(a) Suppose that a very simple economy produces three goods: pasta, tomatoes and cheese. Suppose the quantities produced and their corresponding prices for 2015 and 2016 are shown in the following table:
2015 2016
Product Quantity Price Quantity Price
Pasta 40 $4.00 50 $5.00
Tomatoes 100 $8.00 70 $15.00
Cheese 500 $16.00 600 $16.00
(i) What is nominal GDP in 2015?
(ii) What is nominal GDP in 2016?
(iii) What is real GDP in 2015, using 2016 as the base year?
(iv) What has been the percentage change in nominal GDP between 2015 and 2016?
(v) What has been the percentage change in real GDP between 2015 and 2016, using 2016 as the base year?
(vi) Calculate the GDP deflator in 2015 and 2016 using 2016 as the base year.
(b) Consider the data below for the labor market of a hypothetical economy:
|
Labor Force Survey Categories
|
 Persons
|
|
Working age population
|
30000
|
|
Not in the labor force
|
15000
|
|
Discouraged workers
|
500
|
|
Persons not employed
|
16000
|
|
Do not want to work
|
7000
|
(i) Calculate the unemployment rate.
(ii) Calculate the labor force participation rate.
(c) Suppose an economy has only three goods, and the typical family purchases the amounts given in the following table. Furthermore, these three goods are included in the basket of goods used to calculate the Consumer Price Index (CPI). Assume that the base year chosen for the CPI is 2014.
|
Product
|
Quantity (2014)
|
Price (2014)
|
Expenditures (2014)
|
Price (2015)
|
Price (2016)
|
|
Computers
|
1
|
$2000
|
$2000
|
$2100
|
$2000
|
|
Books
|
10
|
$30
|
$300
|
$25
|
$35
|
|
Burgers
|
50
|
$4
|
$200
|
$5
|
$6
|
|
Total
|
|
|
$2500
|
|
|
(i) What is the value of the CPI in 2014? (ii) What is the value of the CPI in 2015?
(iii) What is the value of the CPI in 2016?
(iv) What is the annual inflation rate in 2015?
(v) What is the annual inflation rate in 2016?