a) A small economy starts the year with $1 million in capital. During the course of the year, gross investment is $150,000 and depreciation is $50,000.

How big is the economy's stock of capital at the end of the year?

b) Suppose that this year a small country has a GDP of $100 billion. Also assume thatI_g= $30 billion,C= $60 billion, andX_n= - $10 billion.

How big isG?

c) Suppose that Alberta imposes a sales tax of 10 percent on all goods and services. An Albertan named Ralph then goes into a home improvement store in the provincial capital of Edmonton and buys a leaf blower that is priced at $200. With the 10 percent sales tax, his total comes to $220.

How much of the $220 paid by Ralph will be counted in the national income and product accounts as private income (employee compensation, rents, interest, proprietors' income, and corporate profits)?

d) Suppose that this year's nominal GDP is $1.6 trillion. To account for the effects of inflation, we construct a price-level index in which an index value of 100 represents the price level five years ago. Using that index, we find that this year's real GDP is $1.5 trillion.

Given those numbers, we can conclude that the current value of the index is ___________

e) Statistics derived from National Income Accounting. Pick one.

• are useful to assess the health of an economy and formulate policies to maintain and improve that health.
• form the basis for business accounting systems.
• are valuable for assessing economic health at a point in time but are less useful for comparisons over time.
• change frequently and therefore are limited in their usefulness.