eco 2601 终极版
TRANSCRIPT
![Page 1: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/1.jpg)
Group 5
Members: Ginger, Leona, Maggie, Richard
![Page 2: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/2.jpg)
What is GDP?
• GDP is the market value of final goods and services in a country during the given period.
1. Type of goods and services (no intermediate goods)
2. Location (within the country)
3. Time (in the current year)
![Page 3: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/3.jpg)
• 7.1 Peter operates a garage which provides customers with car repairing services.
?Discuss how the 2008 GDP and its components were affected under the three different approaches of GDP accounting.
• In March 2008 he bought a 5-year old second hand car from his customer at a price of $60,000
• He paid his worker $5,000 to repair and clean up the engine (for improvements)
• then successfully sold the car to another customer for $68,000 in June 2008
![Page 4: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/4.jpg)
Review of the three approaches
• Expenditure approach
Consumption + Investment + Government expenditure + Net export
• Income approach
Labor income + Capital income
• Outcome approach
Adding up the contribution to the final output by every firm in the economy
![Page 5: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/5.jpg)
Expenditure Approach
Total car price $68,000
Second hand car $60,000
(previous years)
Service of improvement
$8,000
(Current year)
• Total output = $8,000 (C) + $0 (I) + $0 (G) + $0(NX)
![Page 6: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/6.jpg)
Income Approach
• Labor income
Wage of workers $5,000 + Salary of Peter $ X
• Capital Income
Profit = Revenue $68,000 – Cost of second hand car $60,000 – Salary/Wage expenses $(5,000 + X)
Profit $(3,000 – X)
• Total output
$5,000 + $X + $(3,000 – X) = $8,000
![Page 7: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/7.jpg)
Output ApproachStage of Production
Value of Output
Cost of intermediateinput
ValueAdded
$60,000 $0 $60,000
$68,000 $60,000 $8,000
$68,000
![Page 8: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/8.jpg)
Output approach & Sum-up
• Total output = $8,000• The value of the second hand car should not by
calculated. Why?• It is the value added in previous years, not the
current year.
• The outputs obtained under the three approaches are the same.
• When calculating GDP, we should pay attention to the time and location of production.
![Page 9: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/9.jpg)
7.2 a) A Chinese-owned ice-cream producer operating in the U.S.
• Total sales revenue
• Total costs include the following:
Wages paid to U.S. workers
Wages paid to Chinese workers
Interest paid to a U.S. bank
Rent paid to a U.S. landlord
• Total costs
$1,000
$500
$100
$40
$60
$700
Accounting Record
![Page 10: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/10.jpg)
7.2 a) (i) What is the value of U.S. GDP contributed by this firm usingthe expenditure approach? Which component(s) of the expenditureapproach will be involved?
• Expenditure approach
• Total sales revenue
• Total costs include the following:
Wages paid to U.S. workers
Wages paid to Chinese workers
Interest paid to a U.S. bank
Rent paid to a U.S. landlord
• Total costs
$1,000
$500
$100
$40
$60
$700
Consumption Expenditure (C): $1000Contribution to U.S. GDP=$1000(C)+$0(I)+$0(G)+$0(NX) = $1000
Ice-cream: Final goodsMarket value: Sales revenue
Sold to household: consumption
![Page 11: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/11.jpg)
7.2 a) (ii) What is the value of U.S. GDP contributed by this firmusing the income approach? Which component(s) of the incomeapproach will be involved?
• Income approach• Total sales revenue
• Total costs include the following:
Wages paid to U.S. workers
Wages paid to Chinese workers
Interest paid to a U.S. bank
Rent paid to a U.S. landlord
• Total costs
$1,000
$500
$100
$40
$60
$700
Labour
Labour income: $500+$100=$600
Capital income: ($1000-$700)+$40+$60=$400
Contribution to U.S. GDP: $600+$400=$1000
![Page 12: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/12.jpg)
7.2 a) (iii) How much is this firm’s contribution to the Chinese GNP?
• Chinese GNP –the value of output produced by Chinese
• Total sales revenue
• Total costs include the following:
Wages paid to U.S. workers
Wages paid to Chinese workers
Interest paid to a U.S. bank
Rent paid to a U.S. landlord
• Total costs
$1,000
$500
$100
$40
$60
$700
Contribution to Chinese GNP:($1000-$700) + $100 = $400
![Page 13: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/13.jpg)
7.2 b) If a Canadian tourist drinks German beer in arestaurant in the U.S., how will the U.S. GDP be affected?
