Topic 1: National Accounts

Question 1

Give a diagram that shows the flows between sectors in a closed economy

Answer 1

Question 2

Three approaches to measuring GDP

Answer 2

Expediture method: Y = C + I + G + X - M

Income Method: Y = sum(W + π)

Production (VA) Method: sum(Revenue - non labour input costs)

Question 3

Give a diagram showing investment flows. Label.

Answer 3

I₁ Revenue to firm from the issue of stocks, bodns and other debt

I₂ Expenditure of that income on new plant and equipment.

I₃ Firms which produce capital goods recieve these payments in return for their supply of the new plant and equipment.

I₁ = I₂ = I₃ = I, so I₂ I₃ net out.

Net flows are C & I₁=I

Question 4

Show the open economy flow diagram

Answer 4

Question 5

What is net national product?

Answer 5

NNP = Y_n - dK

GNP less the depreciation of capital stock. Money

Question 6

What is national income?

Answer 6

Income of firms take indirect taxes & depreciation

NI = NNP - indirect tax revenue

Question 7

Gross national expenditure

Answer 7

C + I + G

Question 8

Real GDI

Answer 8

C + I + G +X*(P_x/P_m) - M