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# 10H2 - (f RGDP in 2001 and 2002[2(g The GDP deflator in...

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Econ. 102. Homework 2. Due: March 1, 2010. [1. Honor the due date. 2 No e-mail submission.] NGM (N. Gregory Mankiw) points out that GDP, CPI and the unemployment rate quantify the performance of the economy in the standard of living, cost of living and business cycle. 1. Explain carefully what is GDP? RGDP? GDP deflator? To show the standard of living, economists prefer RGDP to GDP, why? [6] 2. An economy only produces Apple (Q a ) and Orange (Q o ). The following table gives the quantities produced and the prices in 2001 and 2002. Note that 2001 is base period. Q (2001) Q’(2002) P (2001) P’(2002) Apple 100 110 \$10 \$20 Orange 25 30 \$15 \$25 . Calculate: (show your work explicitly) (a) nominal GDP in 2001 and 2002. [2] (b) The value of 2002 production in 2001 prices. [2] (c) % increase in production when valued at 2001 prices. [2] (d) The value of 2001 production in 2002 prices. [2] (e) % increase in production when valued at 2002 prices. [2]
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Unformatted text preview: (f) RGDP in 2001 and 2002. [2] (g) The GDP deflator in 2001 and 2002. [2] 3. In this economy, people consume Apple (Q a ) and Organge (Q o ). The following table gives CPI basket and the prices in 2001 and 2002. 2001 is the base year . CPI basket (Q) P (2001) P’(2002) Apple 10 \$3 \$4 Organge 5 \$6 \$8 . (a) Explain carefully what is CPI? [2] Calculate: (show your work explicitly) (b) CPI in 2001 and 2002. [2] (c) Inflation rate of CPI. [2] 4. From population survey of this economy in 2002, we find the following information. Labor force 10,000 Employment 9,000 Under 16 years of age 2,000 Working age population 12,000 Calculate (i) the labor force participation rate and (ii) the unemployment rate. (Show your calculation explicitly) [2] 5. From your answer in 2, 3, and 4, please use the short-run AD and AS model to show p and Y of this economy. [2]...
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