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Production. Suppose that bananas are the only variable input in the production of TwoRown Banana Crepes , with the rest of other inputs kept fixed. Compute for the MP and the AP of bananas given the production schedule below . TwoRown Quantity of Banana Crepes MP of Bananas (in AP of bananas Output (in bananas crates) number of packages 0 0 1 10 2 30 3 60 4 100 5 150 6 190 7 220 8 240 9 250 10 250 11 240 12 220

a.

b.

c. d. 2.

Graphically show the relationship between TwoRown Banana Crepe Output vs. the quantity of bananas used; show as well the relationship between MP and AP vs the number of bananas used in the production process, below the first graph. Show the three stages of production in your graphs. Which stage is the most efficient level of production? Why? What is the most productive level of production? Why?

Cost. Use the same output schedule in Problem #1. Suppose that each crate of banana costs €3 with the sunk/overhead cost equal to €125, a. Solve for: i. Total Fixed Cost (TFC) ii. Total Variable Cost (TVC) and iii. Total Cost (TC) Graph the computed values properly. b. Solve for the profit when the price of each package of TwoRown Banana Crepes is €6. What is the production level that will yield the highest profit? National Income Accounting 1. Given the following data, solve for the Nominal and Real GDP using specific base years. Assume a simple economy, Haagendazland® , produces only ice cream as its only economic output, composed of three variants: Ice Cream Variety 3K : Kamote, Karrots and Kalabasa Wasabi and Spinach Medley Halo-Halo Fiesta Price 100 120 150 Quantity 80 140 Value Price 150 240 300 Quantity 120 170 250 GDP (Year 2) Value

3.

140 GDP (Year 1) Compute for the: (3 points each) 1. Nominal GDP in Year 1: ______________ 2. Nominal GDP in Year 2: ______________ 3. Real GDP in Year 1, using Year 1 as a base year: 4. Real GDP in Year 2 , using Year 1 as a base year:

______________ ______________

5.

Suppose the economy experienced deflation after year 2 and economists have found out the nominal GDP for that year increased when compared to year 2. Is there a possibility of real GDP growth? Explain briefly.

4.

National Income Accounting 2. Fill in the missing values. Year Current Deflator GNP 1989 1990 1991 1992 1993 1994 178,067 220,957 303,644 378,745 100 138.9 157.1 173.2

Real GNP

Populatio n 46.5 47.8

Per capita Current GNP 3,829.40 5,387.70

Per Capita Real GNP 3,934

Inflation Rate

17.5

190,841 193,281 198,816

50.3 51 52.1

6,576.90

3,797

10.2

5.

Determination of National Income 1. Income (Y) 0 100 200 300 400 500 600 700 800 900 1000 a. Consumption 200 250 275 300 325 350 375 400 425 450 475 Change in C Change in Y mpc Savings (S)

b.

c. 6.

Given the Income-Consumption schedule above, compute for the mpc and mps. Formulate the consumption and the savings functions. Show mathematically and graphically that when Y=C, S=0.

Determination of National Income 2. a. Using the same Income-Consumption-Savings schedule in #6 and assuming investment is autonomous (i.e, constant), I=150, compute for the Aggregate Expenditure (planned spending), AE. Assume that the economy is composed of two sectors, hence AE=C+I. b. Graphically show that when S=I, AE=Y. (Clue: Show Savings-Investment Graph below the Aggregate Expenditure-GDP graph). Alternatively, you may algebraically prove why S=I is an equilibrium condition. c. What would happen if Investment would double (New Investment=300)? What would be the new equilibrium level of income? National Income Accounting 1.

7.

a.

b. c.

Suppose that at time to , a simple open economy’s Personal Consumption Expenditure is equal to 35, Investment spending is 20, government spending is equal to 25, with exports and imports equal to 30 and 20, respectively, compute for the GDP and per capita GDP until t4. Assumptions: each GDP component grows by 5% and population 3% annually. Assume population is 50 at to What if NFIA is equal to -10? Compute for GNP and Per capita GNP until t4.

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