Please find the attached questions below.
#21. (30 pts) Consider an economy that produces 3 goods. Unless otherwise stated, 2017 is the base year. Quantity Price Product 2017 2018 2017 2018 A $30 $40 $20 $40 12 $15 $20 (a) (10 pts) Calculate nominal and real GDP for 2017 and 2018. What is the GDP deflator in 2017 and 2018? What is the corresponding annual growth rate of the economy and the annual inflation rate? (b) (10 pts) Assume that the typical consumer's basket of goods is given by the average of the quantities between 2017 and 2018. Calculate the CPI for 2017 and 2018, as well as the annual CPI inflation rate. (c) (10 pts) The price of good B increased sharply between 2017 and 2018. At the same time, the quantity of good B dropped. What is a possible explanation for this relationship? Which measure of inflation - the GDP deflator or the CPI - is better suited to account for this phenomenon? Explain.#22. (30 pts) This question focuses on the labor market and unemployment using actual U.S. data. The adult population (M) of the U.S. is approximately 256 million. The labor force is approximately 160.5 million and the number of employed workers (E) is approximately 154 million. (a) (10 pts) How many people are unemployed? What is the unemployment rate? How does it compare to the reported U.S. unemployment rate for November 2017? What is the labor force participation rate? (b) (10 pts) The rate of job separation ($) is 0.01. Calculate the rate of job finding (f) that is consistent with a 4% natural rate of unemployment? How many people are losing their job each month? (c) (10 pts) Assume that Congress and the President are proposing to abolish the federal minimum wage. What effect will the proposal have on f, s, and the natural rate of unemployment? Please explain.#23. (32 pts) Consider the following short-run, open-economy model of the economy. Goods Market Money Market C = 100 + 0.9(Y - T) M = 21,500 I = 280 - 10r; NX = -100 P = 10 G = 100; 7 = 200 L(Y,r) = Y - 50r (a) (8 pts) Graph the IS and LM equations and the find the equilibrium values of r and Y. (b) (8 pts) The equilibrium interest rate in part (a) is a little unusual. Give an explanation for this value. Assume that inflation is currently 1%, how would the Fed target a 1% nominal interest rate? Explain.(c) (8 pts) Policymakers plan to balance the budget by decreasing taxes. What is the size of the Keynesian-cross tax multiplier and the horizontal shift in the IS curve? Show this on your graph in part (a). What are the resulting IS-LM equilibrium values of r and Y after the shift? What is the size of the effective IS-LM tax multiplier? (d) (8 pts) At equilibrium in part (a), what is the value of national saving? Investment? Net capital outflows? Is the foreign exchange market in equilibrium? Show the results in a diagram.#25. (18 pts) Draw a line to match the best answer (right column) to the question (left column). Current U.S. debt to GDP ratio 3% Current U.S. deficit to GDP ratio 100% Current U.S. unemployment rate 63% Share of GDP going to workers: Y = VKI 4% Steady state unemployment rate (s = 0.01, f = 0.09) 10% Current U.S. labor force participation rate 50%#24. (30 pts) AD-SRAS-LRAS model of the economy. Assume the SRAS curve is upward sloping. (a) (15 pts) Janet Yellen recently warned that Bitcoin investors stand to lose a significant amount of money if the market for the cryptocurrency crashes. Assume that the market does indeed crash and causes a drop in the intercept of the aggregate consumption function. Use the AD-SRAS-LRAS diagram to discuss the predicted short- and long-run impacts on the price level, real GDP and unemployment. Clearly label your graph and write a concise paragraph to accompany your graph. (b) (15 pts) How should President Trump and Congress respond? Use an AD-SRAS-LRAS diagram to support your discussion
