Name (print clearly): PROBLEM SET # 1 Macroeconomics Print out the problem set and write in your solutions, neatly. Make sure your problem set is stapled. If you need a staple, go to the library. Problem sets without a staple will not be accepted. Show all calculations. VVVV Multiple Choice Question There are a series of multiple choice questions at the end of this problem set. Using the adjacent table, write in your choice for each question. l) The following table contains production data for a developing country. Only two goods are produced: x and y. Use the data to answer the questions below. m n---- 1) The following table contains production data for a developing country. Only two goods are produced: x and y. Use the data to answer the questions below. 3.25 b) Assume 2001 is the base year, calculate the following values. Year RGDP % Change RGDP From Previous Year 1999 2000 2001 2002c) Assume 2001 is the base year, calculate the GDP price index for the following years. Year GDP Price Index 1999 2000 2001 2002 d) Calculate the rate of inflation for the following periods: Year Inflation Rate 1999-2000 2000-2001 2001-2002e) Use the data from above. Which measurement of GDP, NGDP or RGDP, should we use to measure the standard of living? Explain why. f) Using the data from above, did the standard of living ever decrease? g) Using the data from above. Did the economy ever experience periods of inflation? How about deflation?2) Use the following data to answer the questions below. Year NGDP RGDP GDP Price Index 2008 14,477.60 14,873.70 2009 14,718.60 14,830.40 2010 14.418.70 14,418.70 2011 14,964.40 14,783.80 a) Calculate the GDP Price Index using the formula from class. Show work.b) Based on the calculations in part (b), which year is the base year? Explain how you know. 3) For each scenario below, explain what is counted in the GDP of the United States this year. at) Your professor decided to sell his entire collection of Brooks Brothers shirts on Poshmark.com. b) You purchase an Investing for Dummies book at Barnes and Nobel. c) You purchase a vintage Porsche at a Mecum car auction and pay a 4.5% commission to the auction house. Would the car count? Would the commission count? (1) The federal government sends you an unemployment check for $450 dollars. You pay $450 dollars to have your teeth cleaned and xrayed. e) You order a Cuckoo clock from a city in Baden Baden Germany. 4) Suppose that inventories fall by $2 billion, consumption increases by $8 billion, unemployment insurance payments decline by $4 billion and imports rise $1 billion. What will be the net effect on GPD? 5) Suppose that this year the United States has GDP $100 billion. Also, assume that I = 30 billion, C = 60 billion, and NX = -10 billion. How big is G? Multiple Choice: 1) Gross Domestic Product is equal to the market value of all the final goods and services in a given period of time. A) produced within a country B) consumed within a country C) consumed by the citizens of a country D) produced by the citizens of a country E) produced and consumed within a country 2) "Homemakers often feel their work is taken for granted, and advocates in the women's movement argue that the statistical invisibility of homemakers' work has substantive policy implications." What is meant by "statistical invisibility" here? a) homemakers' output is not counted in GDP b) homemakers' output is double-counted in GDP c) homemakers' output is added into GDP at an artificially-low price d) homemakers' output is only counted into GDP if there exists a market counterpartReal GDP (trillions of 2000 dollars) Time 3) In the above figure, a recession begins at point and an expansion begins at point A) a; b B) b; c C) b; a D) d; c 4) A recession is commonly defined as occurring when A) real GDP decreases for a period of 12 or more months. B) real GDP decreases for a period of 6 or more months. C) the unemployment rate rises above 7.5 percent for 6 or more months. D) the unemployment rate rises above 5.0 percent for 12 or more months.5) Which of the following is included in Germany's GDP? i. BMWs produced in a German-owned factory in South Carolina ii. the value of the stocks sold on the German stock exchange, the Frankfurt Stock Exchange iii. china produced by the English-owned Wedgewood Company at a factory in Berlin, Germany A) i and iii B) ii only C) iii only D) i and ii E) None of the above answers are correct.6) If exports are greater than imports (i.e. X-M>0), then a country is running a A) Trade decit B) Trade surplus C) Trade balance embargo. D) Inationary trade gap. 7) Investment is best described as . A) The act of buying stocks and bonds. B) The act of purchasing capital. C) Buying a house or rental property. D) Buying raw materials. 8) Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that: A. Ben's statement is normative, but Holly's is positive. B. Holly's statement is normative, but Ben's is positive. C. Both statements are normative. D. Both statements are positive. 9) The phase of the business cycle in which real GDP is at a minimum is called: A. the peak. B. a recession. C. the trough. D. the underside. 10) An example of "investment" is the purchase of A) a new van by a potter, who packs it with his wares and travels to art shows. B) 100 shares of Intel stock on the New York Stock Exchange. C) a 100-year-old house that was just put on the protected historic sites list in the year in question. D) a U.S. government bond. 1 1) "The Commerce department announced that it is shifting from 1987 to 1992 as the base year for calculating the nation's real GDP and price index." In the new official figures, compared to the old official figures, the 1987 number for real GDP is a) smaller b) unchanged c) larger d) not enough information to tell