Department of Economics

Ryerson University
Prof. Constantine Angyridis
ECN 301 – Intermediate Macroeconomics I
Assignment #1

INSTRUCTIONS: Upon completion, please submit your answer key and Excel spreadsheet
through D2L. The Excel spreadsheet should contain your raw data, calculations and graphs for
each question. Your answer key should contain your response to each question. Please present
your work clearly and in detail.

QUESTION 1 – TOTAL MARKS: 30

The Distributions of Household Economic Accounts by Statistics Canada provide important
insights into the trends in household economic well-being and income inequality in Canada.
The related table can be found at:

https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3610058701

The table is labelled as “Distributions of household economic accounts, income, consumption and
saving, by characteristic, annual (x 1,000,000)”. Note that all figures listed in the table are on an
annual basis and are measured in millions of dollars. You can easily change the default choice
under “Characteristics” and “Reference Period” from the dropdown menu. By pressing the
“Apply” button, the table will be updated to reflect your choices. In addition, the table allows you
to Add/Remove data and provides various download options to you. All your calculations and
plots for this assignment should be performed using the Microsoft Excel software package.
a. Change the “Reference Period” from the default one to the period 1999-2021 which is the
longest period publicly available. This period applies to all parts of this assignment unless
otherwise stated. Download the “Household Disposable Income” series for the five income
quintiles: lowest, second, third, fourth and highest. The series represent the income earned
by each quintile in a given year net of taxes paid to the government and including transfers
received by the government. Note that the five quintiles are all listed in the
“Characteristics” tab.

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 i. Calculate the percentage annual change in household disposable income by income
quintile. Please use the formula for the annual change rather than the approximation
provided by the logarithm of the series. (2 marks)
ii. Plot in a single figure the percentage annual changes calculated in part (i) for all
income quintiles against the year. (2 marks)
iii. Comment on the figure in part (ii) focusing on the change in disposable income
between the last two years in the sample. (2 marks)
b. Use the Add/Remove option to change the characteristics of the series to be extracted. Your
objective is to obtain household disposable income over time in terms of income group as
in part (a) and age-group. The table provides data for five age groups: less than 35 years,
35 to 44, 45 to 54, 55 to 64, and 65 years and over.
i. Calculate the percentage annual change in household disposable income for each
age group across income quintiles between the last two years in the sample. As in
part (a), use the formula for the annual change rather than the logarithm of each of
the series. Comment on your calculated numbers. (3 marks)
ii. Use a bar chart to plot the annual change in household disposable income by income
quintile for households less than 35 years old and 65 years and older between the
last two years in the sample. Comment on this figure. (3 marks)
c. Obtain the “Household Net Saving” series across all income quintiles during the sample
period. Divide for each income quintile this series with the sum of the corresponding
household disposable income plus the change in pension entitlements. Multiply this ratio
by 100 to obtain the saving rate for the specific quintile. Plot the household saving rate by
income quintile and comment on the figure. (6 marks)
d. Repeat part (c) for the five age groups instead of the five income groups. (6 marks)
e. This part of the question requires you to calculate statistics at the national level (i.e. for
Canada as a whole) and the provincial level. The related table that provides data at both
levels is located at:

https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3610058801

Note that the table is labelled as “Distributions of household economic accounts, income,
consumption and saving, Canada, provinces and territories, annual (x 1,000,000)”. As in
the previous table, all figures listed are on an annual basis and are measured in millions of
dollars. When using the Add/Remove data option, you will find the ten provinces listed
under the “Geography” tab.
i. For Canada and each of the ten provinces divide the household disposable income
for the lowest, second, fourth and highest quintile in 2021 with their respective total
household disposable income: total household disposable income for the entire
country in the case of Canada and total provincial household disposable income for
the corresponding province. This calculation yields the share of each income group
in the distribution of household disposable income at the national and provincial
levels. Make sure to multiply these ratios by 100 in order to express them in
percentage terms. (1 mark)

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 ii. Add the shares of the lowest and second quintiles for Canada as a whole and for
each province. (1 mark)
iii. Repeat part (ii) above with respect to the shares of the fourth and highest quintiles.
(1 mark)
iv. For Canada and each of the ten provinces subtract the sum obtained in part (ii) from
the sum obtained in part (iii). The yields the gap between the top two and bottom
two quintiles’ share of disposable at the national and provincial levels. This statistic
is a measure of inequality in the distribution of disposable income. (1 mark)
v. Use a bar chart to plot the statistics calculated in part (iv). Comment on this figure.
(2 marks)

QUESTION 2 – TOTAL MARKS: 10

Consider an economy with a corn producer, consumers, and a government. In a given period, the
corn producer grows 3 million tons of corn, and the market price for corn is $50 per ton. Of the 3
million tons produced, 2 million tons are sold to consumers, 0.5 million are stored in inventory,
and 0.5 million are sold to the government to feed the army. The corn producer pays $60 million
in wages to consumers and $20 million in taxes to the government. Consumers pay $10 million in
taxes to the government, receive $10 million in interest on the government debt, and receive $5
million in Canada Pension Plan payments from the government. Finally, the profits of the corn
producer are distributed back to the consumers.
a. Calculate GDP using (i) the product approach, (ii) the expenditure approach, (iii) the
income approach. (5 marks)
b. Calculate private disposable income, private sector saving, government saving, national
saving, and the government budget balance. Is the government budget in deficit or surplus?
(5 marks)