Compute the output gap for each year

Assignment Help Macroeconomics
Reference no: EM132218744

The purpose of the Unit Exercises is to assess the student's ability to apply the economics concepts learned in the unit to practical problem-solving scenarios.

Instructions

At the end of each chapter is a series of Unit Exercises. Students are to complete the exercises in Word (or some other compatible word processor) and submit by 11:00 p.m. on Sunday of Unit 2.

1. Consider the macroeconomic data shown below for a hypothetical country's economy.

 

 Real GDP (billions of $) 

 Output Gap

 (% of potential) 

 Unemployment Rate 

 (% of labour force) 

 YEAR 

 Actual 

 Potential 

 2003

1172

1192

 

11.0

 2004

1188

1200

 

10.0

 2005

1201

1209

 

9.0

 2006

1215

1219

 

8.2

 2007

1230

1226

 

7.6

 2008

1244

1240

 

7.2

 2009

1257

1251

 

7.1

 2010

1269

1262

 

7.3

 2011

1274

1274

 

7.6

a. Compute the output gap for each year.
b. In several years actual GDP exceeded potential GDP. Explain how GDP can exceed potential GDP.
c. In this example, real GDP has not fallen from year to year but at times it happens. When real GDP falls from year to year what do economists call such periods?
d. What is the unemployment rate when this economy is at "full employment"? What kind of unemployment exists at this time?

2. Consider the following data for a hypothetical economy that produces two goods: milk and honey.

 

Quantity Produced

Prices

Milk (litres)

Honey (kg)

Milk ($/litre)

Honey ($/kg)

Year 1

110

45

2

6

Year 2

125

40

3

7

a. Compute nominal GDP for each year in this economy.
b. Using year 1 as the base year, compute real GDP for each year. What is the percentage change in real GDP from year 1 to year 2?
c. Using year 1 as the base year, compute the price deflator for each year.
d. Now compute the GDP deflator for each year, using year 2 as the base year.
e. Explain why the measures of real GDP growth (and growth in the deflator) depend on the choice of base year.

Verified Expert

In the given assignment,we were required to solve the given questions in the assignment through the application of economic principles in relation to GDP of an economy.

Reference no: EM132218744

Questions Cloud

Identify major barriers to developing international brands : How would you distinguish between services and products? What are the main implications of this difference for the global marketing of services
Discuss methods to assess the quality of simulations : Chapter 3 discusses methods to assess the quality of simulations. You learned about three different views of simulation quality.
Discuss principal environments of contemporary organisation : Write a short essay on the topic - Discuss the principal environments of contemporary organisation and their impacts on HRM
What are janets options if francine sues her for the entire : Assuming Janet has the funds in her savings account, will Francine be successful if she tries to collect the entire debt from Janet?
Compute the output gap for each year : Compute the output gap for each year - What is the unemployment rate when this economy is at "full employment"? What kind of unemployment exists at this time
How the case will impact an actual organization : To challenge you to think about the business implications of the case, and specifically how the case will impact an actual organization.?
Create a directional hypothesis from the research scenario : 100013 Experimental Design and Analysis Assignment - For Part 1, your task is to create a directional hypothesis from the Research Scenario provided
Describe what you believe are the most challenging elements : Describe the main compliancy requirements and the protected information for both COPPA and CIPA.
Describe how falling barriers to trade and investment : Discuss the major points of the inequality between nations argument and describe how falling barriers to trade and investment might help reduce this inequality

Reviews

Write a Review

 

Macroeconomics Questions & Answers

  Explain how much will real gdp change

explain how much will real GDP change. Explain how the concept of comparative advantage was relevant to the trade negotiations.

  Enter the equation for f and attach

Design a minimum three-level NOR-gate circuit to realize f = a'b' + abd + acd. Enter the equation for f and attach files of any Karnaugh maps or other work used to derive the equation. Attach a Word, PDF, or image file of your circuit.

  Is the federal funds rate currently too high or too low

The federal funds rate is currently 3 percent. The equilibrium real federal funds rate is 3 percent, and the weights on the output gap and inflation gap are 0.5 each. The inflation target is 1 percent. Is the federal funds rate currently too high o..

  What is the argument against attempting to balance

What is the argument against attempting to balance the Federal Government budget rapidly at the present time via either deep cuts in Federal Government spending on goods and services or via sharp increases in federal income tax rates?

  Understanding of the federal budget

Based on your understanding of the federal budget from the assigned reading and any other sources you select, explain how the federal budget

  Identify journal articles focused on macroeconomic factors

Identify and read at least four peer-reviewed journal articles focused on macroeconomic factors in two selected countries. Use national statistical data or data

  How do cost of operations relate to strategy of organization

How would you manage the costs associated with a value-creation activity? How do costs of operations relate to the strategy of the organization?

  Identify the amounts of labor

Find the following: First solve this problem using an Excel spreadsheet approach and then do the problem using the optimization procedure; compare the answers for the two methods.

  Vending machines should wendy sell

Each vending machine costs $500 to produce and bring to the market. How many vending machines should Wendy sell if she wants to maximize her profit?

  Interest rates are lower in japan than in europe

Because interest rates are lower in Japan than in Europe, the "carry trade" makes money by borrowing in Japan and lending in Euroland - as long as the yen does not strengthen against the Euro.  Describe a scenario in which a positive feedback d..

  Demonstrate the effect of expansionary monetary policy

Demonstrate the effect of expansionary monetary policy in the AS/AD model when the economy is:

  Compute the expected return-standard deviation

Compute the expected return, standard deviation, and value at risk for each of the following investments: Investment (A): Pays $100 three-fourths of the time and a $140 loss otherwise.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd