TUTORIAL 1,USEC22

SEMESTER SPRING 2018

Answer ALL the questions below. (Total marks = 30 marks)

1. What are the three primary measures used in macroeconomics to assess the
performance of an economy? (6 marks)

2. What is the difference between a slowdown in economic growth and a recession? (4

marks)

3. What adjustments need to be made to go from national income to GDP? (5 marks)

4. The next four questions refer to the following price and output data over a five-year
period for an economy that produces only one good. Assume that year 2 is the base
year.
Year Units of output Price per unit
1 16 $2
2 20 3
3 30 4
4 36 5
5 40 6

a) If year 2 is the base year, give the price index for year 3. (1 mark)
b) Give the nominal and real GDP for year 4. (2 marks)
c) Tell which years you would deflate nominal GDP and which years you would
inflate nominal GDP in finding real GDP. (2 marks)

5. Which of the following are included and which are excluded in calculating this year’s
GDP? Explain in each instance. (10 marks)

a) An auto mechanic who fixes his own car at home

b) Cash received from selling a corporate bond
c) Spending by a city government on a waste treatment plant
d) The pleasure that people obtain from working at jobs they like
e) A veteran’s payment made to a retired military officer