Problem Set #2

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FE 312Q
Prof. Katherine Smith
Fall 2012
Problem Set #2
1. Williamson Chapter 2 Problem #1
2. What does GDP measure? What are the three ways to calculate GDP? Why
conceptually should the three methods give you approximately the same number?
Why does our government bother to calculate GDP three different ways?
3. Suppose the government deficit is 10, interest on the government debt is 5, taxes
are 40, government expenditure s are 30, consumption expenditures are 80, net
factor payments are 10, the current account surplus is -5, and national savings is
20. Calculate the following (not necessarily in the order given)?
a) Private disposable income
b) Transfers from the government to the private sector
c) Gross national product
d) Gross domestic product
e) The government surplus
f) Net exports
g) Investment expenditure
4. Suppose that the unemployment rate is 5%, the total working age population is
100 million, and the number of unemployed is 2.5 million.
a) The participation rate
b) The labor force
c) The number of employed workers
d) The employment/population ratio
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