CECO 251:Principles of Macroeconomics

ASSIGNMENT.Due Date Tuesday, 07/13/21@ 11:59 pm.

SUBJECT::INTRODUCTION TO MACROECONOMICSGross Domestic Product& Business Cycles.

All answers are to be provided here on the question blanks.You may choose to type answers, preferably in different color or highlights form that of the questions

Question:The economy of Cape Coast is dominated by the production of three 3major products: Cocoa, Gold,and iPad.Choosing 2010 as the base year, the subsequent years' production and prices are as shown in the table below:

COCOA (,000)PRICE(C$)GOLD (,000)PRICE (C$)IPADS (,000)PRICE (C$)

2010500150800250400100

2011400200700150500125

2012350225650120550140

2013325250700200600150

1.Calculate a) the Nominal GDP and b) the Real GDPfor Cape Coast in each of the 4 years[15points]

A: Nominal GDP

2010: (500,000 x $150) + (800,000 X $250) + (400,000 X $100)= $315,000,000

2011: (400,000 x $200) + (700,000 x $150) + (500,000 x $125)= $247,500,000

2012: (350,000 x $225) + (650,000 x $120) + (550,000 x $140)= $233,750,000

2013: (325,000 x $250) + (700,000 x $200) + (600,000 x $150)= $ 311,250,000

B: Real GDP

2010: ($150x500,000) + ($250x400,00) + ($100x800,000)= $ 315,000,000

2011: ($150x400,000) + ($250x700,000) + ($100x500,000)= $285,000,000

2012: ($150x 350,000) + ($250x650,000) + ($100x550,000)= $270,000,000

2013: ($150x325,000) + ($250x700,000) + ($100x600,000)= $283,750,000

2.Calculate the GDP Deflator for each of the four years [ 15 POINTS]

Note: The GDP deflator= [(Nominal GDP )/(Real GDP)]* 100.It is an expression of the price index.

Since the base year Nominal GDP and the Real GDP are equal,the GDP Deflator for the base year,which is2010=100.

i.e., GDP deflator (2010=[Nominal GDP/ Real GDP]* 100)= 100.

GDP deflator

2010100

2011

2012

2013

Answer:

2010 ($315,000,000/$315,000,000) x 100 = 100

2011 ($247,500,000/$285,000,000) x 100 = 86.8

2012 ($233,750,000/$270,000,00) x 100 = 86.6

2013 ($311,250,000/$283,750,000) x 100 = 109.7

3.Calculate the annual growth rate of theNominal GDP; and theeconomicgrowth ratebasedon the real GDP[ 20 points.]Also calculate the total growthover the 3 year period.[20 pts.]

Nominal GDP growth rateReal GDPgrowth rate

2010-2011=-21.4%2010 - 2011 = -9.5%

2011-2012=-5.5%2011-2012 = -5.3%

2012-2013=33.1%2012-2013 =5.1%

2010 -2013=-1.2%2010 - 2013 =-9.9%

4.Discuss the Business cycle behavior of the economy of Cape Coast using the real GDP performance you calculated in Question #1 above.. Did the economy find itself in any phase of the Business Cycle?

5.Which Industries in Cape Coast were declining in importance, and which ones were gaining more relevance in the economy? What do these trends say about the structural changes in the economy of Cape Coast?What are the risks associated with the current structure of the economy?[ 25 pts.].