What is the change in us gdp due to the sword

Assignment Help Microeconomics
Reference no: EM131022640

Homework 3-

1. This problem concerns the economic activities of five friends-Sylvester, Bruce, Jean- Claude, Kurt, and Arnold-who live in Hollywood. Answer the following questions:

a) Jean-Claude decides to offer all the other guys karate lessons at his karate studio, Fast Chop. Everyone but Arnold signs up and pays a one-time enrollment fee of $250. To convince Arnold to join, Jean-Claude offers him a 20% discount, so Arnold signs up as well. What is the change in U.S. GDP due to the karate lessons?

b) In 1997, Bruce decides to sell his 1992 Rolls-Royce to Kurt for $300,000. Sylvester takes care of all the paperwork for this deal, for which the other two each pay him $25. What is the change in U.S. GDP in 1997 due to the car deal?

c) In 2000, the five guys inherit $10 million from their friend, Dolph, and decide to use it to set up a business to produce and sell swords. In order to save money, they decide to build the factory themselves, which takes 3 months to complete. They buy the materials and the machinery for the production of swords from China and pay $1.5 million for them. Kurt offers to take care of advertisement, for which he is compensated with $10,000. The entire first batch of swords is immediately sold to Japan for $3 million. What is the change in U.S. GDP due to the sword-making business?

d) In 2001 the guys continue their production of swords. During that year, they produce 10,000 swords, but are able to sell only a quarter of them for a total value of sales   of $250,000. What is the change in U.S. GDP for 2001 due to this activity? Which expenditure components of GDP (C, I, G, X, or M) change?

e) In 2002 the guys get bored with their sword-making business, so they look for new jobs. Arnold takes a government job, which pays $45,000 a year. Sylvester and Kurt get hired to star in a movie and each of them is paid $150,000 for the job. Jean-Claude decides to try a more exciting life and joins a band of drug smugglers, who pay him a weekly salary of $1000. Bruce is the only one left to take care of the business, so he has to scale down, but still collects an annual profit of $250,000. How do the economic activities of the five friends affect U.S. GDP for 2002?

2. The following table contains information about the small economy of Nedelialand, which produces only four kinds of goods: cheesecakes, muffins, chocolate fudge, and cookies. Use the information to answer the questions below.

Year

Cheesecakes

Muffins

Chocolate Fudge

Cookies

Price

Quantity

Price

Quantity

Price

Quantity

Price

Quantity

2007

$5.00

150

$0.80

320

$5.50

20

$0.25

400

2008

$5.00

200

$1.00

400

$6.00

30

$0.30

600

2009

$6.25

100

$1.00

250

$6.00

16

$0.50

300

a) Calculate the nominal GDP of Nedelialand for 2007, 2008, and 2009.

b) If we use 2008 as a base year to calculate real GDP, do you think real GDP in 2007  would be higher or lower than nominal GDP in 2007? Why? (No calculations here, just intuition).

c) Calculate real GDP for 2007, 2008, and 2009 using 2008 as the base year.

d) Calculate the GDP deflator for the three years, using 2008 as the base year.

e) By what percentage did Nedelialand's real GDP grow from 2007 to 2008? How about from 2008 to 2009? Can you think of economic reasons to justify these numbers?

f) What was the inflation rate from 2007 to 2008? How about from 2008 to 2009? (using 2008 as the base year)

3. The population of Raleigh, NC is 400,000. Of those, 5% are under 16 years of age and 10% are already retired. Of the remaining people, 10% fall into the category "not in the civilian labor force". Of the remaining people, there are 26,000 part-time workers, 20,000 who are underemployed, and 230,000 full-time employees.

a) Determine the size of the civilian labor force of Raleigh.

b) What is the unemployment rate in Raleigh?

c) What figure would be a more realistic representation of the proportion of people in Raleigh who would like to work, but don't have a job?

d) Now suppose you are told that of those who are unemployed, 20% are being retrained because their skills no longer match the advancements in technology introduced at their jobs. Another 15% of the unemployed are students who have just graduated and are looking for a job for the first time since they got their degree. Also, another 65% of the unemployed are workers who were laid off when the recession hit and have been unsuccessfully looking for a job ever since.

i. What is the frictional rate of unemployment in Raleigh?

ii. What is the structural rate of unemployment in Raleigh?

iii. What is the cyclical rate of unemployment in Raleigh?

iv. What is the natural rate of unemployment in Raleigh? How can you check your work?

 4. In the small island country of Montecristo, people consume only services. Thus, their representative consumer basket for one year consists of 5 haircuts, 20 bus rides, 4 visits to the dentist, 10 visits to the movies, and 1 consultation with a lawyer. The prices of these services for the years 2000, 2001, and 2002 per usage (visit) in Euros are as follows:

Service/Year

2000

2001

2002

Haircut

€8

€20

€20

Bus Ride

€2

€3

€5

Dentist

€20

€20

€25

Movies

€4

€8

€10

Lawyer

€50

€80

€100

a) Fill out the following table, noting that the CPI value for the base year should be 100 (this is a good way to check your calculations).

 

Base year:    2000

Base year: 2001

Base year: 2002

CPI in 2000

 

 

 

CPI in 2001

 

 

 

CPI in 2002

 

 

 

b) Using your answers from part a), calculate the rate of inflation from 2000 to 2001 and from 2001 to 2002 and fill out the table below. Provide some intuition for your answers.

