Class Test

F.M 20
P.M 10
Short Answers Questions (5 X
2=10)
1. What GDP Does Not Measure?
2. What is domestic income and net factor income from abroad?
3. Suppose a woman marries her butler. After they are married, her husband continues to wait on
her as before, and she continues to support him as before (but as a husband rather than as an
employee): How does marriage affect GDP? How should it affect GDP?
4. If you woke up in the working & found that nominal GDP has doubled overnight, what statistic
would you need to check before you began to celebrate: Why?
5. Explain the concept of Depreciation. why we add up depreciation to derive GDP from income
method?
Long Answers Questions (2 X 5 = 10)
6. Abby consumes only apples. In year 1, red apples cost one dollar each, green apples cost two
dollars each, and Abby buys 10 red apples. In year 2, red apples cost two dollars, green apples
cost one dollar, and Abby buys 10 green apples.
a) Compute a consumer price index for apples for each year. Assume that year 1 is the base
year in which the consumer basket is fixed. How does your index change from year 1 to year
2?
b) Compute Abby’s nominal spending on apples in each year. How does it change from year 1
to year 2?
c) Using year 1 as the base year, compute Abby’s real spending on apples in each year. How
does it change from year 1 to year 2?
7. Let us suppose the economy has two goods A and B. consider the following data and answer the
following questions

Items Rs. In Million

Sales by Firm A 2000
Purchase from B by A 800
Purchase from A by B 1200
Sales by Firm B 4000
Closing Stock of Firm A 400
Closing Stock by firm B 700
Opening Stock by firm A 500
Opening Stock by firm B 900
Indirect taxes paid by firm 1000
Subsidy 400
Interest Paid by the government 2987
Interest paid by the individuals 832
Sales of Shares by firm B 1289
Sales of motorbike by Firm A purchased on 2017 4567
Hawala money 789
Money given as a bribe 1569
Sale of stock 1278
Purchase of bonds 2346
Expenditure on raw materials 1236
Business transfers 9087