Measuring economic activity
1. Find nominal and real GDP for the following economy that produces 2 goods: beef and chicken. Use Year 1 as the base year.
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Quantity of beef
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Price of beef
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Quantity of chicken
|
Price of chicken
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|
Year 1
|
50
|
$20
|
100
|
$15
|
|
Year 2
|
70
|
$25
|
150
|
$25
|
|
Year 3
|
90
|
$30
|
200
|
$40
|
|
|
|
|
|
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Year 1 nominal GDP ________
Year 2 nominal GDP _________
Year 3 nominal GDP ___________
Year 1 real GDP _______
Year 2 real GDP ________
Year 3 real GDP ________
Also, find the growth rate for the economy between Year 1 and Year 2. Then, between Year 2 and Year 3.
Growth rate (year 1 to year 2) _______________
Growth rate (year 2 to year 3) _______________
Measuring inflation
2. Compute the inflation rate using the CPIfor the following example:
Fixed basket of goods
Oranges 10
Lemons 15
Limes 25
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Year 1
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Year 2
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Year 3
|
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Oranges
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$3
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$3.30
|
$4
|
|
Lemons
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$2
|
$2.50
|
$3.60
|
|
Limes
|
$1.50
|
$3.50
|
$5
|
a) Find the values for the CPI price indexes (useyear 1 as the base year)
Year 1 _____________
Year 2 _____________
Year 3 _____________
(b) Compute the inflation rates:
Year 1 to 2 ___________
Year 2 to 3 ____________
Saving and investment
3. Using the following information find (a) national saving, (b) private saving, and (c) public saving. (d) Also, find the value for investment spending done by firms. (e) Does this economy have a budget surplus?
Consumption = 500
Taxes-transfers = 150
Government spending = 300
Y = 1200
Loanable funds model
4. Use the loanable funds model to analyze the impact of a wave of optimism spreading over the business community.