Macro

[Chandrani]

Over a ten-year period the population of a country increased at the annual rate of 2%, nominal GDP grew at 5% and inflation p.a was 10%. The per-capita real GDP of the country
(a) remained same
(b) increased
(c) decreased
(d) can't say

Pls explain also..so i understand :)

[priyanka p]

it should increase. i try to give an appropriate explanation. if population was x, it now becomes 1.02x  and we know that nominal gdp= real gdp * price.  so to calculate real gdp, first find the increased price level, it rises 10% per annum, means if initially it was p, in 2nd year 1.1p, 3rd year (1.1+.11)p 4th year (1.21+.12)p and so on till 10 yrs....this would cum around 1.9p ( rounded off). now nominal gdp=y*1.9p   but its given nominal gdp rises , so its now (1.05)(1.9p)   therefore real gdp now is (1.05*1.9p)/1.02x  and then we can find the change {(2.8-1)yp/} / yp/x which is 1.84. thus it rises

[Chandrani]

i was getting the inflated price as 2.59.. isn't it just the compound interest formula?
and for real gdp, acc. to your formula should equal (1.05)/(2.59p*1.02). In that case, the real GDP is actually decreasing..
could you clarify... thanks

[duck]

hi.. :)

it can be done in the following way>>

% change in real gdp =% change in nominal gdp - % change in inflation

                            = 0.05- 0.10 = -0.05

now, % change in per capita real gdp = % change in real gdp - % change in population
                                       
                                                  = (- 0.05) - (0.02)

                                                 = (-0.07)
=> per capita real gdp decreased

....

[Chandrani]

Hey thanks.. :)
If between two periods in a closed economy, everybody's propensity to save doubles, while investment remains unchanged. What happens to income and savings?

[Chandrani]

Sir, could you solve this one..
GDP at factor cost = 10000
Net current account balance = -500
Gross investment = 2000
Net Factor Income from abroad = -800
Depreciation = 1000
NIT= 1300

Wat would b d 'gross savings' and 'net savings'? Pls explicitly show d calculation. Thank you.

I think in this ques, income definately increases becoz of the multiplier effect, n savings remain the same we assume tht whole of our savings are invested and investmnt is the same..Am i right?

[Chandrani]

The actual ques was: Bet 2 periods in a closed economy, everybody's MPS doubles, while investment remains same. As a result:
(a) savings double
(b) income doubles
(c) savings remain unchanged
(d) income remains unchanged

so i guess the correct option would be (c)