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Name__________________________
Homework 4- Chapters 8,9,10
Econ 105.08
Due: Wednesday, October 23rd, 2013 (beginning of class)
50 Points
Instructions: Make sure you show all your work. You can write your answers in the space
provided.
1. Suppose an economy’s real GDP is $49,000 in year 1 and $53,900 in year 2.
a. (2 points) What is the growth rate of its GDP?
b. (3 points) Assume that population was 100 in year 1 and 105 in year 2. What is the
growth rate in GDP per capita (per person)?
2. (5 points) A farmer produces corn at no cost, which is valued at $1.00. The corn is then sold
to a miller, who turns it into cornmeal. The miller sells the cornmeal to a bakery for $1.75. The
bakery then sells the cornbread for $3.00 to a grocery store. Finally, the grocery store sells the
bread to a consumer for $6.50.
In the table below, show the value added at each stage of production, and the total value added to
GDP.
Firm
Value Added
Farmer
Miller
Baker
Grocery Store
Total Value Added to GDP:
3. (5 points) In the table below are statistics showing the labor force and total employment in
month 1 and month 2 of the same year. Make the computations necessary to complete the table.
(Number of persons is in thousands.)
Labor force
Employed
Unemployed
Unemployment rate (%)
Month 1
Month 2
136,297
130,558
_____
137,065
130,526
_____
_____
_____
4. Use the following data,
number of employed individuals: 130;
unemployment rate is 5%;
labor force participation rate is 67%
to calculate:
(a) (2 points) the labor force.
(b) (2 points) the number of unemployed.
(c) (2 points) the working-age population.
5. (3 points) Explain the differences among the frictional, structural, and cyclical forms of
unemployment.
6. Answer the next four questions based on the following data using year 2 as the base year. All
dollars are in billions.
Year
Nominal income
CPI
1
2
3
4
$50,000
60,000
70,000
80,000
98
100
108
110
(a) (2 points) Find real income in year 1.
(b) (2 points) What was the percentage rise in prices between years 2 and 3?
(c) (2 points) What was the percentage rise in prices between years 3 and 4?
(d) (2 points) What was the increase in real income from year 3 to year 4 in percentage?
7. (5 points) Use a graph representing the supply and demand of loanable funds to answer the
following:
a. Illustrate an increase in the supply of loanable funds. Also, describe how the equilibrium
changes with 2 sentences.
b. (5 points) Illustrate a decrease in the demand of loanable funds. Also, describe how the
equilibrium changes with 2 sentences.
8. Consider the following data for a closed economy:
Y=$15 trillion
C=$9 trillion
I=$4 trillion
TR=$2 trillion
T=$0.5 trillion
a. (2 points) Find public savings.
b. (2 points) Find private savings.
c. (2 points) Find government expenditures.
d. (2 points) Find the government budget deficit or budget surplus.