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Economics 302
Spring 2005
Practice Questions 1
(Covers Chapters 1 and 2 in Mankiw text)
1.
Use the following information to answer this set of questions.
Year
Real GDP in 1990 Prices
Price Index
1990
400
100
2000
500
150
a.
Calculate the nominal (or money) GDP for 1990 and 2000 using the above
information.
b.
Calculate Real GDP in year 2000 prices using the above data and your
calculations in part (a).
2.
Use the following information to calculate the labor cost per unit of output in each
of the following cases.
Wage rate Initially = $10 per hour
Output per Labor Hour Initially = 10 units of output
Productivity Gain
Wage Increase
Labor cost/Unit of Output
0%
0%
i)
0%
10%
ii)
0%
20%
iii)
10%
0%
iv)
10%
10%
v)
10%
20%
vi)
20%
0%
vii)
20%
10%
viii)
20%
20%
ix)
a.
Fill in the above table i) through ix).
b.
What is the relationship between labor cost per unit of output and productivity?
In your answer explain when labor cost per unit of output decreases and when
labor cost per unit of output increases.
c.
Can real wages in an economy increase if there are no productivity gains?
Explain your answer.
d.
How can labor costs per unit of output be reduced?
3.
Use the following assumption and information to answer this set of questions.
Assumptions:
i.
There is no government spending or taxation in this model.
ii.
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This note was uploaded on 08/08/2008 for the course ECON 302 taught by Professor Gold during the Spring '07 term at Wisconsin.
 Spring '07
 GOLD
 Economics, Macroeconomics

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