Answer each question clearly and concisely.

1. Identify the following as consumption, investment, government purchases, or net exports. Justify your answers.

a. Government of Canada repaves the Trans-Canada highway.

b. You pay for a haircut.

c. An unsold truck is made by a GM plant in Ontario.

d. You buy a cowboy hat made in Mexico.

e. You buy a share of stock.

f. Paul purchases a new house.

g. A Canadian cattle rancher sells her beef to a U.S. grocery store.

h. You buy a new Ford truck.

i. The government pays the salaries of its employees.

j.The government buys Covid-19 vaccines from Europe.

2. Use the data below to answer the questions that follow.

Item	Amount (billions of dollars)
Consumption expenditure	350
Government purchases	100
Interest and investment income	35
Profit of corporations & public enterprises	55
Income from farms and unincorporated businesses	50
Wages, salaries, and supplementary labour income	325
Capital consumption allowance (depreciation)	50
Investment	150
Exports	46
Imports	56
(Indirect) taxes less subsidies	75

a. Calculate net exports.

b. Use the expenditure approach to calculate GDP.

c. Use the income approach to calculate GDP.

3. Use the data below to answer the questions that follow. (

Year	Nominal GDP (in billions of dollars)	GDP Deflator (base year = Year0)
Year0	600	100.0
Year1	680	110.0
Year2	750	125.0

a. What was the growth rate of nominal GDP (i) between Year0 and Year1, and (ii) between Year1 and Year2? Show your work.

b. What was the growth rate of the GDP deflator (i) between Year0 and Year1, and (ii) between Year1 and Year2? Show your work.

c. What was the real GDP in Year0 prices in (i) Year0, (ii) Year1, and (iii) Year2? Show your work.

d. What was the growth rate of real GDP (i) between Year0 and Year1, and (ii) between Year1 and Year2? Show your work.

e. Was the growth rate of nominal GDP higher or lower than the growth rate of real GDP (i) between Year0 and Year1, and (ii) between Year1 and Year2? Explain.

4. Suppose that people in the small island country of Mudotch produce and consume rice and beans as follows.

Year	Rice	Beans
Quantity	Price	Quantity	Price
Year0	20	5	15	7
Year1	25	7	17	10
Year2	35	9	20	16

a. Calculate the consumer price index (CPI) in each year using Year0 as the base year. Show your work.

b. Using your CPI in (a), what is the inflation rate in Year1 and Year2? Show your work.

c. Calculate the GDP deflator in each year using Year0 as the base year. Show your work.

d. Using your GDP deflator in (c), what is the inflation rate in Year1 and Year2? Show your work.

e. Is the inflation rate in Year2 the same in (b) and (d)? Explain why or why not.

5. The International Property Rights Index (IPRI) ranks countries based on the legal and political environment and how well property rights are protected. Go online and find a recent ranking, then answer the following questions.

a. What is the lowest possible score and highest possible score of IPRI? Which of these two scores represents "bad score" and which one represents a "good score"?

b. In a table, list four countries with high scores and four countries with low scores of IPRI. Note: show the IPRI for each country in the table.

c. The World Bank publishes online the GDP per capita (constant base-year US$) for countries. Find and report the most recent estimates of GDP per capita of the countries in (b) above.

d. What pattern do you find between IPRI score and GDP per capita?

e. Give two possible interpretations of the pattern in (d).

6. Consider a closed economy with a gross domestic product (Y) of 800, consumption expenditure (C) of 500, government expenditure (G) of 100 and tax revenues (T) of 190. The figures are in billions of dollars. Suppose the investment expenditure function is I = 300 - 50r, where r is the real interest rate expressed as a percentage.

a. State the equation between Y and the three components of expenditure.

b. Calculate private saving (S_p), public saving (S_g), and national saving (S).

c. Calculate investment (I).

d. Calculate the equilibrium real interest rate and quantity of loanable funds.

e. If the government ran a budget deficit of $30 billion in the next period, explain how this would affect the market for loanable funds.

7. Use a diagram of the labour market to show the effects of the following on (i) wages paid to workers, (ii) the quantity of labour supplied, (iii) the quantity of labour demanded, and (iv) the amount of unemployment.

a. an increase in working-age population

b. a new production technology that decreases the demand for labour

c. a decrease in average hours per worker

d. an increase in minimum wage

e. a decrease in the employment-to-population ratio

8. Consider a hypothetical economy with a nominal GDP of $1.2 trillion, real GDP of $600 billion, and money supply of $60 billion. Suppose commercial banks are required to maintain a reserve requirement of 10% of deposits. Assume that banks do not hold excess reserves.

a. Calculate the money multiplier for this economy. If the central bank buys $1 billion of government bonds, what is the effect on money supply? Show your work.

b. Using the quantity theory of money, calculate the price level and the velocity of money for this economy prior to central bank action. Show your work.

c. Assume that velocity is constant and real GDP increases by 2% each year. What will happen to nominal GDP and the price level next year if money supply does not change? Show your work.

d. In (c), what money supply should the central bank set next year to keep the price level unchanged? Show your work.

e. In (c), what money supply should the central bank set next year if it wants inflation of 5%? Show your work.