• Assumption:Cost of German beer: $5Selling price of German beer: $8
• U.S. GDPConsumption Expenditure(C): $8
Imports(M): $5
GDP=C+I+G+X-M
U.S. GDP is affected by: + $8 - $5 = +$3
![Page 14: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/14.jpg)
7.3 Country X produces only two products in 2005: canned salmon fish and truck.Stage ofproduction
Output produced Outputproduced by
Market value of output
Required intermediateinput
Market value of intermediate input
First Fresh salmon fish
Local fishermen
$ 3 million
None Zero
Final Canned salmon fish
Localfactory
$ 5 million
Freshsalmon fish
$ 3 million
Stage ofproduction
Output produced
Output produced by
Market value of output
Required intermediateinput
Marketvalue of intermediate input
First Engine Factory located in foreign country
$ 6 million
None Zero
Final Truck Local factory $ 9 million
Engine $ 6 million
![Page 15: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/15.jpg)
7.3
Canned salmon fish 1/2 of the output 1/2 of the output
Purchased by Local households Foreigners
truck 1/3 of the output
1/3 of the output
1/3 of the output
Purchase/ unsold
Local firms government unsold
![Page 16: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/16.jpg)
7.3 (a)
• how each of the four products (fresh salmon fish, canned salmon fish, engine and truck) contributes to county X’s GDP under the output approach;
what is the value of GDP under output approach
Output approach: add up the contribution to the final output of every firm in the
country
Value added = value of output – cost of intermediate input
![Page 17: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/17.jpg)
7.3 (a)Output produced Output
produced by
Market value of output
Required intermediateinput
Market value of intermediate input
Fresh salmon fish
Local fishermen
$ 3 million
None Zero
Canned salmon fish
Localfactory
$ 5 million
Freshsalmon fish
$ 3 million
Output produced
Output produced by
Market value of output
Required intermediateinput
Marketvalue of intermediate input
Engine Factory located in foreign country
$ 6 million
None Zero
Truck Local factory $ 9 million
Engine $ 6 million
Valueadded
$ 3 million
$ 2 million
Value added
—
$ 3 million
$ 8 million
![Page 18: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/18.jpg)
7.3 (b)
• How country X’s GDP in 2005 would be recorded using the expenditure approach.
• GDP= consumption expenditure
+ investment expenditure
+ government expenditure
+ net export
Final goods/ services
![Page 19: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/19.jpg)
7.3 (b)
Stage ofproduction
Output produced Outputproduced by
Market value of output
Required intermediateinput
Market value of intermediate input
First Fresh salmon fish
Local fishermen
$ 3 million
None Zero
Final Canned salmon fish
Localfactory
$ 5 million
Freshsalmon fish
$ 3 million
Stage ofproduction
Output produced
Output produced by
Market value of output
Required intermediateinput
Marketvalue of intermediate input
First Engine Factory located in foreign country
$ 6 million
None Zero
Final Truck Local factory $ 9 million
Engine $ 6 million
![Page 20: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/20.jpg)
7.3 (b)
Canned salmon fish $ 5 million
1/2 of the output 1/2 of the output
Purchased by Local households Foreigners
Truck$ 9 million
1/3 of the output
1/3 of the output
1/3 of the output
Purchase/ unsold
Local firms government unsold
C= 1/2 * 5 million = $ 2.5 million
![Page 21: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/21.jpg)
7.3 (b)
Canned salmon fish $ 5 million
1/2 of the output 1/2 of the output
Purchased by Local households Foreigners
Truck$ 9 million
1/3 of the output
1/3 of the output
1/3 of the output
Purchase/ unsold
Local firms government unsold
I= (1/3+ 1/3) * 9 million = $ 6 million
![Page 22: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/22.jpg)
7.3 (b)
Canned salmon fish $ 5 million
1/2 of the output 1/2 of the output
Purchased by Local households Foreigners
Truck$ 9 million
1/3 of the output
1/3 of the output
1/3 of the output
Purchase/ unsold
Local firms government unsold
G=1/3 * 9 million = $ 3 million
![Page 23: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/23.jpg)
7.3 (b)
Canned salmon fish $ 5 million
1/2 of the output 1/2 of the output
Purchased by Local households Foreigners
Truck$ 9 million
1/3 of the output
1/3 of the output
1/3 of the output
Purchase/ unsold
Local firms government unsold
NX= exports – imports= ½ * 5 million – 6 million = $ -3.5 million
![Page 24: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/24.jpg)
7.3 (b)
• GDP= C + I + G + NX
= 2.5 million + 6 million + 3 million – 3.5 million
= $ 8 million
![Page 25: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/25.jpg)
7.3 (c)
• The factory which produces engine earns a profit of $ 0.6 million in 2005 and half of the factory is owned by the citizens of country X.
• Calculate GNP of country X
![Page 26: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/26.jpg)
7.3 (c)
• GNP measures the value of output produced by the nationals.
