Transcript
ECON 211
HW 3
1. Suppose that you are given the following information:
Total population
300.0 million
Adult, noninstitutionalized, nonmilitary population
200.0 million
Unemployment
7.5 million
a. If the labor force participation rate is 70 percent, what is the labor force?
b. How many workers are employed?
c. What is the unemployment rate? (10 points)
2. In a country with a labor force of 200, a different group of 10 people becomes unemployed each month, but becomes employed once again a month later. No others outside these groups are unemployed. EXPLAIN YOUR ANSWER!
a. What is this country’s unemployment rate?
b. What is the average duration of unemployment?
c. Suppose that establishment of a system of unemployment compensation increases to two months the interval that it takes each group of job losers to become employed each month. Nevertheless, a different group of 10 people still becomes unemployed each month. Now what is the average duration of unemployment?
d. Following the change discussed in part (c), what is the country’s unemployment rate? (10 points)
3. Consider the following price indexes: 90 in 2015, 100 in 2016, 110 in 2017, 121 in 2018, and 150 in 2019. Answer the following questions. (See pages 157–158.)
a. Which year is likely the base year?
b. What is the inflation rate from 2016 to 2017?
c. What is the inflation rate from 2017 to 2018?
d. If the cost of a market basket in 2016 is $2,000, what is the cost of the same basket of goods and services in 2015? In 2019? (5 points)
4. Suppose that in 2019 there is a sudden, unanticipated burst of inflation. Consider the situations faced by the following individuals. Who gains and who loses? Explain why?
a. A homeowner whose wages will keep pace with inflation in 2019 but whose monthly mortgage payments to a savings bank will remain fixed
b. An apartment landlord who has guaranteed to his tenants that their monthly rent payments during 2019 will be the same as they were during 2018
c. A banker who made an auto loan that the auto buyer will repay at a fixed rate of interest during 2019
d. A retired individual who earns a pension with fixed monthly payments from her past employer during 2019 (10 points)
5 Explain in your own words why the flow of gross domestic product during a given interval must always be equivalent to the flow of gross domestic income within that same period. (5 points)
6. Which of the following are production activities that are included in GDP? Which are not? Explain why or why not
a. Mr. King performs the service of painting his own house instead of paying someone else to do it.
b. Mr. King paints houses for a living.
c. Mrs. King earns income from parents by taking baby photos in her digital photography studio.
d. Mrs. King takes photos of planets and stars as part of her astronomy hobby.
e. E*Trade charges fees to process Internet orders for stock trades.
f. Mr. Ho spends $10,000 on shares of stock via an Internet trade order and pays a $10 brokerage fee.
g. Mrs. Ho receives a Social Security payment.
h. Ms. Hernandez makes a $300 payment for an Internet-based course on stock trading.
i. Mr. Langham sells a used laptop computer to his neighbor.
Briefly explain your answers. (10 points)
6. Answer these questions about GDP: (10 points)
a. Could next year’s real GDP exceed next year’s nominal GDP?
b. Could real GDP grow at the same time that real GDP per capita falls?
c. Could people’s real consumption possibilities expand at the same time that real GDP per capita falls?
d. How does changing amount of leisure complicate comparisons of real well-being over time?
7. Consider the following hypothetical data for the U.S. economy in 2018 (all amounts are in trillions of dollars; see pages 179–182).
Consumption
11.0
Indirect business taxes
.8
Depreciation
1.3
Government spending
3.8
Imports
2.7
Gross private domestic investment
4.0
Exports
2.5
a. Based on the data, what is GDP? NDP? NI?
b. Suppose that in 2019, exports fall to $2.3 trillion, imports rise to $2.85 trillion, and gross private domestic investment falls to $3.25 trillion. What will GDP be in 2019, assuming that other values do not change between 2018 and 2019? (5 points)
8. Explain in your own words why the flow of gross domestic product during a given interval must always be equivalent to the flow of gross domestic income within that same period. (5 points)
10. Which of the following are production activities that are included in GDP? Which are not?
a. Mr. King performs the service of painting his own house instead of paying someone else to do it.
b. Mr. King paints houses for a living.
c. Mrs. King earns income from parents by taking baby photos in her digital photography studio.
d. Mrs. King takes photos of planets and stars as part of her astronomy hobby.
e. E*Trade charges fees to process Internet orders for stock trades.
f. Mr. Ho spends $10,000 on shares of stock via an Internet trade order and pays a $10 brokerage fee.
g. Mrs. Ho receives a Social Security payment.
h. Ms. Hernandez makes a $300 payment for an Internet-based course on stock trading.
i. Mr. Langham sells a used laptop computer to his neighbor (10 points)
