EXERCISE 3 Page 1 of 2

UNIVERSITY OF THE PHILIPPINES

School of Economics
Economics 100.1
Introduction to Macroeconomic Theory and Policy
Exercise 3

Prof. Solita C. Monsod / R. Domingo / R. Valientes 2nd Semester, AY 2009-2010

Please use yellow paper. Show your solutions for items requiring calculations.

Submission: September 8

You should sign your answer sheets

PART 1. Fill in the missing values

Nominal Per Capita Per
Real GDP Population Inflation
Year GDP CPI Nominal Capita
(Billion) (Million) Rate
(Billion) GDP Real GDP
1993 729.102 100 729.102 58.72 1,241.66 1,241.66 -
1994 912.027 112.2 812.858 60.1 1,517.52 1,352.51 12.20
1995 1068.557 128.1 834.158 60.7 1,760.39 1,374.23 14.17
1996 1266.07 152 832.941 62.13 2,037.78 1,340.64 18.66
1997 1385.562 165.6 836.692 63.58 2,179.24 1,315.97 8.95
1998 1500.287 178.2 841.912 65.11 2,304.23 1,293.06 7.61
1999 1737.728 194.3 894.353 66.59 2,609.59 1,343.07 9.03
2000 1967.743 210.1 936.574 68.62 2,867.59 1,364.87 8.13

PART 3. According to reviews, the movie TITANIC is by far the top grossing movie of all time. As a movie enthusiast and an
Economist at the same time, I say it is “Gone With the Wind”. Using the data below, prove that I am correct (that is by
constructing a new ranking using real gross sales).

Nominal Real
TOP GROSSING MOVIES
YEAR RANK Gross Sales CPI Gross Sales RANK
Ranked by Nominal (Current) Dollars
(million $) (million $)
Titanic 1997 1 $601 160.50 $374.45 4
Star Wars - Original 1977 2 $461 60.60 $760.73 2
ET 1982 3 $434 96.50 $449.74 3
Star Wars - New 1999 4 $431 166.60 $258.70 7
Jurassic Park 1993 5 $357 144.50 $247.06 8
Forrest Gump 1994 6 $330 148.20 $222.67 9
Harry Potter 2001 7 $317 177.10 $178.99 13
Lion King 1994 8 $313 148.20 $211.20 11
Return of the Jedi 1983 9 $309 99.60 $310.24 6
Lord of the Rings 2001 10 $307 177.10 $173.35 15
Independence Day 1996 11 $306 156.90 $195.03 12
Sixth Sense 1999 12 $293 166.60 $175.87 14
Empire Strikes Back 1980 13 $290 82.40 $351.94 5
Home Alone 1990 14 $286 130.70 $218.82 10
Gone With The Wind 1939 15 $200 14.10 $1,418.44 1
EXERCISE 2 Page 2 of 2

PART 4. Given an economy with the following income accounting figures:

Item Billions of Pesos Item Billions of Pesos
Exports 367 Transfer Payments 320
Dividends 60 Interests 201
Consumption of Fixed 307 Proprietor’s income 132
Capital
Wages and Salaries 1442 Personal consumption 1810
expenditures
Government purchases 577 Imports 338
Rents 33 Social security contributions 148
Indirect business taxes 255 Undistributed corporate 55
profits
Wage and salary 280 Personal taxes 372
supplements
Gross private domestic 437 Net factor income earned in 0
investment the economy
Corporate income tax 88

a. Compute for the following:

i) Compensation of employees = Wages and Salaries + Wage and salary supplements = 1722
ii) Net Exports = Exports – Imports = 29
iii) Net private domestic investment = Gross private domestic investment - Consumption of Fixed
Capital = 130

b. Using the figures from the table and your answers in (a), complete the table below:

GDP Expenditure Approach GDP Income Approach

Personal consumption 1810 Wages and Salaries 1442
expenditures
Gross private domestic 437 Wages and Salary 280
investment supplements
Government purchases 577 Interest 201
Net Exports 29 Rent 33
Proprietors Income 132
Undistributed corporate
profits 55
Indirect business taxes 255
Dividends 60
Corporate income tax 88
Consumption of Fixed
Capital 307
GDP: 2853 GDP: 2853

c. In this economy:
i) Net domestic product is: GDP - Consumption of Fixed Capital = 2546
ii) National income is: NDP – Indirect business taxes = 2291
iii) Personal income is: National Income + Transfers = 2611
iv) Disposable income is: Personal Income – Personal taxes = 2239