Calculate inflation rate by chain weighted method

Reference no: EM13747627

Question 1:

Take 2002 as the base year. Calculate for all the years

Year	Price of TV	Price of Car	Quantity of TV	Quantity of Car
2000	51000	$zomoo	100	100
2001	51200	$21.000	130	80
2002	51400	$22.000	170	120
2003	51600	$23.000	210	150

a) Nominal GDP

b) Real GDP

c) Real Growth Rate

d) Nominal Growth Rate

e) Inflation Rate

f) Calculate Real GDP growth rate by chain weighted method

g) Calculate inflation rate by chain weighted method

Question 2:

Consider the following small economy's data:

Year	GDP	Consumption	Unemployment
1997	15	5	4
1998	25	22	3
1999	35	13	2
2000	40	27	1
2001	35	33	2

a) Plot a graph with consumption on the vertical axis and GDP on the horizontal axis, and another graph with unemployment on the vertical axis and GDP on the horizontal axis. Are consumption and unemployment procyclical or countercyclical?

b) The average (arithmetic mean) of a variable is obtained by adding up all the values and dividing by the number of values summed. Calculate average GDP, average consumption and average unemployment for this economy.

Question 3:

Representative consumers have the utility function U(C, L^s) = ln(C) + ln(1- L^s)

Representative consumers have labor endowment of 1. So Ls must be less than 1

Representative firm's production function is Y(L^d ) = 4 L^d

There is perfect competition in the markets (so price and wages are taken as given by firms and consumers)

a) Write down profit function of the firm

b) Solve for the firms maximization problem and find the labor demand

c) Write down the budget constraint of the representative consumer

d) Write down the maximization problem of the representative consumer and find labor supply

e) Write down the market clearing conditions

f) Solve for equilibrium labor supply and labor demand

g) Solve for equilibrium goods demanded and goods supplied

h) Solve for equilibrium price and wage

Reference no: EM13747627

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