Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
HOMEWORK 1 HOMEWORK ASSIGNMENTS FOR CHAPTER 2 PROBLEM #1 IS DUE FOR HOMEWORK ON TUESDAY, AUGUST 24 PROBLEMS #2 AND #3 ARE DUE FOR HOMEWORK ON THURSDAY, SEPTEMBER 2 Do not write your answers on this question sheet; record your answers on blank notebook paper Suppose you are provided with the following information about an economy comprised of just two firms, a dairy farm that produces milk and an ice cream shop that produces ice cream. The information in the chart shows “the books” for the firms in 2010. DAIRY FARM Revenues (milk) From Sales to Households From Sales to Government From Sales to Ice Cream Shop Expenses (wages) $25,000 $30,000 Profits $10,000 $10,000 $ 5,000 ICE CREAM SHOP Revenues (ice cream) From Sales to Households $80,000 Expenses Wages Milk Profits $40,000 $25,000 $15,000 a. Which goods above are FINAL goods? How can you tell? Calculate GDP for 2010 using the FINAL GOODS APPROACH. Show each step of your calculations. Why do we only count final goods when compiling GDP? (10 points) b. Explain what information you need to estimate GDP for 2010 using the INCOME APPROACH. Calculate GDP for the economy above using the income approach. Show the steps and calculations clearly. (10 points) 2 2. Consider an imaginary economy that produces only two goods – computers and bicycles. The quantities and prices of each good sold for two years (2009 and 2010) are given below. PRODUCTS Computers Bicycles 2009 PRICE QUANTITY $1,200 5 $ 200 200 PRICE $600 $240 2010 QUANTITY 10 250 For this hypothetical economy, calculate the following. BE SURE TO SHOW ALL WORK. a. b. c. d. e. Nominal GDP for both years. (8 points) Real GDP in constant 2010 dollars (i.e. 2010 is the base year for both years). (5 points) The GDP deflator for both years. (6 points) The GDP growth rate (%) between 2009 and 2010. (3 points) The rate of inflation (%) between 2009 and 2010. (3 points) 3. 3 This problem requires that you collect some data for the U.S. economy. a. What would you expect to happen to real GDP during a recovery? What would you expect to happen to the unemployment rate during a recovery? Explain your reasoning briefly. (6 points) b. GRAPH the relationship you expect between real GDP and the unemployment rate during a recovery on a diagram with the unemployment rate on the vertical axis and real GDP on the horizontal axis as shown below. Unemployment Rate Real GDP (3 points) The National Bureau of Economic Research (NBER), which dates the business cycle for the U.S., identified a recovery beginning after November 2001 and continuing until December 2007. COLLECT DATA FOR THE ANNUAL US UNEMPLOYMENT RATE AND THE ANNUAL LEVEL OF REAL GDP FROM 2002 THROUGH 2007 WHEN THE ECONOMY WAS IN RECOVERY. To find the unemployment rate, go to the web. Type in: www.bls.gov/cps/cpsaat1.pdf You will see a table. Find the column labeled “Unemployed – Percent of labor force” To find the annual level of real GDP, use the handout from class or< if you don’t have the handout, go to the web and: Type in: www.bea.gov Click on “Gross Domestic Product” and then click on “Current-dollar and “real” GDP” c. LIST the level of real GDP and the unemployment rate for each year from 2002 through 2007. Also, GRAPH the data you collected on real GDP and the unemployment rate for each year from 2002 through 2007 on a diagram with the unemployment rate on the vertical axis and real GDP on the horizontal axis as below. (7 points) Unemployment Rate Real GDP d. Is the relationship between the actual data you collected for the unemployment rate and real GDP consistent with your expectations? Explain. (4 points)