ECON 144 : chp 5-15.doc
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Consider now the information about the supply of labor in the file named Supply of Labor - HW2. Combine this information with information about the demand for labor in the previous question. What are the equilibrium levels of real wage and employment?
Equilibrium Real Wage = () units
Equilibrium Level of Employment =() Workers
Consider the demand and supply information in the previous questions. What is the level of potential GDP in this country?
Potential GDP = units.
Consider the demand and supply information in the previous questions. Suppose that currently, the nominal wage is W = $1,000 and the price level is P = $20. Then, there are jobs available in the economy and workers are willing and able to work.
Consider the demand and supply information in the previous questions. Suppose that currently, the nominal wage is W = $1,000. If the price level increases by 25% and if the nominal wage does not change, There will be jobs available in the economy and workers will be willing and able to work.
Consider the demand and supply information in the previous questions. Suppose that currently, the nominal wage is W = $1,000. If the price level increases by 25% and if the nominal wage does not change, the labor market will be thrown out of equilibrium. To restore equilibrium, the nominal wage must change to dollars.
1. What component of GDP (if any) will each of the following transactions affect? Explain.
a) A family buys a new refrigerator.
b) Aunty Jane buys a new house.
c) Kina Pharma sells drugs from its inventory.
d) Emmanuel buys a pizza.
e) The government builds a new Motorway from Accrato Kumasi
f) You buy a bottle of California wine.
g) Samsung build an assembly plant in Ghana.
2. Consider an economy that produces only four types of fruit: apples, oranges, pineapples, and bananas. In the base year (2017), the production and price data were as follows:
Fruit | Quantity | Price |
Apple | 3,000 | $2 |
Banana | 6,000 | $3 |
Pineapple | 4,000 | $1.5 |
Oranges | 8,000 | $4 |
In the current year (2020), the production and price data are as follows:
Fruit | Quantity | Price |
Apples | 4,000 | $3 |
Banana | 14,000 | $2 |
Pineapple | 7,500 | $2 |
Orange | 32,000 | $5 |
(a) Calculate the nominal GDP in the current year and in the base year. What is the percentage increase since the base year?
(b) Calculate the real GDP in the current year and in the base year. By what percentage does real GDP increase from the base year to the current year?
(c) Find the GDP deflator for the current year and the base year. By what percentage does the price level change from the base year to the current year?
(d) Would you say that the percentage increase in nominal GDP in this economy since the base year is due more to increases in prices or increases in the physical volume of output?
3. The following information is obtained from the World Bankās World Development Indicators on the Economy of Ghana for the year 2015:
i) GDP per capita (constant 2000 US$) - $1696.08
ii) GDP per capita (current US$) - $1381.41
ii) GDP per capita, PPP (constant 2005 International $) - $3953.21
Ā
a) What factors could account for the difference between the figures in i) and ii)
b) What factors could account for the difference between the figures in i) and iii)?
c) What factors could account for difference between the figures in ii) and iii)?
4. The following relationships hold in the economy of Matata Island:
š¶ = 320 + 0.4(š ā š)
š¼ = 150
šŗ = 275
š = 200
a) Explain the concepts of marginal propensity to consume (MPC) and marginal propensity to save (MPS).
b) What is the MPC for this economy?
c) Explain the concepts of the autonomous spending and tax multipliers.
d) What is the autonomous spending multiplier for this economy?
e) What is the equilibrium level of income for this economy?
f) Suppose that the full employment level of output for this economy is 4000. What sort of output gap is Matata island facing?
g) What kind of policy can the government use to close this kind of gap? Explain with the aid of a diagram.
5. a) For the purposes of assessing an economy's growth performance, which is the more important statistic: real GDP or nominal GDP? Why?
b) Why are goods and services counted in GDP at market value? Explain.
c) What is the difference between intermediate good and final good? Why is the distinction important for measuring GDP?