1. GDP and Related Measures

Suppose an economy produces only 2 products that will also be used for direct

consumption, as per the article at the end of the exam: chicken wings and donuts. In

the second quarter of 2021 (the base period), 180,000 pounds of chicken wings were

produced, at a value of $3.50 per pound, while in the second quarter of 2022,

production of chicken wings increased to 200,000 pounds, at a value of $3.75 per

pound. In the second quarter of 2021 (the base period), 85,000 donuts were produced

at a value of $0.85 per donut, while in the second quarter of 2022, donut production

increased to 100,000 donuts, each at a value of $0.95 per donut. The population in

this economy is 1000 individuals in 2022, while the number of hours worked in 2022

is 5000. Also, the quantities that were produced in 2021 represent the quantities that

were purchased by the typical household, meaning that everything that was produced

was sold.

Complete parts a, b, and c and parts d, e, and f

a. Solve for real GDP in the second quarter of 2021.

b. Solve for real GDP in the second quarter of 2022.

c. Solve for the CPI in 2022 (assuming in this question only, that it is measured quarterly, so the market basket will be for the current and base quarter, instead of current and base month).

d. Solve for the amount of labor productivity in the second quarter of 2022.

e. Solve for the real GDP per capita in the second quarter of 2022.

f. During which phase of the business cycle would an economy experience decreasing values in the real GDP and real GDP per capita?