1. Use the data in the table to answer the following questions. Year Nominal Rea
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Question
1. Use the data in the table to answer the following questions.
Year Nominal Real GDP
GDP ($ trillions) GDP ($ trillions) Deflator
2008 14.7 14.9 -----
2009 14.4 ------- 1
2010 ---- 14.8 1.01
2011 15.5 ------- 1.03
2012 16.2 ------- 1.05
2013 16.7 15.6 -----
2014 ---- 16.1 1.03
2015 18.0 16.5 -----
a) Complete the table above. Round to the nearest hundredth.
b) What prices (base year) are used to calculate Real GDP?
c) What years would be in the expansion phase of the business cycle?
d) What years are included in the recession phase of the business cycle
2.Use the following data to answer the questions below.
Working Age Population 250 million
Labor Force 190 million Employed 175 million
a) What is the number of people not working who are currently seeking employment?
b) Calculate the unemployment rate with the data given above. Round the percent to the nearest tenth.
c) Calculate the labor participation rate with the data given above. Round the percent to the nearest tenth.
3. Consider the following statements:
a) Fewer people are employed in Freedonia now than at any time in the past 75 years.
b) The unemployment rate in Freedonia is lower now than it has been in the past 75 years.
Can both of these statements be true at the same time? Explain.
4.On average, nations in Europe pay higher unemployment benefits for longer periods of time than does the United States. How do you suppose this would impact the unemployment rates in these nations? Explain which of unemployment you think is most directly affected by the size and duration of unemployment benefits.
5. Determine whether each of the following statements is true or false. Briefly explain why. Note:
Apply the economic definition of unemployed.
a) Some people who are officially unemployed are not in the labor force.
b) Some people in the labor force are not working.
c) Everyone who is not unemployed is in the labor force.
d) Some people who are not working are not unemployed.
6. 11. The consumer bundle contains 20 gallons of fuel, a standard meal at a restaurant, a month of cell phone service.
price Quantity
2010 2011 2010 2011
Fuel/ gallon 2.50 2.25 Fuel [gallon 11 400 12100
Standard meal 15.50 18.00 Standard meal 550 525
Cell Service/ month 59.80 70.15 Cell Service / month 950 900
a) Calculate the cost of the consumer bundle in both 2010 and 2011.
b) What is the inflation rate from 2010 to 2011?
c) Compute the nominal GDP for each year.
d) By what percentage did nominal GDP increase between Year 1 and Year 2?
e) Now compute real GDP in Year 2 by using Year 1 prices.
f) By what percentage did real GDP increase between Year 1 and Year 2?
Explanation / Answer
1. a.
Nominal
Real
Year
GDP ($ trillions)
GDP ($ trillions)
Deflator
2008
14.7
14.9
0.99
2009
14.4
14.4
1.00
2010
14.8
14.7
1.01
2011
15.5
15.0
1.03
2012
16.2
15.4
1.05
2013
16.7
15.6
1.07
2014
16.1
15.6
1.03
2015
18
16.5
1.09
b. Base prices are prices of 2008
c. Expansion years are 2010 to 2015
d. Recession phase are 2008 to 2009
2. a.) People not working = Labor force-Employed = 190-175 = 15 million
b.) Unemployment rate = Unemployed/labor force = 15/190 = 7.89 percent
c) LFPR = labor force/working age population = 190/250 =76 percent
3. False . The statement (a) tells about lower employment and statement (b) tells about higher unemployment and hence both cannot be true at the same time
4. The longer the unemployment benefits paid more people would like to claim benefits rather working. Structural unemployment t is the most affected by the unemployment benefits
Nominal
Real
Year
GDP ($ trillions)
GDP ($ trillions)
Deflator
2008
14.7
14.9
0.99
2009
14.4
14.4
1.00
2010
14.8
14.7
1.01
2011
15.5
15.0
1.03
2012
16.2
15.4
1.05
2013
16.7
15.6
1.07
2014
16.1
15.6
1.03
2015
18
16.5
1.09
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