econ problem set 2

# econ problem set 2 - Problem set #2 with answer key...

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Unformatted text preview: Problem set #2 with answer key attached. We shall solve these problems as we move on. It take us a long time to finish all these problems, please try them as we move on. 1. The Bureau of Labor Statistics reported that in January 2000 the total labor- force was 140 . 91 million of possible 208 . 782 working-age adults. The total number of qualified worker unemployed was 5 . 689 million. From this information, calculate the following for January 2000. a. Labor-force participation rate. Information given N t = 140 . 91 million, N pt = 208 . 782 million, and N u = 5 . 689 million. LFPR = N t N pt ¶ × 100 = 140 . 91 208 . 782 ¶ × 100 = 67 . 49% . b. Unemployment rate. UR = N u N t ¶ × 100 = 5 . 689 140 . 91 ¶ × 100 = 4 . 04% . c. Employment rate. EU = 100- U = 100- 4 . 04 = 95 . 96% . 2. Answer the following questions about real output, nominal output, and inflation rate. a. The market value of a domestically produced basket of goods and services in 1999 was \$64. The value of that same basket of goods and services in 2000 was \$68. If 1999 is the base year, what was the price index in 2000? RGDP = \$64, GDP = \$68, PIN = GDP RGDP ¶ × 100 = 68 64 ¶ × 100 = 106 . 25 . b. If nominal output in 2000 was 300 billion and the price index was 115, what was real output. PI = 115 implies price deflator P = 1 . 15, GDP = \$300 billion RGDP = GDP P = \$260 . 67 . 3. Assume that nominal output rises from \$9 . 5 billion in 2002 to \$10 . 0 billion in 2003. Assume also that GDP price-deflator rises from 1 . 0 to 1 . 05. a. What was the percentage increase in price level in 2003? IN 2003 = P 2003- P 2002 P 2002 ¶ × 100 = 1 . 05- 1 . 00 1 . 00 ¶ × 100 = 5 . 0% . 1 b. What was the percentage increase in real output? You need to calculate RGDP for both years, and they are 9.5 and 9.52 respectively. EGR 2003 = RGDP 2003- RGDP 2002 RGDP 2002 ¶ × 100 = 9 . 52- 9 . 5 9 . 5 ¶ × 100 = 0 . 21% . 4. An economy produces only three goods: A, B, and C. The base period’s prices, the current period’s prices, and quantities produced are given below in the following table. Find the price deflator for the current period. Good P b P c Q c A 2 3 30 B 1 2 100 C 3 2 50 In order to find the price deflator, you need GDP and RGDP, none of them is given by me, you need to ask yourself, is there enough information to enable you find these? If the answer is yes, find them first. GDP = X P c Q c = 3 × 30 + 2 × 100 + 2 × 50 = 390 . RGDP = X P b Q c = 2 × 30 + 1 × 100 + 3 × 50 = 310 . P = GDP RGDP = 390 310 = 1 . 26 . The aggregate price level has gone up by 26% since the base year 2000. 5. For an economy, the data on GDP and price deflator are given for two years, find the economic growth rate for year 2....
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## This note was uploaded on 01/18/2011 for the course ECON 11853 taught by Professor Brianallenhunt during the Fall '10 term at Georgia State.

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econ problem set 2 - Problem set #2 with answer key...

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