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Unformatted text preview: 1 Economics 101 Intermediate Macro Theory Problem Set #1 -- Due Thursday, July 2 Department of Economics Professor Siegler UC Davis Summer 2009 1. Exogenous and Endogenous Variables Recall the production possibilities frontier (PPF) model from introductory economics (for a review see http://en.wikipedia.org/wiki/Production_possibility_frontier ). What are the exogenous variables in this model and what are the endogenous variables? Briefly explain. 2. The Definition of GDP Are the following included or not included when estimating GDP? Provide a brief (one sentence) explanation in each case below. A. Flour sold to a bakery at a local grocery store. B. Sale of an existing home. C. Rental value of owner-occupied housing. D. Interest payments on the national debt. E. Household production (laundry, cooking, childcare, etc.) F. A purchase of a Wal-Mart stock in the stock market. G. Flour sold to a customer at the grocery store. 3. Equivalent Methods of Computing GDP Consider a simple economy consisting of only four firms. Firm A, a mining enterprise, extracts iron ore. Firm B, a steelmaker, produces steel sheets. Firm C, a carmaker, makes automobiles while Firm D produces automobile tires. In 2009, Firm A extracts 50,000 tons of ore, valued at $200 per ton, using previously existing machinery. Firm B produces 10,000 tons of steel sheets, valued at $3,000 per ton, having bought and used all of the ore produced by Firm A. Firm C manufactured 5,000 vehicles and sold them all to households for...
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This note was uploaded on 06/28/2009 for the course ECON 101 taught by Professor Miyanishi during the Summer '08 term at UC Davis.
- Summer '08