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Problem Set #1 ECON 295
[a] NGDP and RGDP in 2008;
[b] NGDP and RGDP in 2009;
[c] GDP deflators in 2008 and 2009, respectively.
[a] What is GDP in this economy? Explain.
[b] Value added is defined as the value of a producer’s output minus the value of the intermediate goods that the producer buys to make the output. Assuming there are no intermediate goods beyond those described above, calculate the value added of each of the three producers.
[c] What is total value added of the three producers in this economy? How does it compare to the economy’s GDP? Does this example suggest another way of calculating GDP?
[a] Boeing sells an airplane to the Air Force.
[b] Boeing sells an airplane to American Airlines.
[c] Boeing sells an airplane to Air France.
[d] Boeing sells an airplane to Amelia Earhart.
[e] Boeing builds an airplane to be sold next year.
Year |
Apple |
Pizza |
||
Price |
Quantity |
Price |
Quantity |
|
2019 |
$4 |
50 |
$6 |
200 |
2020 |
$8 |
100 |
$14 |
160 |
2021 |
$10 |
120 |
$10 |
180 |
|
Tennis Balls |
Golf Balls |
Battles of Gatorade |
2011 price |
$2 |
$4 |
$1 |
2011 quantity |
100 |
100 |
200 |
2012 price |
$2 |
$6 |
$2 |
2012 quantity |
100 |
100 |
200 |
[a] What is the percentage change in the price of each of the three goods?
[b] Using a method similar to the consumer price index, compute the percentage change in the overall price level.
[c] If you were to learn that a bottle of Gatorade increased in size from 2011 to 2012, SHOULD that information affect your calculation of the inflation rate? If so, how? Does it actually affect inflation rate in reality? If not, is the reported inflation rate overstated or understated?
[d] If you were to learn that Gatorade introduced new flavors in 2012, SHOULD that information affect your calculation of the inflation rate? If so, how? Does it actually affect inflation rate in reality? If not, is the reported inflation rate overstated or understated?
|
Karaoke Machines |
|
CDs |
||
|
Quantity |
Price |
|
Quantity |
Price |
2020 |
15 |
$50 |
|
60 |
$12 |
2021 |
20 |
75 |
|
80 |
18 |
[a] Using a method similar to the consumer price index for both years, compute the percentage change in the overall price level. Use 2020 as the base year, and fix the basket at 1 karaoke machine and 4 CDs.
[b] Using a method similar to the GDP deflator for both years, compute the percentage change of the overall price level. Also use 2020 as the base year.
[c] Is the inflation rate in 2021 the same using the two methods? Explain why or why not.
[a] the working age (or adult) population;
[b] the labor force;
[c] the labor-force participation rate;
[d] the unemployment rate.
21. [5 pts.] What are three possible circumstances where the data of the establishment survey might be biased? Under each of the circumstances, will it overstate or understate the unemployment situation? Briefly explain your answer.
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