1.Suppose that people expect inflation to equal 3 percent, but in fact prices rise by 5 percent. Indicate whether this unexpected higher rate of inflation would help or hurt each of the following groups.

a.a homeowner with a fixed-rate mortgage.

b.a union worker with a fixed labor contract

c.a company that has invested some of its endowment in government bond which pay fixed rate of return.

Answer:

2.Country X's Macroeconomic Data in 2017

Macroeconomic Variables

Values (I billion $)

Consumption Expenditure

13

Employee Compensation (wages)

12

Government Spending

3

Interest Payments

1

Investment Spending

4

Net Export

-1

Profit

5

Calculate Country X's nominal gross domestic product for 2017 using the expenditures approach.

Answer:

3.Suppose the consumer price index CPI was 100 on January 1st, 2017 and 110 on January 1st,2018 with no changes in nominal wages. Calculate inflation rate between January of 2017 and January of 2018?

Answer:

4.In the year 2018, the economy produces 100 Mango that sell for $5 each. In the year 2019, the economy produces 200 orange that sell for $6 each. Calculate nominal GDP, real GDP, and the GDP deflator for each year. (Use 2010 as the base year.) By what percentage does each of these three statistics rise from one year to the next?

Answer:

5.Why every country desire to have a large GDP? What is the negative impact of larger GDP on Economy, if any, explain?

Answer: