Direction: Provide a concise and short answer accordingly (Two Points Each).

1. Write approaches for measuring GDP/GNP.

2. Define GNP.

3. Write the basic difference between classical and Keynesian schools of thought.

4. List the components of GDP calculation using the income approach.

5. List and explain the two main building blocks of Neoclassical macroeconomics and their policy implications on an economy.

6. State the major assumptions of New Keynesian macroeconomics that distinguish this school of thought from New Classical macroeconomics.

7. The measure of GDP that reflects the actual value of goods and services produced by removing the effect of changes in prices is called _________ GDP.

1. GDP/GNP can be measured through the production, expenditure, and income approaches. 2. GNP is the total value of goods and services produced by a country's residents and businesses in a year. 3. Classical economics favors minimal government intervention; Keynesian economics supports active government involvement. 4. Components of GDP by the income approach include wages, interest, rental income, profits, taxes, and depreciation. 5. Neoclassical macroeconomics relies on rational expectations and efficient markets, advocating limited government intervention. 6. New Keynesian macroeconomics assumes sticky prices and imperfect competition, distinguishing it from New Classical economics. 7. Removing the effect of price changes yields Real GDP.

1. Approaches to Measuring GDP/GNP:

a. Production Approach

b. Expenditure Approach

c. Income Approach

2. GNP (Gross National Product) is the total monetary value of all final goods and services produced by a country's residents and businesses within a specific time frame, usually a year.

3. Basic Difference: Classical economics emphasizes minimal government intervention in markets and believes in the self-adjusting nature of the economy, while Keynesian economics advocates for government intervention to manage economic fluctuations.

4. Components of GDP Calculation (Income Approach):

a. Wages and Salaries

b. Interest Income

c. Rental Income

d. Profits

e. Taxes on Production and Imports

f. Depreciation

5. Neoclassical Macroeconomics Building Blocks:

a. Rational Expectations: Assumes that individuals make predictions about the future based on all available information.

b. Efficient Markets: Belief that markets quickly incorporate all available information into prices.

Policy Implications: Limited government intervention in markets and a focus on market efficiency.

6. Major Assumptions of New Keynesian Macroeconomics:

a. Sticky Prices: Prices and wages do not adjust instantly to changes in supply and demand.

b. Imperfect Competition: Firms have market power.

Distinguishing from New Classical: Recognizes market imperfections and price/wage stickiness.

7. The measure of GDP that reflects the actual value of goods and services produced by removing the effect of changes in prices is called Real GDP.

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