Discussion Questions:

1. Discuss the different types of unemployment that exist in the economy.
2. Explain what is participation rate in the labor force?
3. How much does the labor force participation rate affect the unemployment rate?
4. Doyou think one type of unemployment is worse than others and why?
5. What can governments do to assist in reducing this type of unemployment?

Calculations:

1. Table 1.0 below provides nominal GDP, real GDP and GDP deflator data.

(a) Complete Table 1.0

(b) What is the base year for the GDP deflator?

(c) Calculate the percentage change in nominal GDP, real GDP, and the GDP deflator between 2014 and 2015.

(d) Was the increase in nominal GDP due mostly to an increase in real GDP or to an increase in the price level?

TABLE 1.0

YEAR	NOMINAL GDP	REAL GDP	GDP DEFLATOR
2012	3,055		94
2013		3,170	100
2014	3,410	3,280
2015		3,500	108

1. Consider the following data on Canadian GDP:

NOMINAL GDP GDP DEFLATOR

YEAR (IN BILLIONS) (BASE YEAR 2010)

2011 $725 101.2

2012 $762 102.4

a. What was the growth rate of nominal income between 2011 and 2012? (Note: The growth rate is the percentage change from one period to the next.)

b. What was the growth rate of the GDP deflator between 2011 and 2012?

c. What was real income in 2011 measured in 2010 prices?

d. What was real income in 2012 measured in 2010 prices?

e. What was the growth rate of real income between 2011 and 2012?

f. Was the growth rate of nominal income higher or lower than the growth rate of real income? Explain.

1. Suppose that the residents of Wolfgang spend all of their income on cauliflower, broccoli, and carrots. In 2014 they buy 100 heads of cauliflower for $200, 50 bunches of broccoli for $75, and 500 carrots for $50. In 2015 they buy 75 heads of cauliflower for $225, 80 bunches of broccoli for $120, and 500 carrots for $100. If the base year is 2014, what is the CPI in both years? What is the inflation rate in 2015?