Economics 100.

1: Introduction to Macroeconomic Theory and Policy

Exercise Set No. 1
E. de Dios

Deadline: June 25, 2013

Abesamis / Arellano/ Libre

I. Encircle the letter corresponding to the best answer. 1. Which of the following statements is UNTRUE when an economy is on its production possibilities curve? a. Resources are being fully employed. b. Society is operating with productive efficiency. c. The production of any good cannot be increased without reducing the production of some others. d. Consumers will have all that they want of all goods and services. e. A strike by workers will move the economy beneath the PPC. 2. What is being measured on the axes of a PPC graph? a. quantities of productive inputs or resources b. quantities of final goods and services c. values of productive inputs or resources d. values of produced goods and services e. levels of prices of commodities 3. Which of the following will not shift the production possibilities curve outward? a. An improvement in levels of education among the labor force. b. An increase in the quantity of the labor force. c. An improvement in production technology. d. The discovery of a huge source of oil within the country. e. A reduction in unemployment. 4. The main difference between nominal and real GDP is that a. real GDP is adjusted for price changes while nominal GDP is not. b. nominal GDP is adjusted for price changes while real GDP is not. c. nominal GDP is a better measure for comparing output across several years. d. real GDP increases more compared to nominal GDP during periods of high inflation. e. nominal GDP is more stable compared to real GDP. 5. Real GDP of the Philippines grew by 6.6% for the year 2012. If the population grew 1.87% over the same period, then per capita real GDP grew roughly by ____ for 2012. a. 0.28 % b. 3.53 % c. 4.73 % d. 6.6 % e. 8.47 % 6. The total working-age population in the Philippines for the year 2010 was 61.53 million, of which 63.7% were in the labor force. In 2011, total working age population grew to 62.68 million while labor force participation rate grew to 64.2%. If the number of unemployed people was 2.90 million for both 2011 and 2012, then a. the unemployment rate was higher in 2011 than in 2012. b. the unemployment rate was higher in 2012 than in 2011. c. the unemployment rate was the same for both years. d. the number of people employed in 2011 was higher than in 2012. e. there is not enough information to determine the unemployment rate. Refer to the following information for items 7-8: Various parts of the typical unit of the U.S. smart phone Orange Nebula X5 are produced in several countries. The hard disk and display screen cost $95 and are produced in Japan. Other components are produced in South Korea at a cost of $30. The parts are then assembled in China at a cost of $8. The assembled phone is transported by third-party American freight companies at the cost of $2 per unit. Finally it is sold directly by Orange, Inc. to consumers at the price of $399.

7. What is the value-added contributed by Orange, Inc. for every unit of the smart phone? a. $0 b. $264 c. $399 d. $534 e. None of the other choices. 8. How much does a unit of Orange Nebula X5 contribute to US GDP? a. $262 b. $264 c. $266 d. $397 II. Fill in the blank spaces in the table with the correct values. National Income Account of the Philippines (values in million pesos except for the GDP deflator) Type of Expenditure 2010 2011 7,132,581 941,836 1,985,897 3,103,018 _________ _________ _________ 7,814,330 9,706,267 5,909,000 _________ 2012 7,837,881 1,112,586 1,950,524 3,254,460 3,590,563 2,043,843 _________ _________ _________ 6,311,671 _________ Household Final Consumption 6,442,033 Government Final Consumption 875,291 Capital Formation 1,849,380 Exports of Goods and Services 3,133,507 Imports of Goods and Services 3,296,732 Net Primary Income from abroad 1,848,952 Implicit GDP deflator (2000 = 1) 157.91 GNI (at current prices) _________ Nominal GDP _________ Real GDP _________ Inflation (based on GDP deflator) N/A Note: All expenditure components are listed in current prices.

e. $399

Source (except GDP deflator): National Statistical Coordination Board (NSCB)

III. Fill in the blanks with the correct answers. State whether the individual described in each item will be officially recorded as employed (E), unemployed (U), or not in the labor force (N). 1. A 10-year old who dropped out of school to look for work 2. A recent college graduate who goes to Makati to look for a job 3. A tricycle driver taking college classes at night 4. A person who owns a farm and raises cattle and poultry 5. A laid-off factory worker who is too discouraged to look for a job 6. A professional who quit his job several years ago to raise children but is now applying for the same position he held before