1. In an economy that only produces bread, they produce 300 loaves and the price is $4 per loaf in year1. In year 2 the quantity increases to 400 and the price is $5. In year 3, the quantity rises to 500 and the price is $6. Assuming that year 1 is the base year, calculate: Nominal GDP for each year. Real GDP for each year. GDP deflator for each year. Percentage growth rate of real GDP for years 2 and 3. 2. A small country produces only hamburgers, hotdogs and pizzas. The following data is given for three years: Hamburgers Hotdogs. Pizzas Quantity. Price Quantity. Price. Quantity Price 2015 20. $4. 60 $2 50 $5 2016. 24. $5 100 $3 80 $6 2017. 28 $6 110 $4 90 $7 a. Assuming 2015 as the base year, calculate the CPI index for years 2016 and 2017. b. Calculate the inflation rates for 2016 and 2017. 3. If Americans decided to reduce their annual consumption by 10% and instead increase investment by the same amount, What would be the effect of such a decision? Who will be the main beneficiary of such a move? 4. If the US government-imposed restrictions on foreign investment in the US, such as levying taxes on foreigners investing in America, What would happen to supply and demand for loan-able funds? Show by graph. What will happen to the interest rates?5. If Congress increases the federal minimum wage from $7.25 to $15 per hour, and the president signs it into the federal law, what effect will such legislation have on the labor market? Use graph if you can. 6. If the reserve requirement of the Federal Reserve System is 25%, and assume that banks do not hold excess reserves and the public holds no cash. The Federal Reserve decides to increase money supply by $100 million. Will the Federal Reserve buy or sell bonds? How much bonds does Federal Reserve buy or sell to achieve its goal? 7. Suppose the Federal Reserve increases money supply sharply and the inflation rises from its current 2% to 5% a year. Who will be benefiting and who will be the main loser of this higher inflation? 8. The natural rate of unemployment is the frictional rate that exists in every economy when people move between jobs, and economists refer to full employment when the rate of unemployment is at the natural rate. The natural rate of unemployment in Europe is normally twice and at times three times that of the USA. Can you explain why? 9. What is stagflation, and when does that happen? Can you show it by graph and explain the outcome of such a phenomenon? 10. Consider an economy described as follows: Y=C+/+G C=100 +0.75(Y-T) . 1=500-50r G=125 T= 100 -Where Y is GDP, C is consumption, I is investment, G is government expenditure, T is taxes and r is the interest rate. -If Y is 2000, what would be the interest rate? -Suppose the monetary authorities want to set interest rate at 4%. What would happen to Y