• Although the country produced several types of commodities (goods and services) in the year 2002, but this country's Central Statistics Office has grouped such commodities into five broad categories (A to E) for the purpose of estimating private consumption expenditure for the year 2002.
1.While it is difficult to precisely predict future economic growth, the country's leading economists believe that if no measures are taken to revitalize the economy in 2012, the economy will become stagnant and its effect would be reflected in the GDP for the year 2017. In order to estimate the GDP for 2017,
i = interest; w = wages/salaries; r = rent; p = profit;
m = intermediate inputs; s = market value of output sold for intermediate uses;
f = market value of output sold to final users.
Note: All values are in billions of dollars, expressed in 2017 prices.
Other select information for the year 2017 (in 2017 prices) is noted below: Gross National Expenditure (GNE) $ 1500bn Depreciation $ 100bn Direct taxes $ 100bn Indirect taxes $ 80bn Net exports (deficit) $ (100)bn Transfer payments $ 200bn
• If however measures are taken to revitalize the economy (in this instance - by investing in Proposal A or Proposal B) in 2012, the GDP for the year 2017 could be affected - due to the multiplicative effect of investments. For Proposal A, for example, GDP will be roughly equal to the ‘without investment GDP' for 2017 plus investment inclusive of the multiplicative effect. The average value of the investment multiplier for investment in Project A can be determined from the following information:
The GDP of the country, inclusive of the multiplicative effect of investment, for Proposal B, for the year 2017, can be estimated from the following simplified representation of the country's economy: The total value of the output produced by all firms in the country is estimated to be $1844bn. Of this output, $100bn worth of output is expected to be kept aside by the firms to build inventories for the future. In that year, the production processes are estimated to consume $400bn worth of intermediate inputs (raw materials), and the corporate sector is estimated to suffer a loss of $200bn. The indirect taxes in that year are estimated to be $100bn, and wages and salaries, $500bn. All these estimates are in 2017 prices.
• Assume that the investments in either of the proposals will not cause any inflationary pressures.