Assignment: Macroeconomics and Business Environment

1. Assume that there are only two goods in the market i.e. A & B. On the basis
of following information , calculate (8 marks)
(a) Nominal GDP for both the years.
(b) Real GDP for 2014
(c) GDP deflator for 2014
(d) Rate of inflation for 2014
Year

No. of units of
good A
produced
1000
1250

2013
2014

Price of good
A/unit
40
44

No. of units of
good B
produced
50000
55000

No. of units of
good B
produced
6
7

2. Briefly discuss about the following components of GDP: (8 marks)

a. Consumption
b. Investment
c. Government spending
d. Net Export
3. Use the graph below to answer the following questions: (8 marks)
a. What does the distance OA represent? Briefly discuss and explain what events
could occur in
this model which would cause the distance OA to decreases.
b. Briefly explain what the following distances represent: OY1 , Y1 E, Y1 F. Is the
economy in
equilibrium when output equals Y1? Explain.
c. Briefly explain what the following distances represent: OY2, Y2B, Y2C. Is the
economy in
equilibrium when output equals Y2? Explain.
d. Given your analysis in parts (b) and (c), what is the level of equilibrium output?
Z

F
E

C
A

0
Y2

Y1