ECO102
Principles of
Macroeconomics
Problem Session-1
by
Research Assistant
Serkan Değirmenci
02.03.2012
Today
• Mankiw (2008), Principles of Economics:
- Chapter 23: Measuring A Nation’s Income:
Questions for Review (QfR): 1-8 (page: 525)
Problems and Applications (P&A): 1-11 (page: 525-527)
- Chapter 24: Measuring the Cost of Living:
Questions for Review (QfR): 1-5 (page: 543)
Problems and Applications (P&A): 1-10 (page: 543-545)
- Chapter 25: Production and Growth:
Questions for Review (QfR): 1-8 (page: 573)
Problems and Applications (P&A): 1-10 (page: 574)
- Chapter 26: Saving, Investment, and the Financial System:
Questions for Review (QfR): 1-6 (page: 594)
Problems and Applications (P&A): 1-11 (page: 595-596)
CHAPTER 23
MEASURING A NATION’S INCOME
Chapter 23: QfR-1 (page: 525)
• Explain why an economy’s income must equal its expenditure.
income = expenditure (why?)
ANSWER: (page: 508) => please see Figure 1 (page: 509)
An economy's income must equal its expenditure,
because every transaction has a buyer and a seller.
Thus, expenditure by buyers must equal income by sellers.
Chapter 23: QfR-2 (page: 525)
• Which contributes more to GDP—the production of an
economy car or the production of a luxury car? Why?
GDP: the market value of all officially recognized final goods
and services produced within a country in a given period.
ANSWER: (page: 510-512)
The production of a luxury car contributes more to GDP than
the production of an economy car
because the luxury car has a higher market value.
because market prices measure the amount people are willing to
pay for different goods, they reflect the value of those goods. (page
510)
Chapter 23: QfR-3 (page: 525)
• A farmer sells wheat to a baker for $2.
The baker uses the wheat to make bread, which is sold for $3.
What is the total contribution of these transactions to GDP?
ANSWER: (page: 511)
The contribution to GDP is $3,
the...