Reference no: EM131165787

Q1. Here is a table showing the outputs of Atlantis in recent years (all prices are in Atlantis Dollars):

Year	Banana	Unit Price	Boat	Unit Price	Aircraft	Unit Price
2010	5,600,000	1	3,500	1,000	1	5,000,000,000
2011	6,400,000	2	4,000	1,500	2	5,000,000,000
2012	7,200,000	3	4,000	2,000	3	5,000,000,000
2013	6,000,000	4	3,000	2,500	4	5,000,000,000

The regular consumer in Atlantis consumes 500 bananas and 1 boat per year, which is the bundle for CPI calculation.

(1) Taking 2010 as the base year, calculate the GDP deflator measured inflation for year 2011, 2012 and 2013.

(2) Taking 2013 as the base year, calculate the GDP deflator measured inflation for year 2011, 2012 and 2013.

(3) Taking 2010 as the base year, calculate the CPI measured inflation for year 2011, 2012 and 2013.

(4) Taking 2013 as the base year, calculate the CPI measured inflation for year 2011, 2012 and 2013.

Q2. Dr. Frankenstein graduated from PSU in 2009 and entered the labor market seeking for a position. At the beginning of 2010 he found his first job in North Pole. But due to lack of skills (skills that ensure people surviving in North Pole) required, he lost his job at the beginning of 2011. After further study he got another work in South Pole at the beginning of 2012. However, he was unlucky again. At the beginning of 2013 he lost his work again because there was a great recession all over the world. This time Dr. Frankenstein lost his confidence entirely. He stopped seeking for new positions and stayed at home watching TV.

(1) What are the impacts on unemployment rate and labor force participation rate in 2009, 2010, 2011, 2012 and 2013 due to Dr. Frankenstein? Hint: we only consider Dr. Frankenstein's employment condition, assuming all others' employment conditions keeping the same.

(2) What kinds of unemployment occurred in the story? Please list all of them together with your evidence.

Q3. The country, Oceania, is now under hyperinflation. Here is the description of what happened there:

Every day, workers in Oceania receive salary twice, once in the noon and once in the afternoon. Usually, the afternoon salary is dramatically higher than the noon one while the noon one is astonishingly higher than yesterday's afternoon one. After getting the money, people rush out their offices seeking for foods and other necessaries. In fact, they have a 2-hour rest after each salary payment merely for this purpose. Even this is limited since foods and other goods are more and more difficult to be found. Shops and salesmen refuse to sell anything because it is too hard for them to change the tags. It is especially hard for the poor because no one want to lend anything. Even the rich choose not to hold extra local currencies; instead they exchange them to US dollars in the underground market.

(1) Please list all social costs occurred under hyperinflation described above. Hint: please only list what is mentioned above and provide facts accordingly to support your argument.

(2) What do you think happened to those middle class residents who used to have some savings in local currency? Based on your answer, why rich people tend to exchange for US dollars nowadays?