1. Problem Set 3 Karen R. Polenske
11. 481J, 1.284J, ESD.284J Wang Xiaodong
Spring 2003
Due April 7, 2004, 9:30am
A. China input-output data: Assume that the Ministry of Water is planning to construct a
major set of canals that run from the South to the North of China in order to reduce water
scarcity in the North.1 You, as a member of the Ministry staff, are responsible for
analyzing the economic impacts of the canal construction on both regions. Your first
task is to construct an accounting table for each of the two regions. You are provided
with the 1997 statistical account information of both regions in the attached table. [Note:
These are hypothetical data for North and South China; therefore, these data should not
be used for studies other than those in this class.]
A1. From the information given in Appendix A and using the attached Excel
worksheet REGION, construct an input-output table for each of the two regions,
showing both intermediate and final transactions. You will have to create two
regional input-output tables, one for North China and one for South China, based
on the data provided in the attached table. When you enter the data into the
worksheet REGION, the worksheet will automatically calculate the gross regional
consumption and gross regional outlays for you. (60 points)
A2. Specify the gross regional product in 2003 for each of the two regions. Please
also specify the gross regional income in 2003 for each of the two regions.
Explain why they are the same or different.
(20 points)
A3. Give a brief explanation of the following entries:
(12 points)
a. the entries in the transportation column (hint: explain the cost
structure of the transportation sector in each region);
b. the entries in the transportation row.
B. U.S. gross national product
The attached definition (refer to Appendix B) was published in the Boston Globe.
(1) Explain whether or not the definition is correct and why. (2) What difference, if any,
would it make if you were to comment on this as a definition of Gross Domestic Product,
rather than Gross National Product?
1
In this exercise, we arbitrarily divide China into the North and South regions, using
the Yangtze River as the dividing line. The North includes all provinces and
municipalities located north of the river; whereas the South represents all provinces and
municipalities situated south of the river.

2. HYPOTHETICAL 2003 DATA FOR THE NORTH AND SOUTH CHINA
(Million Renminbi)
Sales and
Purchases North South
AGRICULTURE
Sales of goods and services to other sectors
to agriculture 92500 54655
to industry 294492 107980
to construction 1226 620
to transport 18 7
to commerce and services 18232 9640
Sales of final goods
to personal consumption 351276 90691
to public consumption 237 127
to net exports (exports minus imports) 2589 6976
as investment (accumulation) 24677 15279
Adjustment -2633 -1498
INDUSTRY
Sales of parts and semi-finished goods
to agriculture 102766 59541
to industry 1343487 636435
to construction 197068 108730
to transport 68919 25625
to commerce and services 336511 145889
Sales of final goods
to personal consumption 452196 114553
to public consumption 25932 9507
to net exports (exports minus imports) 3547 10579
as investment (accumulation) 244237 141979
Adjustment 8423 4792
NEW AND MAINTENANCE CONSTRUCTION
Sales of semi-finished goods and services to other sectors
to agriculture 82 44
to industry 1117 562
to construction 2375 1202

3. HYPOTHETICAL 2003 DATA FOR THE NORTH AND SOUTH CHINA
(Million Renminbi)
Sales and
Purchases North South
CONSTRUCTION (Continued)
to transport 271 101
to commerce and services 12414 7075
Sales of final goods and services
to personal consumption 0 0
to public consumption 0 0
to net foreign trade (Exports-imports) 0 0
as investment (accumulation) 319958 190003
Adjustment 61 35
TRANSPORT
Sales of goods and services to other sectors
to agriculture 6640 3546
to industry 53886 32108
to construction 15329 6228
to transport 2847 1326
to commerce 68279 36811
Sales of final goods and services
to personal consumption 44651 8593
to public consumption 306 164
to net foreign trade (Exports-imports) 4516 15679
as investment (accumulation) 2259 1330
Adjustment 1120 637
COMMERCE AND SERVICES
Sales of goods and services to other sectors
to agriculture 29731 18344
to industry 285042 148596
to construction 35663 19544
to transport 18413 9132
to commerce and services 137136 73462

4. HYPOTHETICAL 2003 DATA FOR THE NORTH AND SOUTH CHINA
(Million Renminbi)
Sales and
Purchases North South
COMMERCE AND SERVICES (continued)
Sales of final goods and services
to personal consumption 199610 46831
to public consumption 272829 136005
to net foreign trade (exports-imports) -2985 -11225
as investment (accumulation) 39461 24602
Adjustment 3643 2073
DEPRECIATION (Consumption of capital)
in agriculture 13278 7091
in industry 122595 63760
in construction 8142 4121
in transport 26296 9823
in commerce and services 63340 38714
LABOR COMPENSATION
from agriculture 331435 191658
from industry 194205 102797
from construction 66904 35356
from transport 29813 13390
from commerce and services 196421 108486
NET TAXES
from agriculture 15163 8098
from industry 161139 81177
from construction 9454 4785
from transport 9483 3543
from commerce and services 22561 12009
OPERATING SURPLUS
from agriculture 31679 16918
from industry 238607 120204
from construction 18898 9565
from transport 45151 16867
from commerce and services 182884 97345

5. Appendix B
THE BOSTON GLOBE * SATURDAY, JANUARY 26, 1991
ASK THE GLOBE
Q. How is the term "Gross National Product" defined? - D.E., Somerville
A. Barron's Dictionary of Finance and Investment Terms defines the Gross National
Product (GNP) as the total value of goods and services produced in the United States
over a particular period of time (usually a year). It is made up of consumer and
government purchases, private, domestic and foreign investments in the United States
and the total value of exports. Figures on an annual basis for the GNP, the primary
indicator of the status of the economy, are released every quarter, as is an inflation-
adjusted version, called "the real GNP."