1. Suppose that there are three things produced in the economy: Bread, Wine, and Cheese. The matrix below displays how much of each item was produced in 2019 and 2020, along with prices in each year.

Item	2019 Quantity	2019 Price
Bread	100	$5
Wine	20	$20
Cheese	40	$10

Item	2020 Quantity	2020 Price
Bread	100	$5
Wine	25	$22
Cheese	50	$15

(a) Nominal GDP in 2019 was ["", "", "", "", "", ""] [ Select ] 1,300 1,400 1,500 1,600 1,700 1,800 . Nominal GDP in 2020 was ["", "", "", "", "", ""] [ Select ] 1,300 1,400 1,500 1,600 1,700 1,800 .

(b) Suppose that all wine, bread, and cheese is consumed by consumers in proportion to the overall production in each year. Using2019as a baseline/basket, the percentage increase in the consumer price index from 2019 to 2020 was ["", "", "", "", "", "", ""] [ Select ] 18 18.46 19.11 19.5 20 21.33 22.78 .

(c) Using2020as a baseline/basket, the percentage increase in the consumer price index from 2019 to 2020 was ["", "", "", "", "", "", ""] [ Select ] 18 18.46 19.11 19.5 20 21.33 22.78 .

2. In this question, use a "three panel diagram" of the joint determination of interest rates and exchange rates to determine the effect of each shock on r, e, and GDP. Unless otherwise specified, assume we are not at the zero-lower bound and MP slopes up.

(a) If the federal government imposes a large sales tax, then GDP will ["", "", ""] [ Select ] rise fall stay the same , real interest rates will ["", "", ""] [ Select ] rise fall stay the same , and the dollar will ["", "", ""] [ Select ] rise fall stay the same . Net exports will ["", "", ""] [ Select ] rise fall stay the same .

(b) If the federal government implements a large spending plan to improve our infrastructure, then GDP will ["", "", ""] [ Select ] rise fall stay the same , real interest rates will ["", "", ""] [ Select ] rise fall stay the same , and the dollar will ["", "", ""] [ Select ] rise fall stay the same . Net exports will ["", "", ""] [ Select ] rise fall stay the same .

(c) If there is a financial panic in Europe, then GDP will ["", "", ""] [ Select ] rise fall stay the same , real interest rates will ["", "", ""] [ Select ] rise fall stay the same , and the dollar will ["", "", ""] [ Select ] rise fall stay the same .

(d) Assume that we are at the zero-lower-bound so IS and MP do not intersect. If the federal government reduces spending , then GDP will ["", "", ""] [ Select ] rise fall stay the same , real interest rates will ["", "", ""] [ Select ] rise fall stay the same , and the dollar will ["", "", ""] [ Select ] rise fall stay the same

3.In answering these questions, do not use commas or dollar signs. When answers are in millions of dollars, I will write "million" after the space, so you just put in the number of millions. For example, if the answer is $220,000,000, then I will supply the $ and the million. You simply write in 220. Write zero if there is no effect. If the effect is negative, then write the negative symbol. For example, if the answer is $-15,000,000, you would write -15.

In each of the following situations, determine how much US GDP and each of its components is affected in dollars. Write zero if there is no effect.

(a)General Electric produces $400 million in turbines and $200 million in blenders at its Illinois factory. It sells $350 million in turbines to foreign power companies, with the rest adding to its inventories. It sells $230 million in blenders to US consumers, with some draw-down in inventories.GDP increases by $ million, consumption increases by $ million, investment increases by $ million, government consumption increases by $ million, and net exports increases by $ million.

(b) Rojit purchases $100 of specialty pencils that were produced in Canada this year. He uses $80 for his freelance design firm, and gives $20 to his nephew for his birthday.GDP increases by $ , consumption increases by $ , investment increases by $ , government consumption increases by $ , and net exports increases by $ .

(c)Mohan Enterprises buys $10 million of steel produced in South Korea. It sits in inventory, to be used eventually to build a tower crane. GDP increases by $ million, consumption increases by $ million, investment increases by $ million, government consumption increases by $ million, and net exports increases by $ million.