Homework #1 key

# Homework #1 key - ECON 3131 Dr A King Fall 2010 Homework 1~...

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Unformatted text preview: ECON 3131 Dr. A. King Fall 2010 Homework 1~ Chapters 1 and 2 1. For this question, you should have listed a. RGDP or per capita RGDP data (per capita is better) b. Unemployment rate c. Inflation rate as the measures an economist looks at when describing an economy. Then you should have looked for things about the country such as political stability, skill level of the population, age of the population, opportunities for jobs (i.e., types of industries in the country), locale, access to health care and education, etc. that would paint a fuller picture about standard of living in this economy. (Note: this is a general list and not all of these things may have been available for your country). 10 points for each country. 2. Textbook Questions p. 37 4. a. 2006 GDP: 10(\$2,000)+4(\$1,000)+1000(\$1)=\$25,000 2007 GDP: 12(\$3,000)+6(\$500)+1000(\$1)=\$40,000 Nominal GDP has increased by 60%. b. 2006 real (2006) GDP: \$25,000 2007 real (2006) GDP: 12(\$2,000)+6(\$1,000)+1000(\$1)=\$31,000 Real (2006) GDP has increased by 24%. c. 2006 real (2007) GDP: 10(\$3,000)+4(\$500)+1,000(\$1)=\$33,000 2007 real (2007) GDP: \$40,000. Real (2007) GDP has increased by 21.2%. d. The answers measure real GDP growth in different units. Neither answer is incorrect, just as measurement in inches is not more or less correct than measurement in centimeters. This question was worth 10 points 5. a. 2006 base year: Deflator(2006)=1; Deflator(2007)=\$40,000/\$31,000=1.29 Inflation=29% b. 2007 base year: Deflator(2006)=\$25,000/\$33,000=0.76; Deflator(2007)=1 Inflation=(1-0.76)/0.76=.32=32% c. Analogous to 4d. Note: Technically the GDP deflator is [NGDP/RGDP] * 100. Your book however leaves off the *100 part. In reality the answers in a and b should be: a. Deflator 2006=100; Deflator 2007=129 b. Deflator 2006=76; Deflator 2007=100 This question was worth 7 points. 6. a. 2006 real GDP = 10(\$2,500) + 4(\$750) + 1000(\$1) = \$29,000 2007 real GDP = 12(\$2,500) + 6(\$750) + 1000(\$1) = \$35,500 b. (35,500-29,000)/29,000 = .224 = 22.4% c. Deflator in 2006=\$25,000/\$29,000=.86 Deflator in 2007=\$40,000/\$35,500=1.13 Inflation = (1.13 -.86)/.86 = .31 = 31%. d. Yes, see appendix for further discussion. This question was worth 7 points. ...
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