Assignment Number: 1

Submitted By

Name: Rashik Ahmed

ID: 2020-1-10-203

Course: ECO102

Section: 9

Submitted To
Asiya Siddica

Senior Lecturer, Department of Economics

Faculty of Business and Economics, East West University

Semester: Fall 2020

Date of Submission: 31st October, 2020.

 1.

A)

Calculating Nominal GDP,

Year Calculation
2016 ($900 per computer X 10) + ($10 per DVD X 100) + ($15 per Pizza X 2) = $10030
2017 ($1000 per computer X 10.5) + ($12 per DVD X 105) + ($16 per Pizza X 2) = $11792
2018 ($1050 per computer X 12) + ($14 per DVD X 110) + ($17 per Pizza X 3) = $14191

B)

Calculating Real GDP,

Year Calculation
2016 ($900 per computer X 10) + ($10 per DVD X 100) + ($15 per Pizza X 2) = $10030
2017 ($900 per computer X 10.5) + ($10 per DVD X 105) + ($15 per Pizza X 2) = $10530
2018 ($900 per computer X 12) + ($10 per DVD X 110) + ($15 per Pizza X 3) = $11945

C)

Calculating GDP Deflator,

Year Calculation

2016 ($10030/$10030) X 100 = 100

2017 ($11792/$10530) X 100 = 117

2018 ($11945/$10530) X 100 = 119

2.

A) This will not be included in the GDP because we know that shares of stock are a non-market activity,
thus, it doesn’t influence the market.

B) This will not be included in the GDP because a plant will produce more goods and services, so the plant is
an intermediate service.

C) This is will be included in the GDP because it is a finished good/product.

D) This will not be included in the GDP because used copy of a textbook is a used good.

E) This will not be included in the GDP because Social Security Benefits is a transfer payment which is made
by the government.
F) This will be included in the GDP because the mozzarella cheese is a raw material which is in the inventory
but not yet used to produce the intermediate good or final good.

G) This will not be included in the GDP because illegal goods are not reported to the economy, hence, they
are not counted.

3.

A)

The cost of basket for 2017 = (50*3+70*2+4*80) = 610

The cost of basket for 2018 = (55*3+72*2+90*4) = 669

The cost of basket for 2019 = (57*3+74*2+100*4) = 719

B)

The CPI for 2017 = (610/610) *100 = 100

The CPI for 2018 = (669/610) *100 = 109

The CPI for 2019 = (719/610) *100 = 117

C)

Calculating Inflation rate,

For 2018, Inflation rate = (109-100)/100 = 0.09

For 2019, Inflation rate = (117-109)/109 = 0.073

4.

We know that,

Expenditure approach = Consumption + Investment + Government Expenditure + Net Export

= 5000+1000+1000+500-700
= 6800

Income Approach = Wages + Rent + Interest + Profit

= 5300+600+900
= 6800

Here, we can see that the expenditure approach and the income approach add up the same figure.
5.

A) Here, intermediate goods are breads and cheese. And final good is pizza.

Therefore, Value added approach for bread = (Final good – Intermediate good) = 50-0 = 50

Value added approach for Cheese = (Final good – Intermediate good) = 35-0 = 35

Value added approach for Pizza = (Final good – Intermediate good) = 200-50-35 = 115

Total value added = (50 + 35 + 115) = 200

B)

We know,

Expenditure Approach = Consumption + Investment + Govt. Expenditure + Net Export

= C + I + G + (X – M)

Here, C = Pizza price = 200

I=0
G=0
(X – M) = 0

Therefore, Expenditure Approach = 200+0+0+0 = 200

C)

Calculating income approach,

Aggregate Income
Bread Cheese Pizza
Value of Output 50 35 200
Cost of Input 0 0 50+35
Wage 15 20 75 Total wage = 110
Profit 50-15 = 35 35-20 = 15 200-85-75 = 40 Total Profit = 90
Rent 0 0 0 Total Rent = 0
Interest 0 0 0 Total Interest = 0
110+90+0+0 = 200