practice exam 1 - cereal(32 boxes and the goods cost $3.25...

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Economics 2020 Practice Problems for Exam I Short answer: 1. Define GDP. What are the pluses and minuses of using GDP as a measure of economic (and even social) well-being? 2. What types of items are included when calculating the CPI? What are the drawbacks of trying to measure the cost of living with the CPI? 3. The following is information on US GDP in billions of dollars. Nominal GDP Year 1999 2000 2001 2002 2003 Gross domestic product 9268.4 9817 10128 10487 11004 Real GDP Year 1999 2000 2001 2002 2003 Gross domestic product 9470.3 9817 9890.7 10074.8 10381.3 a. According to the tables, what year is the base year? How do you know? b. Calculate the GDP deflators for 2002 and 2003. Make sure to show your formula. Longer problems (SHOW WORK OR YOU WILL LOSE POINTS!!!!!!) : 1. You consume only 2 goods (milk and cereal), and in 2003 you buy 40 gallons of milk and 30 boxes of cereal at $3/gallon and $2.50/box respectively. In 2004 you buy the same amount of milk but eat more
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Unformatted text preview: cereal (32 boxes), and the goods cost $3.25 and $2.60 respectively. Develop your own GDP deflator style price index using 2003 as the base year. What was inflation from 2003 to 2004? 2. The US adult (working age) population increased by 342,098 in January 2005, and as the average age of US citizens increased and people retired, the labor-force participation rate decreased from 66.0% to 65.8% from December 2004 to January 2005. a. In December 2004, there were 148,203,000 people in the labor force. How many were in the labor force in January 2005? b. There were 8,047,000 people unemployed in December 2004, and the unemployment rate fell 0.2% (e.g. from 9.4% to 9.2%) in January 2005. How many people were employed and unemployed in January 2005 and what was the unemployment rate (round to 2 decimal places for the percentage – e.g. 49.82%)?...
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