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Unformatted text preview: 1 STUDY QUESTIONS WEEKS 1 & 2 Week 1 Topics: Introduction to macroeconomics. Unemployment and inflation; how are they measured (including both CPI and GDP deflator), and in what ways are they harmful? GDP, Potential GDP, and the business cycle. The NAIRU. Reading: Chapter 19. Supplement A in the Course Handbook. Week 2 Topics: Using the C.P.I. Measuring GDP. Real GDP. Reading: Chapter 20. Supplement B in the Course Handbook. Study Questions 1. The following data are from Canada's National Accounts for 2002: (all data are in millions of current dollars) Personal Consumption Expenditures: Durable Goods 92,131 Semi- and Non-durable Goods 214,552 Services 349,498 Wages, Salaries and supplementary labour income 597,316 Capital Consumption Allowances (i.e., Depreciation) 155,004 Government Expenditures: Current Expenditure 218,895 Gross Fixed Capital Formation 30,430 Indirect Taxes minus Subsidies 138,197 Corporation Profits (before taxes) (includes govt enterprises) 143,250 Interest and miscellaneous Investment Income 49,425 Net Payments of Investment Income to Non-residents 27,389 Investment in Machinery and Equipment 83,025 Construction of: Residential Structures 65,270 Non-residential Structures 48,469 Inventory accumulation 2,828 Net Income of Non-farm unincorporated businesses (incl. rent) 72,960 Net Income of farm operators 1,715 Inventory Valuation Adjustment -3,561 Exports 474,303 Imports 423,989 2 a. Use the above figures (not all of them; one of them is related to GNP calculation rather than GDP) to compute GDP by value of final product and by value of the income received by the factors of production. You should obtain different answers, before making adjustments, since there is a "statistical discrepancy". What are your two answers? b. The "official" figure for GDP is found by averaging the two estimates you found in (a). What is GDP computed this way? The difference between this average and the estimate you found for GDE in (a) is the "statistical discrepancy" (sometimes called the residual error of the estimate. How big is it? c. Calculate GNP from the data. Why is it different than GDP? Which would you expect to be larger in Canada and why? d. In 1998, GDP was 914,973 million dollars, and in 2002 it was 1,154,859 million dollars. These are the figures for nominal GDP (i.e., measured in current dollars). However, in 1998 the GDP deflator was 99.6 (1997 = 100.0), while in 2002 it was 107.5. By what percent did current dollar GDP rise from 1998 to 2002? By what percent did real GDP rise? What was the rate of inflation between 1998 and 2002? 2. The following are some of the values for the Consumer Price Index from 1973 to 2005 (this version of the index uses 1992 as the base year) (for 2002, we use the value of the CPI in June): Year 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 CPI 28.1 31.1 34.5 37.1 40.0 43.6 47.6 52.4 58.9 65.3 69.1 72.1 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 75.0 78.1 81.5 84.8 84....
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