Macroeconomy

Unit I – Introduction to national accounting

National contability

Faculty of Business
Bachelor's Degree in Business Administration

SUBJECT:
macroeconomy

TEACHER:
Licda. Johanna Lissette Umanzor Hernandez

ISSUE:
National contability

STUDENTS:
Pedro Antonio González Del Cid.

Usulután, September 26, 2020

 Macroeconomy
Unit I – Introduction to national accounting
National contability

Indication: The following questions and cases are presented to develop, read carefully
and carry out what is requested in an orderly manner.

1. The CPI and the PPI are measures of the price level. What distinguishes them and
when is one measure preferred over the other?

The producer price index (PPI) which is a measure of the cost of a basket of goods.
However, it differs from the CPI in terms of its coverage; For example, the PPI includes
raw materials and semi-finished goods. It is a flexible index and often points to
changes in the general price index. And it is used quite a bit in the business field.

2. If you woke up to find out that GDP doubled in value overnight, what statistical
data would you need to review before celebrating? Because?

We should review the national income account which is Y = C + I + G + gross domestic

and net exports that have been in the previous GDP to verify if the value of GDP was
actually doubled.

Then you have to review the GDP deflator given that an increase in GDP could have
consequences on inflation, therefore, it affects the price level of the representative
consumer basket.

3. Suppose you make a loan for $100 that will be repaid in one year. If the loan was
left with a nominal interest rate, will you be happy or sad if inflation is higher than
expected for the year? What if, on the contrary, interest were in terms of a real
return?

4. Yes, since there is a higher

inflation than expected in that
year, the interest rate would be
lower.
5. to that of the real interest rate.
 Macroeconomy
Unit I – Introduction to national accounting
National contability

6. If it had been referred to real

interest and there had been a
higher inflation than expected,
7. the individual would have
paid an interest rate higher than
the nominal rate.
8. Yes, since there is a higher
inflation than expected in that
year, the interest rate would be
lower.
9. to that of the real interest rate.
10. If it had been referred to
real interest and there had been
a higher inflation than
expected,
 Macroeconomy
Unit I – Introduction to national accounting
National contability

11. the individual would have

paid an interest rate higher than
the nominal rate.
12. Yes, since there is a higher
inflation than expected in that
year, the interest rate would be
lower.
13. to that of the real interest
rate.
14. If it had been referred to
real interest and there had been
a higher inflation than
expected,
15. the individual would have
paid an interest rate higher than
the nominal rate.
 Macroeconomy
Unit I – Introduction to national accounting
National contability

Since there is a higher inflation than expected in that year, the interest rate would be
lower than the real interest rate. If it had been referred to real interest and there had
been higher than expected inflation, it would have paid a higher interest rate than the
nominal rate. The following is why I would be sad given that, when making a loan with
nominal interest, the interest during the year can be harmful, since, in terms of real
performance, it is clearly concentrated on the behavior of the country's production.

4. Using the theory of the national income account, prove the following:

a) A tax increase (with transfers constant) implies a change in net exports,

government purchases, or the balance between savings and investment.

Taxes and transfers go hand in hand for state spending, the state must collect taxes to
be able to pay for the transfers provided to people; However, the increase in taxes
directly affects people's income, since they are the ones who pay taxes or income,
which affects people's savings and investment.

b) An increase in disposable personal income implies an increase in consumption or

savings.

The increase in disposable income allows us to decide what percentage we will

dedicate to consumption and what part to saving, which also depends on the
marginal propensities, whether savings or consumption, since these are what
determine what part of the available income is charged to this range. marginal.

c) An increase in consumption and savings implies an increase in disposable income.

(In b and c, assume that there are no interest payments by households and no
transfers abroad.)

It implies an increase in people's disposable income and, since there are no taxes or
transfers and therefore the state; This disposable income of people is greater and
they will be able to better distribute and manage what percentage they will dedicate
to savings and consumption.
 Macroeconomy
Unit I – Introduction to national accounting
National contability

5. The following information is from the national income accounts of a hypothetical

country:
GDP $14,151
Gross investment $2,056
Net investment $1,200
Consumption $10,003
Government procurement of goods and services $2,798
Imports $10,000
Exports $9,294

Please indicate how much is the following:

a) PIN
PIN= GDP – Depreciations
PIN= (Gross Investment – Net Investment)
PIN= 14,151 – (2,056–1,200)
PIN= 14,151 – 856
PIN= 13,295

b) Net exports
Y= C + I + G + XN
14,151 = 10,003 + 1,200 + 2,798 + XN
14,151 = 14,001 + XN
XN = 150

c) Disposable personal income

 Macroeconomy
Unit I – Introduction to national accounting
National contability

Be it as requested: Disposable personal income=YD.

It's known that:
YD=Y+TR-TA
Where:
Y=Output of the economy
TR=Transfers to the private sector.
TA=Taxes.
Also:
Y=C+I+G+XN
Where:
C=Consumption.
I=Investment expenditure.
G=Government expenses.
XN=Net Export.
GDP $14,151
Gross investment $2,056
Net investment $1,200
Consumption $10,003
Government procurement of goods and services $2,798
Imports $10,000
Exports $9,294

Replacing:
YD=(C+I+G+XN) +TR-TA
By data: C =$10,003 , I= $1,200 , G= $2,798 , XN=GDP-(C+I+G)
=$14,151-( $10,003+$1,200+$2,798 ) =150, TR-TA=-(TA-TR) =- $2,798

Replacing the data in:

YD=(C+I+G+XN) +TR-TA YD= ($ 10,003 +$1,200+$2,798+150) + (-$2,798)
YD= $11,353.00

RPTA: Disposable personal income was found to be $ 11,353 .00 monetary

units.

d) Personal savings
 Macroeconomy
Unit I – Introduction to national accounting
National contability

It's known that:

YD=C+S

Where:
YD=Disposable income
C=Consumption
S=Savings

Data: YD= 11,353 C= 10,003 .

Replacing: YD=C+S YD-C=S11.353 -10.003=S=1350
RPTA: Personal savings is 1350 monetary units.