# mt2f05 - ECON 2 Midterm 2 Fall 2005 Answer key 1 In 2005...

This preview shows pages 1–11. Sign up to view the full content.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
ECON 2 - Midterm 2 – Fall 2005 Answer key 1) In 2005: WAP = 10000, LFPR=80%, U=600 a) Unemployment rate? LF= 80% * 10000=8000 UR=U/LF=600/8000=7.5% b) In 2006, LF=8000+300=8300 U=600+(300*1/3)=700 E=LF-U=8300-700=7600 UR=700/8300=8.43% LFPR=8300/10000=83% EPR=7600/10000=76% c) Discouraged workers = (300*1/3)*10%=10 LF=8300-10=8290 U=700-10=690 E=7600 UR=690/8290=8.32% LFPR=8290/10000=82.9% EPR=7600/10000=76% 2) Question 2 a) Nominal GDP for 2003 and 2004 2003: NGDP= 6*900+3*200 = 5400+600=6000 2004: NGDP= 4*1200+4*600=4800+2400=7200 Nominal Growth =7200/6000-1=20% b) Real GDP (base year =2003) 2003: RGDP=6000 2004: RGDP = 1200*6+600*3=7200+1800=9000 Real Growth = 9000/6000-1=50% c) Chain Link Method for RGDP (2004) Using chain link method to calculate real GDP growth for 2004 Real growth (base year 2003) = 50% Real growth (base year 2004) = 63.6% Geometric average = sqrt(1.5*1.636) = 1.567 (real growth in 2004) Arithmetic average = (1.5+1.636)/2 = 1.568 Real GDP in 2004 = Real GDP at 2003 * chain linked growth rate = 6000* 1.567 = 9399.14 (geometric ) or

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
= 6000*1.568 = 9408 Deflator for 2004 = NGDP(2004)/RGDP chain linked (2004) = 7200/9399.14*100 = 76.6 geometric or = 7200/9408*100 = 76.5 (arithmetic) 3) Difference between GDP Deflator and Consumer Price Index GDP Deflator is defined as the ratio of the nominal GDP to real GDP for the period.
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern