Unit: Economics
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Login to Access| Gross national product (at market prices) | = 498.5 |
| Depreciation allowance | = 56.0 |
| Indirect taxes less subsidies | = 52.4 |
| Business taxes | = 13.5 |
| Personal income taxes | = 76.2 |
| Government transfers | = 68.2 |
| Retained profits | = 15.0 |
Required: | |
| Determine the following: |
| (i) | Net National Product at market price. |
| (ii) | Disposable income. |
| (iii) | Personal income. |
| (iv) | Net National Income at factor cost. |
Commodity market
C = 500 + 0.64Y
I = 1720 + 12r
Money market
MS1,400
MDT = 0.5Y
MDS = 600 – 10r
Required:
(i) Derive the IS function.
(ii) Derive the LM function.
(iii) Determine the equilibrium rate of interest and equilibrium level of national income.
Marginal prospensity to save (MPS) = 0.2
Autonomous consumption = 400
Required:
(i) Formulate the consumption function. (3 marks)
(ii) Determine the change in National Income if the Government’s expenditure was to increase by 50%.
| Year | Nominal Gross National Product (GNP) | Real GNP |
| 2000 | 1,359 | 1,359 |
| 2010 | 2,857 | 1,623 |
Autonomous consumption = 8000
Marginal propensity to save (MPS) = 0.45
Required:
(i) Derive the savings function.
(ii) If the level of government expenditure increases by 250%, determine the change in equilibrium level of
national income.
Commodity market
C = 400 + 0.45y
I = 1700 + 18r
Money market
MS = 1600
MDT = 0.25y
MDS = 800 – 12r
Required:
(i) Derive the IS function.
(ii) Derive the LM function.
(iii) Determine the equilibrium rate of interest.
(iv) Determine the equilibrium level of national income.
C = 500 + 0.6Yd
I = 350
G = 250
T = 200
X - M = 280 - 0.1Y
Where:
G = Government expenditure
C = Consumption
I = Investment
T = Taxes
X = Exports
M = Imports
Y = National income
Required:
(i) The equilibrium level of national income.
(ii) The equilibrium level of consumption expenditure.
(iii) The multiplier.
Y = C + I + G + (X – M)
C = 200 + 0.8Yd
T = 20 + 0.2Y
I = 70
G = 50
X = 40
M = 60
Where:
Y = National income
C = Consumption expenditure
I = Investment
G = Government expenditure
Yd = Disposable income
T = Taxes
X = Export
M = Import
Required:
The equilibrium level of:
(i) National income.
(ii) Consumption.
(iii) Taxes.
| Year | Y $ | C $ | I $ | G $ | X $ | M $ |
| 2020 | 80,000 | ? | 10,000 | 40,000 | 100,000 | 120,000 |
| 2021 | 90,000 | 56,000 | 15,000 | 34,000 | 110,000 | ? |
| Total output | Intermediate purchases | |
| Agriculture | 130 | 110 |
| Manufacturing | 170 | 145 |
| Services | 150 | 125 |
government intervention:
The commodity market Consumption function:
C = 50 + 2/5Y
Investment function:
I = 790 – 21r
The Money Market:
Precautionary and Transactions demand for money MDT = 1/6 Y
Speculative demand for money MDS = 1200 -18r
Money supply MS = 1250
Required:
(i) Determine the equilibrium levels of income and interest rate for this economy.
(ii) Using a well labeled diagram, illustrate the equilibrium condition in part (i) above.
|
Year
2011 2019 |
Nominal GNP "Sh.billion" 1,185.90 2,633.00 |
Real GNP "Sh.billion" 1,185.90 1,474.00 |
| Gross National Product (at market price) Depreciation allowance Indirect taxes less subsidies Business taxes Personal income taxes Government transfers Retained profit | 3,992 570 524 214 763 693 230 |
| Year 2011 2016 | Nominal GNP (Sh. billion) 1,085 1,850 | Real GNP (Sh. billion) 1,085 1,275 |
Required:
(i) Equilibrium level of interest rate.
(ii) Equilibrium level of national income.
| Gross National Product (at market price) | 620.4 |
| Government transfers | 78.6 |
| Business taxes | 18.2 |
| Personal income taxes | 56.1 |
| Depreciation allowance | 42.3 |
| Indirect taxes less subsides | 36.5 |
| Sh. "million" | |
| General government final expenditure | 6,750 |
| Taxes on expenditure | 4,250 |
| Transfer payments | 675 |
| Social security contributions | 2,500 |
| Net property income from abroad | 250 |
| Consumers expenditure | 18,500 |
| Subsidies | 750 |
| Gross domestic fixed capital formation | 5,750 |
| Corporate income tax | 750 |
| Undistributed profits | 500 |
| Personal income tax | 1,000 |
| Imports of goods and services | 9,250 |
| Exports of goods and services | 8,750 |
| Depreciation | 3,500 |
(ii) Give the reasons for the lower value of the gross national product in the less developing countries.