Download chapter 17 - what macroeconomics tries to explain

CHAPTER 17 - WHAT MACROECONOMICS TRIES TO EXPLAIN
PROBLEM SET
2.
This statement is false. As you can see in Figure 4 in the chapter, the U.S. experienced doubledigit inflation (an annual inflation rate of 10% or more) in 1946, 1974, 1979 and 1980.
4. a.
Real GDP in 2007 would have been $13,382.
[Here are the calculations: If real GDP had grown by 3% per year from 2004 to 2007, then
real GDP in 2005 would have been $12,247 billion x 1.03 = $12,614 billion. In 2006, it
would have been $12,614 billion x 1.03 = $12,992 billion. And in 2007, it would have been
$12,992 billion x 1.03 = $13,382 billion. (Your answer may differ slightly based on
difference in rounding).]
b. Output per person in 2007 would have been $13,382 billion / 301.4 million = $44,399.
6.
a.
Year
2000
2001
2002
2003
2004
2005
2006
Real GDP (in
billions)
$5,000
$5,300
$5,618
$5,955
$6,312
$6,691
$7,093
No, the real GDP line becomes steeper over time because, as real GDP rises from an
increasingly higher and higher level, the same percentage growth rate causes greater
and greater absolute increases in GDP.
b.
Year
2000
2001
2002
2003
2004
2005
2006
Real GDP (in billions)
$5,000
$5300
$5300 x 1.05 = $5,565
$5565 x 1.04 = $5,788
$5,961
$6,080
$6,141
No, the real GDP line becomes flatter. Because the growth rate is decreasing over
time, then the slope of the GDP line must also be decreasing.