Assignment: INTERMEDIATE MACROECONOMICS
Question 1: Using the AD and AS model, please explain the short-run and Long-run effects of change in Money supply (Consider M > 0).
Question 2: In Movieland, there are only 3 goods: popcorn, movie shows, and diet drinks. The following table shows the prices and quantities produced of these goods in 2013, 2014, and 2015:
|
Year
|
Price of popcorn
|
Quantity of popcorn
|
Price of movie shows
|
Quantity of movie shows
|
Price of diet drinks
|
Quantity of diet drinks.
|
|
2013
|
$5
|
450
|
$25
|
225
|
$15
|
150
|
|
2014
|
$6
|
550
|
$50
|
250
|
$12
|
200
|
|
2015
|
$9
|
950
|
$65
|
275
|
$ 10
|
275
|
Required: (2013 is base year)
a) Calculate the Nominal GDP for all three years.
b) Calculate the Real GDP for all three years.
c) Calculate the annual growth rate of nominal GDP ( for 2014 & 2015)
d) Calculate the annual real economic Growth rate (for 2014 & 2015).
Question 3: Suppose V is constant, M is growing 5% per year,Y is growing 2% per year, and r = 4.
a. Solve for i.
b. If the Central Bank increases the money growth rate by2 % per year, find i.
c. Suppose the growth rate of Y falls to 1% peryear.
• What will happen to?
• What must the Central Bank do if it wishes tokeep constant?
Question 4:
Explain the Concept (s):
a.) Rational People Think at the Margin.
b.) People Respond to Incentives
Question 5 (a): Define Frictional unemployment & Structural unemployment.
Question 5 (b): If each month, 1% of employed workers lose their jobs and 19% of unemployed workers find jobs. Find the natural rate of unemployment?