2. Kazakhstan is well endowed with energy resources, although its resources in per capita terms is much lower than Kuwait. Its estimated oil reserve per capita is 5% of the level in Kuwait, and its estimate gas reserve per capita is 23% of the level in Kuwait. Tables 2 and 3 and Figures 1 and 2 summarize the economies of Kazakhstan and Kuwait from 1992 to 2011 (data sources: Penn World Table and US Energy Information Administration). The sample period starts from 1992 such that it does not include the years of the First Gulf War which involved Kuwait. The variables y,k,h, and A are real output per worker (in 2005 US dollar), real capital per worker (in 2005 US dollar), human capital index, and TFP. The TFP is calculated from the production function y = Ak1/3h2/3. The variables gy,gk,gh and gA are their growth rates. The Brent crude oil price is one of the major measures of crude oil price in the US dollar. For all of the following questions, please use theory or data to explain your answers. These questions may not have deï¬nite answers and you will be graded on the logic and quality of your 1 answers. (a) (6 points) Based on the prediction of the Solow model, which country should have higher growth rate in GDP per worker between 1992 and 2011? (b) (6 points) Based on the data presented here, do you think the TFP series accurately measure productivity in the two countries? (c) (12 points) Comparing the economic performance of Kazakhstan to Kuwait, do you think there is evidence that Kazakhstan suï¬ers from the natural resource curse?
2. Kazakhstan is well endowed with energy resources, although its resources in per capita terms is much lower than Kuwait. Its estimated oil reserve per capita is 5% of the level in Kuwait, and its estimate gas reserve per capita is 23% of the level in Kuwait. Tables 2 and 3 and Figures 1 and 2 summarize the economies of Kazakhstan and Kuwait from 1992 to 2011 (data sources: Penn World Table and US Energy Information Administration). The sample period starts from 1992 such that it does not include the years of the First Gulf War which involved Kuwait. The variables y,k,h, and A are real output per worker (in 2005 US dollar), real capital per worker (in 2005 US dollar), human capital index, and TFP. The TFP is calculated from the production function y = Ak1/3h2/3. The variables gy,gk,gh and gA are their growth rates. The Brent crude oil price is one of the major measures of crude oil price in the US dollar. For all of the following questions, please use theory or data to explain your answers. These questions may not have deï¬nite answers and you will be graded on the logic and quality of your 1 answers. (a) (6 points) Based on the prediction of the Solow model, which country should have higher growth rate in GDP per worker between 1992 and 2011? (b) (6 points) Based on the data presented here, do you think the TFP series accurately measure productivity in the two countries? (c) (12 points) Comparing the economic performance of Kazakhstan to Kuwait, do you think there is evidence that Kazakhstan suï¬ers from the natural resource curse?
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1. What component of GDP (if any) will each of the following transactions affect? Explain.
a) A family buys a new refrigerator.
b) Aunty Jane buys a new house.
c) Kina Pharma sells drugs from its inventory.
d) Emmanuel buys a pizza.
e) The government builds a new Motorway from Accrato Kumasi
f) You buy a bottle of California wine.
g) Samsung build an assembly plant in Ghana.
2. Consider an economy that produces only four types of fruit: apples, oranges, pineapples, and bananas. In the base year (2017), the production and price data were as follows:
| Fruit | Quantity | Price |
| Apple | 3,000 | $2 |
| Banana | 6,000 | $3 |
| Pineapple | 4,000 | $1.5 |
| Oranges | 8,000 | $4 |
In the current year (2020), the production and price data are as follows:
| Fruit | Quantity | Price |
| Apples | 4,000 | $3 |
| Banana | 14,000 | $2 |
| Pineapple | 7,500 | $2 |
| Orange | 32,000 | $5 |
(a) Calculate the nominal GDP in the current year and in the base year. What is the percentage increase since the base year?
(b) Calculate the real GDP in the current year and in the base year. By what percentage does real GDP increase from the base year to the current year?
(c) Find the GDP deflator for the current year and the base year. By what percentage does the price level change from the base year to the current year?
(d) Would you say that the percentage increase in nominal GDP in this economy since the base year is due more to increases in prices or increases in the physical volume of output?
3. The following information is obtained from the World Bank’s World Development Indicators on the Economy of Ghana for the year 2015:
i) GDP per capita (constant 2000 US$) - $1696.08
ii) GDP per capita (current US$) - $1381.41
ii) GDP per capita, PPP (constant 2005 International $) - $3953.21
a) What factors could account for the difference between the figures in i) and ii)
b) What factors could account for the difference between the figures in i) and iii)?
c) What factors could account for difference between the figures in ii) and iii)?
4. The following relationships hold in the economy of Matata Island:
𝐶 = 320 + 0.4(𝑌 − 𝑇)
𝐼 = 150
𝐺 = 275
𝑇 = 200
a) Explain the concepts of marginal propensity to consume (MPC) and marginal propensity to save (MPS).
b) What is the MPC for this economy?
c) Explain the concepts of the autonomous spending and tax multipliers.
d) What is the autonomous spending multiplier for this economy?
e) What is the equilibrium level of income for this economy?
f) Suppose that the full employment level of output for this economy is 4000. What sort of output gap is Matata island facing?
g) What kind of policy can the government use to close this kind of gap? Explain with the aid of a diagram.
5. a) For the purposes of assessing an economy's growth performance, which is the more important statistic: real GDP or nominal GDP? Why?
b) Why are goods and services counted in GDP at market value? Explain.
c) What is the difference between intermediate good and final good? Why is the distinction important for measuring GDP?