• GNP = GDP
+ factor income derived by nationals from overseas
- factor income paid to foreigners
![Page 27: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/27.jpg)
7.3 (c)
Stage ofproduction
Output produced Outputproduced by
Market value of output
Required intermediateinput
Market value of intermediate input
First Fresh salmon fish
Local fishermen
$ 3 million
None Zero
Final Canned salmon fish
Localfactory
$ 5 million
Freshsalmon fish
$ 3 million
Stage ofproduction
Output produced
Output produced by
Market value of output
Required intermediateinput
Marketvalue of intermediate input
First Engine Factory located in foreign country
$ 6 million
None Zero
Final Truck Local factory $ 9 million
Engine $ 6 million
earns a profit of $ 0.6 million in 2005 ;half of the factory is owned by the citizens of country X
![Page 28: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/28.jpg)
7.3 (c)
• factor income paid to foreigners = 0factor income derived by overseas nationals
= 1/2 * 0.6 million = $ 0.3 million
• GNP = GDP + income paid to foreigners- income derived by overseas nationals
= 8 million + 0.3 million - 0= $ 8.3 million
![Page 29: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/29.jpg)
7.3 (d)• Explain how each of the activities should be
treated under the national income accounting of country X by income approach:
I. Fisherman A wins $2,000 from playing cards with fisherman B.
∵ not a process of production (no output)
∴ not counted as income
Value of total incomes generated in the process of production
![Page 30: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/30.jpg)
7.3 (d)• Explain how each of the activities should be
treated under the national income accounting of country X by income approach:
II. Fisherman C catches $ 3,000 of salmon fish and keeps them for his own use.
∵ non-market activity
∴ not counted as income
Value of total incomes generated in the process of production
![Page 31: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/31.jpg)
7.3 (d)• Explain how each of the activities should be
treated under the national income accounting of country X by income approach:
III. The government pays $ 5,000 welfare payment to an unemployed factory worker.
∵ not incomes generate from production
∴ not counted as income
Value of total incomes generated in the process of production
![Page 32: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/32.jpg)
8.1--DenotationActual output : Y Planned aggregate expenditure: PAEDisposable income: Yd
Net tax (tax minus transfer payments): TAutonomous consumption: a=$200 billionMarginal propensity to consume (MPC): b=0.8Autonomous investment : IP =$20 billionAutonomous government spending: G=$100 billionLump sum tax: T0=$50 billionProportional tax rate: t=0.1Autonomous exports: X=$100 billionMarginal propensity to import (MPM) m=0.12
![Page 33: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/33.jpg)
8.1 a) What is the output gap?Equilibrium level PAE=YPAE= C + IP + G + (X-M)
= (a + bYd ) + IP + G + (X – mY)= [a + b ( Y – T)] + IP + G + (X – mY)= [a + b ( Y – T0 –tY)] + IP + G + (X – mY)= (a-bT0 + IP +G +X) + (b- bt-m)Y
(a-bT0 + IP +G +X) : denoted as A
A + (b- bt-m)Y =Y(a-bT0 + IP +G +X) 200-0.8x50+20+100+1001- b(1-t ) + m = 1-0.8(1 -0.1)+0.12
= $950 (billion)
Output gap=actual output – full employment output= $950-$1000 = $-50 (billion)
C =a +b Yd
M=mY Yd= Y- TT = T0+ t Y
Y =
![Page 34: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/34.jpg)
8.1 b) & c)b) Budget deficit or Budget surplus?
Tax income of government=Lump sum tax +induced tax T= T0 + tY = $50 + 0.1x $950 = $145 (billion)G= $100 (billion)Budget Surplus = $145- $100 = $45 (billion)
c) Value of net exports?Net export = X – M
= X – mY=$100 – 0.12x $950=$-14 (billion)
![Page 35: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/35.jpg)
8.1 d)A ΔA
1-b(1-t)+m 1-b(1-t)+m
investment A Y
ΔY = -Output gap =$50(billion), 1-b(1-t) + m =0.4
ΔA= $50x 0.4= $20 (billion) i.e. Δ IP = 20 (billion)
Interest rate: r
$ 10 billion
1%
Δr = 20 ÷10 x 1% = 2%
Interest rate should decrease by 2%
Y= ΔY=
Δ IP Δr
![Page 36: Eco 2601 终极版](https://reader034.vdocuments.pub/reader034/viewer/2022042501/55a3cfd01a28ab140d8b483e/html5/thumbnails/36.jpg)
8.1 e)ΔA
1-b(1-t)+m
m , others , 1-b(1-t) + m
ΔY 1
ΔA 1-b(1-t)+m
multiplier effect will be smaller
ΔY=