National Income Accounting (Macroeconomic
Performance) Questions and Answers
Questions:
1. The following table shows index numbers for real GDP (national output) for various countries (2003
= 100). Using the formula G = (Yt – Yt-1)/Yt-1 x 100 (where G is the rate of growth, Y is the index
number of output, t is any given year and t – 1 is the previous year):
(a) Work out the growth rate for each country for each year from 2004 to 2009 (remember that 2003 is
the base year)
(b) Plot the figures on a graph and decribe the pattern that emerges
2003 2004 2005 2006 2007 2008 2009
USA 100 103.6 106.7 109.6 111.9 113.1 110.0
Japan 100 102.7 104.7 106.9 109.4 108.7 102.8
Germany 100 100.7 101.7 104.9 107.6 108.7 102.9
France 100 102.2 104.2 106.6 108.9 109.7 107.1
UK 100 102.8 104.9 107.8 111.1 111.9 107.0
2. What would be the effect of each of the following events on actual economic growth? (Assume
no other changes take place.)
(a) A reduction in the level of investment. rise / fall / no effect
(b) People save a larger proportion of their income. rise / fall / no effect
(c) A reduction in the working week. rise / fall / no effect
(d) Increased expenditure on education and training. rise / fall / no effect
(e) The discovery of new, more efficient techniques which could benefit industry generally.
rise / fall / no effect
(f) A reduction in interest rates. rise / fall / no effect
3. In this question, you have a description of a particular type of transaction in the circular flow of
income. Try to match the lettered description with the correct numbered term
Descriptions
(a) Jaguer Land Rover UK sells 50,000 Range Rovers to South Africa
(b) A successful advertising campaign by IRN BRU results in greater sales in its domestic (UK) market
(c) A rise in the pound:euro exchange rate causes Toyota UK to switch from UK-based component
suppliers to those located in the Eurozone
(d) The main GlaxoSmithKline production plant in the UK purchases new machinery from another UK
firm to produce its pharmaceuticals
(e) A rise in UK interest rates raises the amount of money placed by domestic residents in various types
of interest-bearing deposit accounts
(f) A government contract to build a major trunk road is withdrawn because of envirnmental protests
Terms
(i) Consumption expenditure (C)
(ii) Investment expenditure (I)
(iii) Government expenditure (G)
(iv) Exports (X)
(v) Savings (S)
(vi) Imports (M)
Performance) Questions and Answers
Questions:
1. The following table shows index numbers for real GDP (national output) for various countries (2003
= 100). Using the formula G = (Yt – Yt-1)/Yt-1 x 100 (where G is the rate of growth, Y is the index
number of output, t is any given year and t – 1 is the previous year):
(a) Work out the growth rate for each country for each year from 2004 to 2009 (remember that 2003 is
the base year)
(b) Plot the figures on a graph and decribe the pattern that emerges
2003 2004 2005 2006 2007 2008 2009
USA 100 103.6 106.7 109.6 111.9 113.1 110.0
Japan 100 102.7 104.7 106.9 109.4 108.7 102.8
Germany 100 100.7 101.7 104.9 107.6 108.7 102.9
France 100 102.2 104.2 106.6 108.9 109.7 107.1
UK 100 102.8 104.9 107.8 111.1 111.9 107.0
2. What would be the effect of each of the following events on actual economic growth? (Assume
no other changes take place.)
(a) A reduction in the level of investment. rise / fall / no effect
(b) People save a larger proportion of their income. rise / fall / no effect
(c) A reduction in the working week. rise / fall / no effect
(d) Increased expenditure on education and training. rise / fall / no effect
(e) The discovery of new, more efficient techniques which could benefit industry generally.
rise / fall / no effect
(f) A reduction in interest rates. rise / fall / no effect
3. In this question, you have a description of a particular type of transaction in the circular flow of
income. Try to match the lettered description with the correct numbered term
Descriptions
(a) Jaguer Land Rover UK sells 50,000 Range Rovers to South Africa
(b) A successful advertising campaign by IRN BRU results in greater sales in its domestic (UK) market
(c) A rise in the pound:euro exchange rate causes Toyota UK to switch from UK-based component
suppliers to those located in the Eurozone
(d) The main GlaxoSmithKline production plant in the UK purchases new machinery from another UK
firm to produce its pharmaceuticals
(e) A rise in UK interest rates raises the amount of money placed by domestic residents in various types
of interest-bearing deposit accounts
(f) A government contract to build a major trunk road is withdrawn because of envirnmental protests
Terms
(i) Consumption expenditure (C)
(ii) Investment expenditure (I)
(iii) Government expenditure (G)
(iv) Exports (X)
(v) Savings (S)
(vi) Imports (M)
