Macroeconomics Homework
a. Find nominal GDP in the current year and in the base year. What is the percentage increase since the base year (please round this answer to the nearest whole number)? b. Find real GDP in the current year and in the base year. What is the percentage increase since the base year (please round this answer to the nearest whole number)? c. Find the GDP deator for the current year and the base year. By what percentage does the price level change from the base year to the current year (please round this answer to the nearest whole number)? d. Would you say that the percentage increase in nominal GDP in this economy since the base year is due more to increases in prices or increases in the physical volume of output? 3. There are a number of statistics computed to measure the price level, such as the GDP deator and the CPI. The choice of which of these measures to use depends in many cases on the specic questions that need to be addressed. For each of the following situations state whether the CPI or the GDP deflator is a more appropriate measure to use and explain why the statistic is preferred. NOTE: Keep your explanation short and to the point (a sentence will do). You need to state why one index is preferred and why the other index is not. E. g. snake meat is not in a typical consumer basket hence CPI is not an appropriate measure, but snake meat is produced and counted as part of GDP so it is included in deator so deator will be an appropriate measure. a. The government is interested in whether increases in defense spending are affecting the price level. b. An economist is interested in looking at the impact of higher prices of imported oil in the overall cost of living. c. An economic consulting rm is investigating the impact on the aggregate price level of more computers and electronic technology used in production. 1. Palpatine Computing has a factory in the country of Exegol worth $20 million. During the current year, Palpatine Computing builds $3 million worth of computer components. Palpatine's costs are: labor $1 million, interest on debt $0.5 million, and taxes $0.3 million. Palpatine Computing sells all its output to First-Order Supercomputer. Using Palpatine's components, First-Order builds four supercomputers at a cost of $ 1 .25 million each ($0.75 million worth of components, $0.4 million in labor costs, and $0.1 in taxes per computer). First-Order has a $30 million factory in Exegol. First-Order sells three of the supercomputers for $1.5 million each to the government of Exegol. At year's end, it had not sold the fourth. The unsold computer is carried on First- Order's books as an $1.25 million increase in inventory. Calculate the contributions to Exegol's GDP of current year transactions using the expenditure approach. Detail which components of GDP are affected and the nal impact on GDP. Remember to carefully explain your answer (numbers thrown together without explanation does not count as a correct answer). Consider an economy that produces only the following three products: droids, 1i ghtsabers, and star destroyers. In the base year, the production and prices for each product were as follows: Product uanti Price Li ihtsabers 6,000 $500 In the current year, the production and price data are as follows: Product uanti Price Li ihtsabers 14,000 $400 Answer the following questions about the economy. Remember to always write down the formulas using proper notation rst, then put in the numbers
