If the growth rate in year 3 had been a positive 5 percent rather than a negative 2 percent, what would have been the average growth rate?


1.        Using the following national income accounting data, compute (a) GDP, (b) NDP, and (c) NI. All figures are in billions.


Category Value
Compensation of employees $196.2
U.S. exports of goods and services 19.8
Consumption of fixed capital 11.8
Government purchases 59.4
Taxes on production and imports 14.4
Net private domestic investment 52.1
Transfer payments 13.9
U.S. imports of goods and services 16.5
Personal taxes 40.5
Net foreign income 2.2
Personal consumption expenditures 219.1
Statistical discrepancy 0.0


Instructions: Round your answers to one decimal place.

a. GDP = $

If the growth rate in year 3 had been a positive 5 percent rather than a negative 2 percent, what would have been the average growth rate? [removed]%


8.        Suppose that Glitter Gulch, a gold mining firm, increased its sales revenues on newly mined gold from $75 million to $150 million between one year and the next. Assuming that the price of gold increased by 100 percent over the same period, by what numerical amount did Glitter Gulch’s real output change?


If the price of gold had not changed, what would have been the change in Glitter Gulch’s real output?

$ [removed]million


9.        A mathematical approximation called the rule of 70 tells us that the number of years that it will take something that is growing to double in size is approximately equal to the number 70 divided by its percentage rate of growth. Thus, if Mexico’s real GDP per person is growing at 7 percent per year, it will take about 10 years (= 702formula11.mml7) to double.

Apply the rule of 70 to solve the following problem. Real GDP per person in Mexico in 2005 was about $11,000 per person, while it was about $44,000 per person in the United States. If real GDP per person in Mexico grows at the rate of 2 percent per year, how long will it take Mexico’s real GDP per person to reach the level that the United States was at in 2005? (Hint: How many times would Mexico’s 2005 real GDP per person have to double to reach the United States’ 2005 real GDP per person?)

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