ECON1013 Final: macro_exam_review

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skybee806

26 Jun 2016

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Gdp = c + i + g + xn the expenditure approach to measuring gd correlates well with aggregate demand (ad) Gdp = w + i + r + p the income approach to measuring gdp correlates well with aggregate supply. Calculating nominal gdp the quantity of various goods produced in a nation times their current prices, added together. Gdp deflator a price index used to adjust nominal gdp to arrive at real gdp. deflator because nominal gdp will usually overstate the value of a nation"s output if there has been inflation. The consumer price index (cpi) is another commonly used price index. Gdp growth rate: ( current year"s gdp - last year"s gdp)/ (last year"s gdp) x 100. The gdp growth rate is a percentage change in a nation"s real output between one year and the next. The inflation rate via the cpi (this year"s cpi - last year"s cpi)/(last year"s cpi) x 100.

Related Questions

Suppose that the are two goods in the economy, Xylophones (X) and Yams (Y). In year t, consumers in the economy purchase 20 Xylophones at a price of $20 each and 100 Yams at a price of $2 each. In year t + 1, consumers in the economy purchase 18 Xylophones at a price of $30 each and 150 Yams at a price of $2.50 each.

1. Calculate the GDP deflator in years t and t + 1 with base year t. What is inflation according to this deflator? Show each step. (Hint: it will be helpful for you to first calculate nominal and real GDP in years t and t + 1. When you calculate real GDP, make sure that you use the appropriate base year).

2. Calculate the GDP deflator in years t and t + 1 with base year t + 1. What is inflation according to this deflator? Show each step. (Hint: you will need to calculate real GDP in years t and t + 1 using a different base year than you used in part 1. Once you calculate real GDP with the appropriate base year, you will follow the same steps that you did in part 1.)

3. Compare your answers to a and b above. Are they the same? If not, why not? How does chain-weighting address any potential difference?

4. Calculate the CPI in years t and t + 1, using year t as the base year.

5. Describe two ways in which the CPI differs from the GDP deflator.

6. There are several problems with using the CPI to calculate real GDP and measure growth. One of these problems is that the CPI does not account for changes in the quality of goods sold over time. A computer today is significantly more efficient than it was even just ten years ago, so even if the price of computers rise with inflation, you are getting significantly more computing power per dollar. How would this bias estimates of GDP growth and inflation?

QUESTION 31

Suppose that twenty-five years ago a country had nominal GDP of $1,800, a GDP deflator of 150, and a population of 100. Today it has nominal GDP of $2,800, a GDP deflator of 270, and population of 180. What happened to the real GDP per person?

It more than doubled

It increased, but it less than doubled

It was unchanged

It decreased

1 points

QUESTION 32

During a presidential campaign, the incumbent argues that he should be reelected because nominal GDP grew by 12 percent during his 4-year term in office. You know that population grew by 4 percent over the period and that the GDP deflator increased by 6 percent during the past 4 years. You should conclude that real GDP per person

grew by 2%

grew by 6%

grew by 8%

grew by 12%

1 points

QUESTION 33

Suppose todayâs CPI is 134.85, and suppose one must spend $986 today to purchase the same basket of goods and services that could be bought for $680 in 1989. Then the CPI in 1989 was

24.27

60.68

93.00

195.53

1 points

QUESTION 34

If your firmâs production function has a decreasing returns to scale and you increase all your inputs by 60%, then your firm's output will

not change

increase, but by less than 60%

increase by 60%

increase by more than 60%

QUESTION 36

Suppose country's nominal GDP tripled, population grew by 40%, and prices doubles over the last 25 year. What happened to nominal GDP per person?

increased by 114%

increased by 93%

increased by 87%

decreased by 69%

1 points

QUESTION 37

A barber shop produces 288 haircuts a day. Each barber in the shop works 8 hours per day and produces the same number of haircuts per hour. If the shopâs productivity is 3 haircuts per hour of labor, then how many barbers does the shop employ?

None of the above is correct

1 points

QUESTION 38

If the nominal interest rate is 11% and the rate of inflation is 6%, then the real interest rate is

-5%

1.67%

11%

1 points

QUESTION 39

Last year real GDP in Greatland was 651 billion and the population was 2.4 million. The year before, real GDP was 460 billion and the population was 1.9 million. What was the growth rate of real GDP per person during the year?

12 percent

10 percent

4 percent

2 percent

1 points

QUESTION 40

If real GDP increases by 40% and the GDP deflator decreases by 10%, then nominal GDP increases by

40%

30%

26%

-10%

1) In years 1 and 2, there are 2 goods produced in a given economy, hamburgers, and pens. In year 1,

10,000 hamburgers are produced and sold at $2 each, and in year 2, 40,000 hamburgers are produced

and sold at $2.10 each. In year 1, 15,000 pencils are sold for 2 dollars each, and in year 2, 38,000

pencils are sold for $3 each.

a)Calculate nominal GDP in years 1 and 2.

b)Calculate real GDP in years 1 and 2 using year 1 as the base year. Next, calculate the percentage

increase in real GDP from year 1 to year 2.

c)Calculate the GDP deflator and the percentage inflation rate from year 1 to year 2 using year 1

as the base year.

d)What is the CPI inflation rate using year 1 as the base year? Is this equal to the GDP deflator

inflation rate?

2. Now, in the above economy, also suppose that 8,000 notebooks were imported and sold for $1 each

in year 1, and 20,000 notebooks imported and sold for $5 each in year 2

a)Calculate nominal GDP in years 1 and 2.

b)What is the CPI inflation rate using year 1 as the base year?

c)What is the GDP deflator inflation rate using year 1 as the base year?

d)Are the two measures equal? Yes or No? And explain.

e)If the price of imported notebooks increases to $10 in year 3, how would this affect the CPI

inflation rate? How about the GDP inflation rate? Explain, but no need to show work.

3. Consider an economy that initially has a labor force of 2000 workers. Of these workers, 1500 are

employed. The economy enters a recession. Employment falls by 5%, and also, 0.4% of the

labor force becomes discouraged at the prospect of finding a job and leaves the labor force.

a)Can you calculate the employment rate given the information above? Explain.

b)Calculate the unemployment rate before and after the recession.

c)What is the unemployment rate taking discouraged workers into account?

d)Using Okun's law, calculate the expected percentage change in real GDP.

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ECON1013 Final: macro_exam_review

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