ASSIGNMENT ONE
This assignment is due on Friday, October 13, in class. No e-mails will be accepted. No late work will be accepted. I am giving you 2 weeks to complete this assignment so that people with late accommodations will have sufficient time to finish this assignment. Early submission is encouraged.
You MUST work alone on this assignment.
Please leave questions on the paper and insert each answer below the relevant question
SECTION ONE: 2 points
- In a given year, we find the value of final goods and services produced in the economy is $15t. Your professor told you that this is the expenditure approach to measuring GDP. He also told you we can measure GDP using the value of all the incomes generated from that production, but when you do, the dollar value of incomes is less than $15t. Please explain why this is so AND how this problem is corrected.
- In the nation of ‘Snookie’, GDP grows rapidly. In fact, GDP growth rate is 7%. Tell me two things:
How long would it take for this nation to double its GDP? Show work.
Why might the standard of living fall in ‘Snookie’ despite its impressive growth rate?
- “Good news”, says the President. Unemployment is down. Remembering what I told you about being careful with data, and being skeptical, why might the economy not really be better even though the numbers seem to indicate an improvement? To illustrate, imagine the labor force was comprised of 100 people, 10 of whom were unemployed. Adjust these numbers to show a drop in unemployment and then explain why things might actually be worse. This means you have to adjust your numbers to show a lower unemployment rate AND explain why this is worse than before.
- You will now find three separate unemployment rates from the data provided below. You MUST show how you used the numbers to arrive at your answers.
Tiny Town has a population of 1,000 residents. 50 are in jail and 200 are youngsters. 100 people are housewives and house husbands and not looking for work, while 50 are retired. 400 have full-time jobs while 100 have part-time jobs. The remainder of people are looking for work.
What is the unemployment rate in Tiny Town? Show work.
Next, 50 of those with part-time jobs move to another state. What is the unemployment rate in Tiny Town now? Show work.
Finally, using these latest numbers, 5 of the unemployed move out of state. What is the unemployment rate now? Show work. Circle all answers for clarity.
SECTION TWO: 2.0 pts.
In this section, you will be dealing with the consumer price index.
- Assume 2005 is your base year. Assume spending is on 3 items only. One apartment is rented at $500. Sixty hamburgers are bought at $2 each. Ten movie tickets are sold at $6 each. Calculate the dollar value of consumer spending for 2005, showing all work. (A table would work well here).
- Now it is 2011. The apartment rents for $630. Hamburgers cost $2.50 each (sixty are bought). Finally, ten movie tickets are sold at $7 each. Calculate the dollar value of spending for 2011.
- Now, the CPI itself is not measured in dollars. Find the value of the CPI in 2011.
- What does this number tell you? Discuss.
- Now, assuming all the same numbers for 2005, imagine that four sweaters were sold at $30 each (add to previous numbers). Now what is the dollar value of spending for 2005? Show.
- Now, assuming all the same numbers for 2011, imagine that four sweaters are sold at $50. What is now the value of total spending in 2011? Show.
.
- What is now the value of the CPI in 2011 using the numbers from parts ‘d’ and ‘e’? Show.
- What does this number tell you? Discuss.
SECTION THREE: 1.0 point.
Please examine the data I have provided below. There will be some extra data included that you will not need. Using only the relevant data, set up a table that is like table 2, chapter 5. Label each component of GDP and put each subcomponent below the relevant component . When complete, you should have totals for each component as well as numbers for each subcomponent. Include total GDP. You can search for where each subcomponent goes or you may just deduce where they go.
The numbers are in billions of dollars:
Exports=1,838.5, State and local spending=1,831.4, Depreciation=1,860, Inventory investment=68.9, durable goods=1,089.3, Business fixed investment=1,413.2, Rental income=299, Federal spending=1,233, Imports=2,354.1, Residential investment=340.4, Nondurable goods=2,337.4, Compensation of employees=7,929 , Services=6,923.9