relevant
assumptions.
(2.5 marks)
Question 1
3
:
(
1.25 marks for each correct diagram and 1.25 marks for each
correct explanation
)
Using the aggregate demand – aggregate supply (AD-AS)
diagram, show how the four economic events would affect
economic activity and the price level. (Note: use a separate AD-
AS diagram for each event)
(a)
A
decline in the
marketing and selling skills of firm
marketing agents
;
(b)
An increase in imports;
(c)

8. A significant destruction in an economy’s capital stock because
of war;
(d)
An
de
crease in personal income tax
;
Question 1
4
:
(a)
The
consumer price index (i.e. CPI) is the most commonly
used measure of changes in the
general level of prices in Australia.
Discuss some of the advantages and disadvantages of using this
measure
.
(4 marks)
(b)
Explain w
hy some people ‘lose’ from inflation and why do some people
‘win’ from inflation
?
(
3
marks)
(c)
How accurate is the Australian measure of unemployment?

9. (3 marks)
Question 1
5
:
Which of the following would cause a growth in the money
supply?
Answer
yes, no, or possibly
and explain your answer (i.e. please provide reasons)
.
(2 marks each)
(a)
The selling of government securities to banks
;
(b)
A fall in interest rates
;
(c)
An increase in government expenditure, financed by bo
rrowing from the banking sector;
(d
)
The purchase of government securities by the
Central
Bank from the banking sector

10. ;
(e
)
It is agreed by the Treasurer and the
Governor of the
Central
Bank to
reduce the target rate of inflation
Continued over the page
Question 16:
Assuming the following changes to an economy are the only
changes
:
I
dentify
for each change, what GDP variable would be affected (i.e. C, I,
G, X or M) and whether it would cause it to increase or
decrease?
(1 mark
for
each
complete answer
)
(a)
A town council funds a new library;

11. (b)
The Ferderal Government raises the tax free threshhold;
(c)
Fewer tourists visit Australia;
(d)
Consumers demand more domestically produced goods but total
consumption remains constant;
(e)
People
are purchasing bonds issued by the banks
;
(f)
Manufacturing firms are encouraged by lower interest rates to
borrow to finance the building of new factories;
(g)
Consumers abroad are deterred by high prices for the Australian
dollar from buying imports from Australia;
(h)
Both taxation and government expenditure are reduced;
(i)
People decide to save more of their income;
(j)
Our trading partners abroad begin to recover from a recession.
END