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Econ102 Introduction to Macroeconomics
Bilkent Economics
Spring 2016
Homework I
Fatma Taşk¬n
Refet S. Gürkaynak
Homeworks will not be collected but they will be discussed in recitations in the
week of Feb 1, 2016
Before you begin doing the homework make sure to review your class notes
and read the relevant chapters of your book.
Work on these questions before your recitation.
1. De…ne “GDP,” “real GDP,” “nominal GDP,” “value added,” “price
level,” “in‡ation,” “disin‡ation,” “de‡ation,” “labor force,” “unemployment
rate,” “discouraged worker,” “frictional unemployment,” “cyclical unemployment,”“structural unemployment”and “natural rate of unemployment”in your
own words.
2. Show, or argue that GDP measured by production, income and value
added will conceptually give the same result. (They measure the same thing so
they much be the same is not an argument.)
3. Discuss the following statement’s validity in light of the expenditure
method of calculating GDP: “One way of increasing the Turkish GDP is to
decrease imports.”
4. What is the impact of the following on the Turkish GDP?
(a) Dost Kitabevi is sold to a foreign company for 5 million liras.
(b) The company that bought Dost invests a further 2 million liras by importing new books to be sold in the chain stores.
(c) Dost workers spend 2000 hours of overtime at a cost of 1 million liras to
put the new books on the shelves.
(d) Dost buys a million liras worth of paper produced in Turkey to be used
in the production of books produced by Dost for its own brand name.
(e) Dost produces two million liras worth of books under its own brand name
by using the Turkish inputs it had bought and spending another million liras on
labor for production. How is the answer di¤erent if only half of the Dost books
are sold this year and the reminder are sold in the following year?
5. Look at the last page of The Economist. It lists GDP growth rates of
many countries. Do you think these are real or nominal GDP growth rates?
What makes you think that? Do you see a di¤erence between the growth rates
of developing and industrialized countries?
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6. Look at the labor statistics of Turkey. Can you …nd an example of a time
when the number of unemployed people increased but the unemployment rate
decreased? Is this a statistical error or conceptually can this happen?
7. Assume that in Key…stan only three goods are produced: Arnavut ci¼
geri,
Kavun, and Lakerda. The table below shows the prices and quantities of the
three goods in years 1 and 2.
Year 1
Year 1
Year 2
Year 2
Quantity Price Quantity Price
Arnavut ci¼
geri
2
20
6
10
Kavun
20
2
20
2
Lakerda
15
8
10
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Given this information, calculate the nominal GDP, the real GDP using year
1 as base and the real GDP using year 2 as base. Then calculate the growth
rates of nominal GDP and the two real GDP measures. Interpret your results.
8. Now assume that in Key…stan all output is consumed. The consumption
basket of the representative consumer Sefa Bey in the two years and the prices
are:
Year 1
Year 1
Year 2
Year 2
Quantity Price Quantity Price
Arnavut ci¼
geri
2
20
6
10
Kavun
20
2
20
2
Lakerda
15
8
10
10
Given this information, calculate the CPI in‡ation rate from year 1 to year
2 using the year 1 basket. Then calculate the same in‡ation rate using the year
2 basket. Discuss your …nding.
9. Are army conscripts counted as employed in Turkey? How would the
labor force participation rate and the unemployment rate change if that status
were to change?
10. How many discouraged workers are there in Turkey according to the
latest numbers? Are they counted in the unemployment rate? Should they be?
11. Find the real GDP growth rates of the US and one more county of your
choice for as long a history you can. Plot them together and tell a story. Then
plot the in‡ation rates for the same two countries and tell a story. (It is OK if
your sample dates are di¤erent for in‡ation and GDP growth.) Pay attention
to the US in‡ation in the 1970s and the following disin‡ation.
12. Find the real and nominal GDP numbers for Turkey for the recent past.
(Use any horizon you want but make sure that your sample period extends
before 2000.) Plot these two on the same graph. What has been happening to
the Turkish GDP measured both ways? How do you interpret your graph? Are
you using total GDP or GDP per capita? Why?
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13. Find the latest employment survey from TÜI·K’s web page. Report and
discuss the numbers. (Someone who knows nothing about Turkey but reads your
discussion should get a clear picture of the state of the Turkish labor market.
You can and should look at the sub-reports (reasons of not entering labor force,
et) to see the whole picture.)
14. Find the latest (CPI) in‡ation numbers from TÜI·K’s web page. Report
and discuss the numbers. (Someone who knows nothing about Turkey but reads
your discussion should get a clear picture of the in‡ation dynamics in Turkey.
You can and should look at the sub-reports (core in‡ation measures, sub indices,
etc.) to see the whole picture.)
15. In the past year oil prices have been falling and the Turkish lira has
been losing value. How do you think these a¤ected in‡ation in Turkey? What
would have happened if oil prices were not falling?
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