1.
The
macroeconomic data for the country of MonkeyLand for the years 1985 and 1986.
1985 1986
Output
12,200 Mangos
15,300 Mangos
Employment
1,100 workers
1,300 workers
Unemployed
150 workers
50 workers
Total labor force
1,500 workers
1,650 workers
Prices 2 shells/Mango 2.5 shells/Mango
As the data suggest, MonkeyLand produces only mangos (they
are monkeys), and its
monetary unit is the shell. Calculate each of the following macroeconomic
variables for MonkeyLand, being sure to give units.
a. Average labor productivity in 1985 and 1986.
b. The growth rate of average labor productivity between
1985 and 1986.
c. The unemployment rate in 1985 and 1986.
d. The inflation rate between 1985 and 1986.
2.
Prices are much higher in the United States
today than 100 years ago. Does this fact mean that
people were economically better off in 1890? Why or why not?
3.
You are given the
following data on an economy.
Gross national product
20
Government purchases of goods
and services
Government deficit
1
National saving
2
Investment
4
Net factor payments -1
Find the following:
a. Consumption
b. Private saving
c. Disposable income
d. Gross domestic product
e. Net exports
4.
Consider another
Monkey
economy that produces only fruit: lychee, guavas, and passion fruit.
In the
base year (a few years ago), the production
and price data were as follows.
Fruit
Quantity
Price
lychee
3000 bunches
$5 per bunch
guavas 6000 guavas $3 per guava
passion fruit 8000 fruits $4 per fruit
In the current year the production and price
data are as follows.
Fruit
Quantity
Price
lychee 2000 bunches $3 per bunch
guavas 14,000 guavas $2 per guava
passion fruit 3,000 fruits $6 per fruit
a. What are the values of nominal and real GOP in the base year and the
current year?
b. How much did nominal GDP grow between the base year and the current
year?
c. How much did real GDP grow between the base year and the current year?
d. What was the percentage change in the price level between the base year and the current year, as measured by the GOP deflator?
5. A reputable study shows that a particular new workplace
safety regulation will reduce the growth of real GDP. Is this an argument
against implementing the regulation? Explain.
6.
Economists have tried to measure
the GDPs of virtually all the world's nations. This problem asks you to think
about some practical issues that arise in that effort.
a. Before the fall of communism, the economies of the Soviet Union and Eastern Europe were centrally planned. One aspect of central planning is that most prices are set by the government. A government-set price may be too low, in that people want to buy more of the good at the fixed price than there are supplies available; or the price may be too high, so that large stocks of the good sit unsold on store shelves. During the past several decades central planning has been largely eliminated, but government price-setting has not been completely abandoned.
What problem does government control of prices create for
economists attempting to measure a country's GDP? Suggest a strategy for dealing
with this problem.
b. In very poor, agricultural countries,
many people grow their own food, make their own clothes, and provide services
for each other within a family or village group. Official GDP estimates for
these countries are often extremely low, perhaps just a few hundred dollars per
person. Some economists have argued that the official GDP figures underestimate
these nations' actual GDPs. Why might this be so? Again, can you suggest a
strategy for dealing with this measurement problem?
7. Money BananaCreamPie, Inc., has the following
production function.
Number of Monkey
Number of BananaCreamPie
0
0
1 5
2
8
3
11
4
13
5 14
a. Find the MPN for each level of employment.
b. MBCP can get $5 for each pie it produces. How many
monkeys
will it hire if the nominal wage is $28? If it is $9?
c. Graph the relationship between labor demand and
the nominal wage. How does this graph differ from a labor demand curve? Graph
labor demand curve.
d. With the nominal wage fixed at $28, the price of widgets
doubles from $5 each to $10 each. What happens to labor demand and
production?
e. With the nominal wage fixed at $28 and the price of
widgets fixed at $5, the introduction of a new automatic widget maker doubles
the number of widgets that the same number of workers can produce. What happens
to labor demand and production?
f. What is the relationship between your answers to part
(d) and part (e)? Explain.
8. Go to the website of the Bureau of Economic Analysis and find the growth rate of real GDP for the most recent quarter. Go to the website of the Bureau of Labor Statistics and find the inflation rate over the past year and the unemployment rate for the most recent month. How do you interpret these data?
9. Find data on GDP and its components and compute the percentage of GDP for the following components for 1950, 2000, 2010 and the most recent year available.
a. Personal consumption expenditures
b. Gross private domestic investment
c. Government purchases
d. Net exports
e. National defense Purchases
f. Imports