Question 4 and 5 solution

52 MACROECONOMICS Assume that GDP is $6,000, personal disposable income is $5,100. and the government bud- get deficit is $200. Consumption is $3,800, and the trade deficit is $100. a. How large is saving ( S)? How large is investment (1)? How large is government spending (G)? Me & Product Accounts." then "GOP stic Product." Click on "Download If a country's labor is paid a total of $6 billion, its capital is paid a total of $2 billion, and unload the series. For popul profits are zero, what is the level of output? (Hint: See equation (2).) under the "People" category, Click on "Comm Consider an economy that consists only of those who bake bread and those who produce its and "Total Population,"click on "V2012" Select "R set that is NOT the co ingredients. Suppose that this economy's production is as follows: 1 million loaves of bread the United (sold at $2 each); 1.2 million pounds of flour (sold at $1 per pound); and 100,000 pounds infer about the evolution of US. per each of yeast, sugar, and salt (all sold at $1 per pound). The flour, yeast, sugar, and salt are sold only to bakers, who use them exclusively for the purpose of making bread. a. What is the value of output in this economy (i.e., nominal GDP)? b.. How much value is added to the flour, yeast, sugar, and salt when the bakers turn them into bread ? 7. Suppose a country's CPI increased from 2.1 to 2.3 in the course of 1 year. Use this fact to compute the rate of inflation for that year. Why might the CPI overstate the rate of inflation? 8. Suppose you buy a $100 government bond that is due next year. How much nominal interest will you receive if inflation is 4 percent over the year and the bond promises a real return of 3 percent? Empirical 1. Section 2.1 in this chapter deals with the relationship between the different components included in the National Income and Product Accounts (NIPA for short). Go to www.bea.gov. 1."' then click on "Interactive Tables: GDP and the National using the data . . ."