Homework 1 Econ 104-4

Purpose: The homework gives you further practice with the topics of Section 1. It will also add to your knowledge of
macroeconomic data of the last few decades.
Directions: Please hand this homework in at the start of class on Tuesday, September 23. Please type your answers to
make your work easier to grade. Also, so we have an accurate record of who turned it in, please also submit it to the
Dropbox in Angels Homework Section. Please submit in Microsoft Word format (i.e. .doc or .docx) or Adobe pdf
format (note that Macs can do this too). Finally please include your name in the filename of the upload. You may work
with others but you must write up your own answers.
Be sure to show your calculations and to briefly yet carefully explain your answers.
There are 17 questions (grouped into 5 parts) and each is worth .5 points. To make this a 10 point homework well add
1.5 points to each persons score.
1. Please use the following table for the questions after it. Assume that 2012 is the base year and that only these two
things are produced in the economy. (We could say that both cars and trips are measured in the millions, but well
ignore that to make the arithmetic easier.)



a. What is nominal GDP in 2012?
b. What is nominal GDP in 2013?
c. What is real GDP in 2013?
d. What is the GDP deflator in 2012?
e. What is the GDP deflator in 2013?
f. What is economic growth between 2012 and 2013?
g. What is the rate of inflation from 2012 to 2013?
h. Is the relationship between inflation, the percentage increase in nominal GDP, and the percentage increase in
real GDP about what you would expect?
i. How does the rate of growth in this question compare to what was seen in the U.S. over the last year?

2. Consider real GDP, nominal GDP, the GDP deflator, and the CPI. If you wanted to find average income per person in a
country that was adjusted for inflation, which of these would be part of your calculation?

3. Please pull out the charts of real GDP and the GDP deflator that youll find in the Articles and Handouts section of
Angel (and which weve been using in class). Since 1970, what 25 year period had the most stable growth along with
moderate inflation? I.e. 1970 to 1995, 1971 to 1996, etc.?

4. Carefully explain how each of the following is or is not money.
a. a Canadian $10 bill when youre in Canada
b. a Canadian $10 bill when youre in Miami
c. a 10-year Treasury Note
d. the home someone purchased as an investment

5. This question concerns monetary and fiscal policy.
a. How are they similar?
b. How are they are different?

Year Cars Produced Price of a Car Trips Taken Price of a Trip
2012 10 $34,000 100 $2,600
2013 10.4 $36,400 103 $2,700