Econ 104 Quiz 4 With Answers - Quiz 4 Section 4 Key Version...

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K/L Y/L $100,000 $50,000 (K/L) 2 (Y/L) 2 Quiz 4 , Section 4, Key, Version A Each question is worth 14 points. year nominal GDP GDP deflator value of CPI market basket 1983 $3,500 billion 54 $5,000 1990 $6,000 billion 68 $8,000 2009 $15,000 billion 100 $11,000 Questions 1 & 2 use data in this table. 1. a. Set up the calculation for real GDP for 1983. b. Why is nominal GDP less than real GDP for this year? a. ($3,500 billion / 54) C 100 b. Nominal GDP is less than real GDP since real GDP uses prices from its base year (2009) while nominal GDP from 1983, which prices were lower. 2. Set up the calculation for the average annual inflation rate (with the GDP deflator) from 1983 to 2009. [(100 / 54) 1/(2009 - 1983) ] -1 3. Explain how the CPI and real GDP measure different things. The CPI measures average consumer prices while real GDP measures the production (or income, or spending) of all the different items in GDP. 4. Draw the graph of the per-worker production function and show the impact of the country adding more of existing types of capital for each worker. Assume that the initial amount of capital per worker is $100,000 and labor productivity (Y/L) is $50,000. Also, what does this graph describe – labor productivity or K/L?
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