UNIVERSITY OF NORTHERN BRITISH COLUMBIA Winter 2017 Assignment # 1 Intermediate Macroeconomics (Econ311) Due date: February 09. 2017 in class Prepare your answers to the following questions as neatly as possible. Please make sure to show all your work. 1. The following table shows various stages by which wood is turned into wallpapers as the final product. The numbers are all in million dollars. Forest Company: Sales of wood $ 1800 Expenses: 600 Rent paid 50 Wages paid 550 Profits $ 1200 Saw Mill: Sales of wood chips $ 4200 Expenses: 2800 Purchase of wood 1800 Wages paid 400 Interest paid 600 Profits 1400 Pulp & Paper Mill: Sales of paper $ 6500 Expenses: 5000 Purchase of wood chips 4200 Interest paid 500 Wages paid 300 Profits $ 1500 Wallpaper Company: Sales of wallpapers $8000 Expenses: 7300 Purchase of paper 6500 Interest paid 200 Wages paid 600 Profits $ 700 Assuming that wallpaper is the only final good in the economy, compute the value of GDP for this economy using each of the final good, value-added, and income approaches. Compare your results from the three approaches.2. The economy of Fruitland produces four types of fruit: apples, oranges, pears and grapes. The following table contains the production and price data for two consecutive years. Last Year Current Year Fruit Quantity Price Quantity Price Apples 5000 tons $ 800 per ton 5500 tons $ 800 per ton Oranges 4500 tons $ 1000 per ton 4300 tons $ 1200 per ton Pears 1000 tons $ 600 per ton 1100 tons $ 500 per ton Grapes 3200 tons $ 1200 per ton 3300 tons $ 1250 per ton a) What are the values of nominal and real GDP in each year? b) How much did nominal GDP grow between the last year and the current year? c) How much did the real GDP grow between the last year and the current year? d) What was the percentage change in the overall price level (measured by the GDP deflator) between the last and the current year? 3. A closed economy is characterized by the following information: Subsistence consumption $ 40 million Propensity to consume 0.75 Investment $ 300 million Government Purchases $ 450 million Taxes $ 400 million Find out each of the following values: a) Equilibrium GDP (Y) d) Private Saving b) Disposable income (YD) e) Public Saving c) Consumption spending (C) f) The multiplier 4. Show the equilibrium in the above economy (as described in Question3) on a properly labelled diagram using Demand and Output lines. If the economy's current production is at $1800 million, how would you characterize the situation in the economy? What needs to happen for this economy to be in equilibrium? 5. Suppose the money demand is given by Md = $Y(0.25 – i ) and $Y = $1000. a) What is the interest rate if Ms = $200? b) If the Central Bank wanted to reduce the interest rate to 3%, how much should it increase the money supply? c) Show your results in parts a and b on a properly labelled diagram. GOOD LUCK!