UNIT 1
ECONOMICS 601
Problem set #1
Chapter 2 plus Appendix
Please be neat.
50 PTS TOTAL
(20 pts)
1.
Provide an example of a worker who is counted as:
(a) employed
(b) unemployed
(c) out of the labor force
(d) a discouraged worker
(30 pts)
2.
National income: growth and inflation. Show all calculations.
2019
Price
2019
2020
Quantity Price
2020
2021
Quantity Price
2021
Quantity
Peaches $20
100
$22
105
$24
110
Pears
25
$2
50
$1
100
$4
a. Compute nominal and real GDP for each year in an economy that
produces only 2 goods: peaches and pears. Use 2019 as the base year.
2019
Real GDP _________
Nominal GDP ________
2020
Real GDP _________
Nominal GDP _________
2021
Real GDP _____________
Nominal GDP __________
b. Compute the GDP implicit price deflator for each year. Again, use
2019 as the base year.
c. Find the economic growth rates and the inflation rates.
Growth 2019-2020 _______________
Inflation rate ____________
Growth 2020-2021 _______________
Inflation rate ____________
d. Repeat parts (a)-(c) using 2020 as the base year.
2019
Real GDP ____________
Nominal GDP _________
2020
Real GDP __________
Nominal GDP_____________
2021
Real GDP ____________
Nominal GDP ____________
Growth 2019-2020
________________
Inflation rate ___________
Growth 2020-2021 ___________________
Inflation rate __________
e. Use the chain-weighted method to compute real GDP with a base of
2019. Find the new growth rates.
f. Discuss and compare your findings of the 3 methods of computing
growth rates. (Using 2019, 2020, and chained estimates).