Questions:
1. Year 1 Year 2
Quantity Price Quantity Price
Oranges 100 $5 150 $5
Pears 100 $3 75 $4
a. What is the growth rate of constant-dollar real GDP using year 1 as the base year?
b. What is the growth rate of constant-dollar real GDP using year 2 as the base year?
2. Why has nominal GDP increased faster than real GDP in the United States over time? What would it mean if an economy had real GDP increasing faster than nominal GDP?
3. The U.S. dollar price of a Swedish krona changes from $.1572 to $.1730.
a. Has the dollar depreciated or appreciated against the krona?
b. Has the krona appreciated or depreciated against the dollar?
4. How did the United States become the world's largest debtor nation in the 1980s?
5. Use the national income identity GDP . C . I . G . X to explain what a current account deficit (negative net exports) means in terms of domestic spending, production, and borrowing.
6. Suppose 500 people were surveyed, and of those 500, 450 were working full time. Of the 50 not working, 10 were full-time college students, 18 were retired, 5 were under 16 years of age, 7 had stopped looking for work because they believed there were no jobs for them, and 10 were actively looking for work.
a. How many of the 500 surveyed are in the labor force?
b. What is the unemployment rate among the 500 surveyed people?
7. Consider the following price information:
Year 1 Year 2
Cup of coffee $ .50 $1.00
Glass of milk $1.00 $2.00
a. Based on the information given, what was the inflation rate between year 1 and year 2?
b. What happened to the price of coffee relative to that of milk between year 1 and year 2?
8. How can a larger government fiscal deficit cause a larger international trade deficit?