ps1ans - which slopes up. Output and the price level move...

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ECON 205: PRINCIPLES OF MACROECONOMICS FALL 2007 MARK MOORE PROBLEM SET 1: SOLUTIONS 1. To calculate the growth rate of GDP over the 1960s, use the formula [(GDP 1970 – GDP 1960 )/ GDP 1960 ], or more simply, [(GDP 1970 /GDP 1960 )- 1]. Use a similar calculation for real GDP over the other decades and for real GDP per capita. Using the numbers for the 10 th edition, 2007 update, produces the following growth rates: Real GDP Real GDP per capita 1960s 50.8% 32.9% 1970s 36.8% 23.2% 1980s 37.8% 25.4% 1990s 38.0% 22.2% The 1960s look most unusual. The recent decades seem very similar, despite the usual perception that the 1970s was much worse. 2. AD is likely to be shifting to the right (or at least moving faster to the right than AS is moving). If the AD curve shifts, we trace out equilibrium points along the AS curve,
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Unformatted text preview: which slopes up. Output and the price level move in the same direction. 3. The AD curve shifts to the right. Output and the price level increase. 4. The AS curve shifts left. Output falls, and the price level rises. 5. a. GDP increases by $15,000 (assuming, of course, that the carpenter reports this income to the authorities). b. GDP increases by $3,000. The productive activity of using the materials to build the garage is not counted, since this activity was not sold on an organized market. c. No effect in GDP. d. GDP increases by $150,000. e. No effect on GDP. f. GDP increases by $2000. g. No effect on GDP. h. GDP increases by $1000, the price of the plasma TV....
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