Principles of Macroeconomics Homework 1 Iva Masnov

1. 2.

Classify each of the following items as a final good or service or an intermediate good or service and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services: Banking services bought by a student. final service (consumption expenditure) New cars bought by Hertz, the car rental firm. intermediate good (investment) Newsprint bought by USA Today. intermediate good (investment expenditure) The purchase of a new limo for the president. final good (government expenditure) New house bought by Al Gore. Final good (investment) Use the following data to calculate aggregate expenditure and imports of goods and services. Government expenditure: $20 billion Aggregate income: $100 billion Consumption expenditure: $67 billion Investment: $21 billion Exports of goods and services: $30 billion C(consumpt exp)=67 I(ivest)=21 G(gov exp)=20 Y(agreg income)=100 M(exports)=30 Y=c+i+g+(x-m) 100=67+21+20+(X-30) -8=x-30 22=x Aggregate expenditure is 100 billion and imports of goods and services is 22 billion

Use the following data to work Problems 10 and 11. The national accounts of Parchment Paradise are kept on (you guessed it) parchment. A fire destroys the statistics office. The accounts are now incomplete but they contain the following data: GDP (income approach): $2,900 Consumption expenditure: $2,000 Indirect taxes less subsidies: $100 Net operating surplus: $500 Investment: $800 Government expenditure: $400 Wages: $2,000 Net exports: $200

3. Calculate GDP (expenditure approach) and depreciation. Y=g+i+c+(x-m) Y=400+800+2000+(-200) Y=3000 4. The Bureau of Labor Statistics reported the following data for 2008: Labor force: 154,287,000 Employment: 145,362,000 Working-age population: 233,788,000 Calculate the a. Unemployment rate. #ppl unemp=labor force-employment => 154,287,000-145,362,000=8925000 Unemp rate = numberof ppl unemp/labor force *100=> 8925000/154,287,000*100= 5.78% b. Labor force participation rate.=labor force/working age pop*100 => (154,287,000/233,788,000)*100=65% c. Employment-to-population ratio.=Employment/Working-age population*100=> 145,362,000/233,788,000*100=62%

The people on Coral Island buy only juice and cloth. The CPI basket contains the quantities bought in 2009. The average household spent $60 on juice and $30 on cloth in 2009 when the price of juice was $2 a bottle and the price of cloth was $5 a yard. In the current year, 2010, juice is $4 a bottle and cloth is $6 a yard. 5. Calculate the CPI basket and the percentage of the households budget spent on juice in 2009. 2009 j c price $2 $5 avh household expend $60 $30 quant 30 6 cost of cpi $60 $30 $90

household budget= $90 $ spent on juice=$60 $spent on juice/household budg *100=%of household budg spent on juice 60/90*100=66%

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Japans real GDP was 525 trillion yen in 2009 and 535 trillion yen in 2010. Japans population was 127.6 million in 2009 and 127.5 million in 2010. Calculate a. The economic growth rate. EGR=(RGDP2010-RGDP2009)/RGDP2009 *100 =(535-525)/525 *100 =1.90% b. The growth rate of real GDP per person. 2009- RGDPpc=RGDP/P =525/127.6 =4.11 2010- RGDPpc=RGDP/P =535/127.5 =4.20 pc EGR rgdt =(rgdptpc-rgdppct-1)/rgdpt-1 =(4.20-4.11)/4.11 =.02 growth rate of real GDP per person 2% c. The approximate number of years it takes for real GDP per person in Japan to double if the real GDP economic growth rate returns to 3 percent a year and the population growth rate is maintained. Rule of 70=70/percent of change per yr 70/3=23.33 if population growth is maintained it will take approximately 23 years to double.