 

Base year:    2000

Base year:   2001

Base year: 2002

Inflation(2001)

 

 

 

Inflation(2002)

 

 

 

c) Suppose Edmond lives in Montecristo and his annual nominal income in 2001 is €5,000. What must his annual nominal income in 2002 be so that Edmond doesn't experience a drop in real income?

d) Suppose Mercedes is Edmond's wife and their combined annual nominal income in 2001 is €8,000. What should Mercedes' annual nominal income in 2002 be so that the two together don't experience a drop in their real income, if Edmond's nominal income in 2002 is €6,250?

5. Suppose economy X produces according to the following production function:

Y = K½L½

Here, Y is real GDP, K is capital, and L is labor. Suppose capital K is fixed at 25 units at each period. Fill out the following table:

Period

Labor

Real GDP

Growth in Real GDP

0

4

 

 

1

9

 

 

2

25

 

 

3

49

 

 

4

64

 

 

Reference no: EM131022640

Questions Cloud

How many people did anne shake hands with : Show that there can be at most one celebrity at any party and give an example of a party with no celebrities - There are two persons, X and Y. X says "At least one of us is a knave." What are X and Y?
What would be the price per share just after the split : In September, the board of directors of Charles Steel approved a 4-for-1 stock split. After the split, how many shares of Charles Steel stock will an investor have if she or he owned 100 shares before the split? In the question above, if Charles Stee..
Discuss methods to measure the level of success : Choose at least two real-world examples of how organizations have used industrial/organizational psychology to select and train employees.
Cash flow under the current capital structure : Ms. Knowles, a shareholder of the firm, owns 100 shares of stock. What is her cash flow under the current capital structure, assuming the firm has a dividend payout rate of 100 percent?
What is the change in us gdp due to the sword : Kurt offers to take care of advertisement, for which he is compensated with $10,000. The entire first batch of swords is immediately sold to Japan for $3 million. What is the change in U.S. GDP due to the sword-making business
Compute the dft of this sequence using matlab fft routine : Use MATLAB to generate N = 128 samples of the signal given as: x(n) = 2cos(n15Π/64) + 3sin(n17Π/64)  n = 0,1,2,3,....,N, Compute the DFT of this sequence using the MATLAB FFT routine. Plot the magnitude of the FFT and locate the locations of the pe..
Percentage of the allowance for doubtful accounts : Compute the percentage of the allowance for doubtful accounts to the accounts and notes receivable for The XYZ Corporation. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for Patient Care.
Explain why uranus has a retrograde rotation : Explain why Uranus has a retrograde rotation, and compare it with the motion of the other terrestrial and jovian planets.
Write a research report that summarizes the meeting : You have been asked to write a research report that summarizes the meeting and offers some recommendations that might be helpful to those managers who are struggling. Specifically, your report must include:

Reviews

Write a Review

 

Microeconomics Questions & Answers

  How does the adoption of a tighter monetary policy

How does the adoption of a tighter monetary policy, like that conducted by Volcker Fed in the early 1980's affect output, inflation, and the real interest rate in the short run? In the Long run?

  Is the automobile industry in the united states competitive

"Is the automobile industry in the United States competitive? Try to answer this question considering the recent trends in the automobile industry around the world." Discuss.

  Are goods x and y complements or substitutes

Suppose you have the following demand function for the good x: x* = 80(py/px) - 0.5I. Are goods x and y complements or substitutes? How do you know?. Does good x demand satisfy the first law of demand? Why or why not?

  How much of each good will max demand

The question is about economics and it discuss how much of each good will Max demand? A fat-tax of $2 per liter is placed on ice-cream so that it now costs Max $4 per liter.

  Adam duritz utility function between cd''s (c) and hard candy

7. Given the Adam Duritz utility function between CD's (C) and hard candy (H) is , a. Sketch Adam's indifference curve for U=5, U=10 and U=20.b. Suppose Adam has $100 to spend and that CDs cost $2.50 and hard candy cost $10. Draw Adam's budget constr..

  Determining non-value added costs

Jet Set Travel, Inc. (JTI) has been hugely successful in the distribution of stylish, comfortable shoes for travel. Please describe how non-value added costs can damage the company, it sales, it costs, and it's value chain

  Explain concepts of income and substitution effects

Research in developing countries indicate that the incidence of child labor actually rose in some countries as incomes (and wages) of poor families increased. This is difficult to understand since many people assume that as incomes rose, the inci..

  Restricting imports from other nations will save

Evaluate the statement: Restricting imports from other nations will save U.S. jobs. Include both advantages and disadvantages in you argument.

  Average variable costs are 275 and average total costs are

a pure monopolist determines that at the current level of output the marginal cost of production is 2.00 average

  Describe healthcare transactions that have not taken place

Describe some healthcare situations in which an agent has taken advantage of a principal. Now describe some healthcare transactions that have not taken place because of fears about asymmetric information. What are some strategies for reducing adve..

  What is the free-entry number and location of firms

Firms enter sequentially and incur a startup cost of 1/6. Suppose that startup costs are not sunk-firms can costlessly relocate. What is the free-entry number and location of firms?

  The profitability of the leading cola syrup manufacturers

The profitability of the leading cola syrup manufacturers, PepsiCo and Coca Cola, and of the bottlers in the cola business is dissimilar. PepsiCo and Coca Cola enjoy 81 operating profit as a percentage of sales; bottlers experience only 15 operating ..

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