Class Time: ______________ Name: ___________________________
HW # 2
“Principles of Macroeconomics”
NSCC - Fall 2008
Professor: Moonsu Han
Question 1 Bring definitions for following terms and explain why we are calculating
those terms in Macroeconomics ONLY for Bold and Italic terms. (5 pts.)
1. GDP (Definition only):
2. Real GDP (Definition and Why?):
3. GDP Deflator (Definition and Why?):
4. CPI(Definition and Why?):
5. Similarity and Difference btwn CPI and GDP Deflator:
1
Question 2 Below is some data from the land of beer and wine.
Year
2005
2006
2007
Price of Beer
$10
$12
$15
Q of Beer
1,000
2,000
3,000
Price of Wine
$20
$30
$40
Q of Wine
1,000
2,000
3,000
1. Compute nominal GDP, real GDP, and the GDP deflator for each year, using
2004 as the base year. Need to show detailed calculation. (3 pts.)
2005 Nominal GDP:
2006 Nominal GDP:
2007 Nominal GDP:
2005 Real GDP:
2006 Real GDP:
2007 Real GDP:
2005 GDP Deflator:
2006 GDP Deflator:
2007 GDP Deflator:
2. Compute the percentage change in nominal GDP, real GDP, and the GDP deflator
in 2005 and 2006 from the preceding year. Need to show detailed calculation.
(3 pts.)
2005-06 % change of Nominal GDP:
2006-07 % change of Nominal GDP:
2005-06 % change of Real GDP:
2006-07 % change of Real GDP:
2005-06 % change of GDP Deflator:
2005-06 % change of GDP Deflator:
3. Did economic well-being rise more in 2006(=from 2005 to 2006) or 2007(from
2006 to 2007)? Explain. (1 pt.)
2
Question 3
Suppose that there is a country called NSCC Republic. The Bureau of Labor Statistics of
NSCC Republic announced that in January 2008, of all working age adult populations,
50,000 were unemployed, 900,000 were employed, and 50,000 were not in the labor
force. How big was the labor force? What was the labor-force participation rate? What
was the unemployment rate? Need to show detailed calculations. (3 pts.)
Question 4 Suppose that people consume only three goods, as shown in following table.
Tennis Balls
Tennis Racquets
Gatorade
$3
$50
$1
2003 Price
1,000
100
2,000
2003 Quantity
$3
$75
$2
2004 Price
2,000
200
3,000
2004 Quantity
Note: Use fixed basket of goods: 100 balls, 10 rackets, 200 Gatorades. Base year is
2003
1. What is the percentage change in the price of each of the three goods? ( 2 pts.)
2. What is the percentage change in the overall price level? (Hint: CPI) (3 pts.)
3. Do tennis racquets become more or less expensive relative to Gatorade? Does the
well-being of some people change relative to the well-being of others? Explain.
(2 pt.)
3
Question 5
Fill in the missing values in the table of data collected in the household survey for the
year 2008. (3 pts.)
Working-age population
Employment
150,000,000
Unemployment
Unemployment rate
4.5%
Labor Force
Labor Force Participation rate
70%
4