Homework #1 (Due Friday, March 1 at the beginning of lecture) 1. Impact of import price changes on inflations Every year Korea imports 100 barrels of crude oil and a car. Oil companies in Korea produce 20,000 liters of gasoline with the imported crude oil. Oil companies sell 10,000 liters of gasoline to domestic households and export 10,000 liters to foreign countries. Domestic households consume one car and 10,000 liters of gasoline. In 2015, the price of crude oil was $100 per barrel, that of a car $10,000, and that of gasoline $2 per liter. The base year is set to 2015. In 2016, the price of crude oil was $50 per barrel, that of a car $10,000, and that of gasoline $1.8 per liter. Fill out the table below and obtain the growth rates of GDP deflator and CPI in 2016. 2015 2016 Nominal Real Nominal Real Consumption Investment $0 $0 $0 $0 Government spending $0 $0 $0 $0 Net Export GDP In 2016, the price of crude oil was $100 per barrel, that of a car $5,000, and that of gasoline $2 per liter. Fill out the table below and obtain the growth rates of GDP deflator and CPI in 2016. 2015 2016 Nominal Real Nominal Real Consumption Investment $0 $0 $0 $0 Government spending $0 $0 $0 $0 Net Export GDP 2. Impacts of fiscal policy 1) To stimulate an economy, policymaker decided to increase government spending while fixing tax revenue. Find out long-run impacts of this fiscal policy on GDP, consumption, and investment. To answer this question, you may use goods market equilibrium, loanable fund market equilibrium, or both. 2) To avoid budget deficits, policymaker decided to increase government spending and tax revenue by the same amount. Find out long-run impacts of this fiscal policy on GDP, consumption, and investment. To answer this question, you may use goods market equilibrium, loanable fund market equilibrium, or both.