This preview shows pages 1–3. Sign up to view the full content.
Economics 420  Spring 2010
Mike Aguilar
UNC at Chapel Hill
Exam 1, Feb 15th 2010
Instructions
:
•
Please explain your answers thoroughly and show all necessary work.
•
State your assumptions carefully.
•
There may be more than one correct solution.
•
The honor code is in eﬀect.
•
Note: Maintain a ceteris paribus assumption when interpreting all shocks.
1. (5pts) You are an economic advisor to a gubernatorial candidate. You and he are in a limousine on the
way to a campaign speech and he needs to know the current size of the economy. You don’t know the
exact ﬁgure, but you know that the real GDP in the third quarter of 2009 was 12,973.0 billion dollars.
Use the current estimate for s.a.a.r.
real GDP percent change of the fourth quarter of 2009 to answer
your boss’ question.
Answer:
The real GDP of the third quarter of 2009 is 12,973.0 billion dollars.
And the real GDP percent change (s.a.a.r.) of the fourth quarter of 2009 is 5.7%. However,
this number is the annual rate. The quarterly percent change %Δ
GDP
Q
4
can be computed
by:
(1 + %Δ
GDP
Q
4
)
4
= 1 + 5
.
7%
1 + %Δ
GDP
Q
4
= (5
.
7% + 1)
1
4
= 1 + 1
.
4%
The real GDP level of the fourth quarter of 2009 should be: 12
,
973
.
0
*
(1+1
.
4%) = 13
,
154
.
6
billion dollars.
2. (5pts) Suppose we can use the following proxy:
Y/Y%ΔCPI

Y/Y%ΔCore = Y/Y%ΔCPI of Foods and Energy
where “Y/Y%Δ” stands for “year over year percent change of”. Suppose the core CPI percent change
is 1.8%. Using the most recent year over year percent change in U.S. CPI, what is the level of food
and energy inﬂation in the U.S.?
Answer:
Note that we need ”year over year” percent change of CPI. (The month over month percent
change of CPI is 0.1%).
1
This preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentYear over year percent change of CPI is 2.8%.
Year over year percent change of Core is 1.8%.
Year over year percent change of CPI of foods and energy is: 2.8%1.8%=1.0%.
3. (5pts) Choose and brieﬂy discuss one of the following two topics we have talked about on class:
(a) What was the Glass Steagall Act, and why is it of renewed interest today?
(b) What is the major skepticism regarding the GDP growth of the fourth quarter of 2009?
This is the end of the preview. Sign up
to
access the rest of the document.
 Spring '08
 Hill
 Economics

Click to edit the document details