Practice_Exam_102_Spring

# Practice_Exam_102_Spring - Review Exercises: Economics 102...

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Review Exercises: Economics 102 / Prof. Cinyabuguma / Second Term Exam There are 5 problems. Each has multiple parts. 1) (20 points) You have the following data on the economy: 2005 2006 Quantity of Plasma TV’s 10 15 Price of Plasma TV’s \$1000 \$800 Quantity of Doritos 1000 1500 Price of Doritos \$1 \$2 a. (5 pts) Compute Nominal GDP in each year. ( uses current prices to place a value on the economy’s production of goods and services) Nominal GDP in 2005 (10x\$1000)+(1000x\$1)=\$11000 Nominal GDP in 2006 (15x\$800)+(1500x\$2)=\$15000 b. (5 pts) Compute Real GDP in each year using 2005 as the base year. ( uses constant base year prices to place a value on the economy’s production of goods and services.) Real GDP in 2005 (10x\$1000)+(1000x\$1)=\$11000 Real GDP in 2006 (15x\$1000)+(1500x\$1)=\$16500 c. (5 pts) Compute the GDP deflator for each year. According to this are prices rising or falling? ( measures the current level of prices relatice to the level of prices in the base year) (Divide the nominal GDP by the real GDP for each year) GDP deflator in 2005 (11000/11000)x100=100 GDP deflator in 2006 (15000/16500)x100=90.9 According to the GDP deflator, the prices are falling because the it decreased from 100 to 90.9. d. (5 pts) The Bureau of Labor Statistics has decided that the typical basket of goods in the country is 2 plasma TV’s and 2000 bags of Doritos. Use this basket to compute the CPI for each year, with 2005 as the base year for prices. According to the CPI are prices rising or falling?

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Review Exercises: Economics 102 / Prof. Cinyabuguma / Second Term Exam (20 points) a) (4 pts) In the national income accounting identity showing the equality between national saving and investment, what are the algebraic expressions for private saving and public saving? ( Y=GDP, C=consumption, I=investment, G=gvt purchases, S=national savings/ savings) Y=C+I+G equals GDP Y-C-G=I left side is the total income in the economy that remains after paying for consumption and gvt purchases equals investment S=I national savings=investment S=Y-C-G S=(Y-T-C)+(T+G) private savings minus public savings b) (4 pts) Draw and label a graph showing equilibrium in the market for loanable funds. Interest
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## This note was uploaded on 05/08/2010 for the course ECON 102 taught by Professor Cayy during the Spring '10 term at University of Louisiana at Monroe.

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Practice_Exam_102_Spring - Review Exercises: Economics 102...

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