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ECO_102_tute_Qs_S1_2010

# ECO_102_tute_Qs_S1_2010 - Faculty of Business Economics...

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1 Faculty of Business, Economics & Accounting Department of Business Studies HELP Bachelor of Business (Hons) Year 1 - HUBBU TUTORIAL QUESTIONS Semester 1, 2010 Subject: ECO 102 Principles of Macroeconomics Subject Lecturer/ Tutor(s): KFLiew

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2 Tutorial 1 (Week 2): Introduction to Macroeconomics, Measuring a Nation’s Income 1. Why do economists use real GDP rather than nominal GDP to gauge economic well-being? 2. Below are some data from the land of milk and honey. Year Price of Milk Quantity of Milk Price of Honey Quantity of Honey 2001 \$1 100 \$2 50 2002 \$1 200 \$2 100 2003 \$2 200 \$4 100 Compute nominal GDP, real GDP, and the GDP deflator for each year, using 2001 as the base year. 3. Consider the following data on a country’s GDP: Year Nominal GDP (billions) GDP Deflator (base year: 1992) 1996 \$7,662 110 1997 \$8,111 112 a. What was the growth rate of nominal GDP between 1996 and 1997? b. What was the growth rate of GDP deflator between 1996 and 1997? c. What was real GDP in 1996? d. What was real GDP in 1997? e. What was the growth rate of real GDP between 1996 and 1997? f. Was the growth rate of nominal GDP higher or lower than the growth rate of real GDP? Explain. 4. Some countries emphasized on GNP rather than GDP as a measure of economic well-being. Which measure should the government prefer if it cares about the total income of their citizens? Which measure should it prefer if it cares about the total amount of economic activity occurring in the country?
3 Tutorial 2 (Week 2): Measuring the Cost of Living, 1. Economists and policymakers monitor both the GDP deflator and the consumer price index to gauge how quickly prices are rising. However, these two statistics may not always tell the same story. Discuss two important differences that can cause them to diverge. 2. Calculate the consumer price index and the rate of inflation if given a fixed basket of goods of 4 hamburgers and 2 apples by taking the year 2001 as the base year. Year Price(\$) Hamburger Apple 2001 \$1 \$0.50 2002 \$2 \$1.00 2003 \$3 \$1.50 3. Describe the three problems that make the consumer price index an imperfect measure of the cost of living. 4. Convert the salary of Mr. A in the year 1930 to dollars in the year 2000 by using the following information. a. A’s salary in the year 1930 was \$80,000 b. The price level in the year 2000 was 160 c. The price level in the year 1930 was 52

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4 Tutorial 3 (Week 3): Production and Growth 1. What does the level of a nation’s GDP measure? What does the growth rate of GDP measure? Would you rather live in a nation with a high level of GDP and a low growth rate of in a nation with a low level of GDP and a high growth rate? 2. List and describe four determinants of productivity. 3. How does the rate of population growth influence the level of GDP per person? 4. Explain how higher saving leads to a higher standard of living. What might deter a policymaker from trying to raise the rate of saving?
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ECO_102_tute_Qs_S1_2010 - Faculty of Business Economics...

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