Question

The government of Ghana spends two hundred thousand and fifteen cedis (GHC200,015.00) on goods and services. The households spent thirteen thousand and twenty-five cedis (GHC13,025.00) on consumption of goods and services. Two thousand and fifty cedis (GHC2,050.00) was spent on capital goods. Indirect taxes amounted to four hundred and fifty cedis (GHC450.00) and the subsidies of one hundred and fifty cedis (GHC150.00). There was a transfer payment of two hundred cedis (GHC200.00).

a. Present the information contained in the above extract on a table of National Income Accounts for Ghana

b. Determine the national income of Ghana.

c. IfthepopulationofGhanais30,000,calculatethepercapitaincomeofGhana.

d. i. What method was used in estimating the national income?

ii. State any three problems associated with the method used in (d) (i).

2. a. You have just been employed by Ghana Statistical Service and your first task is to calculate inflation for the month of July. With the aid of an illustration, outline how inflation is calculated.

b. If inflation is 7% and you get a 10% raise in your income, what has happened to your money income? real income?

3. What is unemployment and explain three (3) types of unemployment.

4. Ghana’s currency has been depreciating against major currencies like dollar, euro, etc in recent times. What do you think can be done to strengthen Ghana’s currency?

5. Discuss whether the introduction of money has actually solved the problem of barter trade.

Answer 1

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Question:

Answer:

1). Answer:

a). Answer:

Factors	Value
Government Spending	GHC200,015.00
Consumption (household spending)	GHC13,025.00
Investment (Spent on capital goods)	GHC2,050.00

b). Answer:

National Income: National income is value of total items manufactured in-country by its residents and income received by its residents OR total amount of goods and services produced within the nation during the given period.

National Income = C+ I + G + NX

Where,

C = Consumption

I= Investment

G = Government spending

XM = Net Export

National Income = GHC13,025.00 + GHC2,050.00 + GHC200,015.00 = GHC215090

National Income = GHC215090

c). Answer:

Per capita income = National Income/Population

= GHC215090/30000 = GHC7.16

Per capita income = GHC7.16

d (i). Answer:

The expenditure method was used in estimating the national income.

(ii). Answer:

Three problems associated with the  expenditure method:

1. It is difficult to measure the monetary value of some items like, fee services, personal consumption.

2. Statistical methods have some errors related with sample, calculation etc

3. Pricing of the factors is also a big challenge in national income calculation.

2). Answer:

a). Answer:

There are two method of inflation calculation in which CPI method is most popular.

CPI: CPI is the best statistical tool to measure in the economy. Its measures the average change in prices over time that consumers pay for a basket of goods and services

Inflation = [(CPI of the current year - CPI of of the previous year)/CPI of of the previous year] * 100

#### CPI is published every year by the government .

Example:

Suppose, CPI for 2018 = 170 and , CPI for 2019 = 190 then inflation is equal to:

Inflation = [(190 -170)/170] * 100

= 0.1176 * 100 = 11.76%

Inflation = 11.76%

b). Answer:

Inflation and real income have reverse relation. Both move together in the opposite direction.

Real income is inflation adjusted income or income after adjusting inflation.

When inflation increase its decreased the real income and purchasing power of the money.

So, If inflation is 7% and you get a 10% raise in your income then in real term your money/income grow only by 3%. Or you can say that the purchasing power of your money is decreased by 7%.

[Real income = Nominal income - Inflation]

3). Answer:

Unemployment: It means people are looking for job but unable to find. Or we can say have not job.

Three types of unemployment are: Structural unemployment, Cyclical unemployment & Seasonal unemployment.

Structural unemployment: It is related with the skills gap or gap between current skilled set and skilled required by the employers.

Cyclical unemployment: It is related to business cycles when economy grow or in boom phase then more job opportunities are generated and vice-versa. it means in a recession phase unemployment rate is high and vice-versa.

Seasonal unemployment: Job is created during the favorable season and vice-versa like in festive seasons related industry creat more job jobs.

4). Answer:

Ghana’s currency has been depreciating against major currencies like dollar, euro, etc in recent times. It means Ghana currency is getting weaker in the recent years. Government should increase export and FDI inflow, Sell foreign exchange assets, purchase own currency, increase interest rate, supply of the goods and services etc.

When government will increase interest rate then it will attract foreign fund because of providing comparatively higher rate of return and it will increased the demand of domestic currency and currency will appreciated. When government will purchase its own currency then it will increased the demand of domestic currency and currency will appreciated. Supply side efforts will increase the export and inflation that will increase inflow of foreign currency.

5). Answer:

YES,  introduction of money has actually solved the problem of barter trade because it has became the trade more transparent, easy and fast. The issue with the barter trade was the valuation of goods and services, transaction of value and store of value. These all the problems has been solved by  introduction of money.

Thank You