1- Answer the following question by using this table.

Product Current Household Base price Current price

(in units) output level consumption per unit per unit

Clothing 100,000 2 $10 $12

Food 120,000 3 $2 $4

Durable 60,000 1 $50 $40

a) Calculate the rate of price increase from the base period to the current period, using both the implicit GDP deflator and consumer price index?

b) Explain why the two measures are different?

  1. Use the following data to calculate
  1. the size of the labor force and (b) the official unemployment rate:

Total population, 500; Population under 16 years of age or institutionalized, 120; not in the labor force, 150; unemployed, 23; part-time workers looking for full-time jobs, 10

Answer for a and b : a) 230 b) 10%

  1. Assume that in a particular year, the natural rate of unemployment is 5% and the actual rate of unemployment is 9%. Use Okunís law to determine the size of the GDP gap in percentage point terms. If the nominal GDP( output) is $500 billion in that year, how much output is being forgone because of cyclical unemployment?

Answer for a and b 8% $40

4- If the price index was 110 last year, and is 121 this year, what was this yearís rate of inflation? 10%

5- Suppose you are given the following information about some hypothetical economy and its national income accounts. Use this information to answer the questions that follow.

Amounts are in billions of dollars

Corporate profits $101

Corporate income taxes 56

Indirect business taxes 148

Retained earnings 24

Proprietorsí income 73

Rents and interest earned 98

Exports 18

Imports 10

Net domestic product 1436

Government expenditures 323

Transfer payments 230

Social security contributions 120

Consumption expenditures 1055

Gross investment 220

Disposable personal income 1123

a) Find GDP

b) Find depreciation( capital consumption allowances)

c) Find wages and salaries

  1. Find domestic factor income receipts
  2. Find personal income
  3. Find personal income taxes
  4. Find net exports
  1. The following are a yearís data for a hypothetical economy.

Billions of dollars

Consumption 400

Government spending 350

Gross private domestic investment 150

Exports 150

Imports 100

Depreciation 50

Indirect business taxes 25

  1. Based on the data, what is the value of GDP? NDP? NI?
  2. Suppose that in the next year exports increase to $200 billion, and consumption falls to $350 billion. What will GDP be in that year?
  3. If the value of depreciation( capital consumption allowance) should ever exceed that of gross private domestic investment, how would this affect the future productivity of the nation?
  1. Consider the following table for an economy that produces only four goods.

1992 1992 1997 1997

Good Price quantity Price quantity

Pizza $4 10 $8 12

Cola 12 20 36 15

T-shirts 6 5 10 15

Equipment 25 10 30 12

Assuming a 1992 base year:

  1. What is nominal GDP for 1992 and 1997?
  2. Wheat is real GDP for 1992? For 1997?

Examine the following figures for a hypothetical year, then calculate GDP, NDP, NI, PI, and DPI.

Billions of Dollars

Consumption 400

Net exports -20

Transfer Payments 20

Gross Investment 100

Social security contributions 10

Government purchases 120

Net investment 50

Dividends 20

Indirect business taxes 10

Corporate income taxes 30

Personal income taxes 60

Undistributed corporate profits 20