In Macroland, a country that operates according to Okun's law, potential GDP equals $10 trillion, the actual rate of unemployment is 8 percent, and the natural unemployment rate is 4 percent. What is the real GDP in Macroland?
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- The natural unemployment rate is 5 percent and potential GDP is $10 trillion. If the unemployment rate is 9 percent, what is real GDP? Real GDP is _______. A. $10.8 trillion B. $9.2 trillion C. $9.6 trillion D. $10.4 trillionAssume a hypothetical economy that produces only one good – Peanut Butter. In year 1, the quantity produced is 4 packs and the price is Rs.400 per pack. In year 2, the quantity produced is 5 packs and the price is Rs.500 per pack. In year 3, the quantity produced is 6 packs and the price is Rs.600 per pack. Year 1 is the base year. What is the percentage growth rate of real GDP from year 2 to year 3? What is the inflation rate as measured by the GDP deflator from year 2 to year 3? In this one-good economy, how might you have answered parts (d) and (e) without first answering parts (b) and (c)?Macropoland, a country that is a natural gas and oil importer, has a natural rate of unemployment (at the full employment level of GDP) that is about 4.5%, and the long run average rate of inflation over time has been about 2%. However, during the period 1973-1974, the country experienced an inflation rate of about 15% while simultaneously experiencing unemployment of nearly 13%.At the present time, Macropoland is experiencing very sluggish consumption and investment (a result of a fall in the housing market), and unemployment has again edged up to around 9%. Inflation is very low at 0.4%.Macropoland has just hired you as their economic advisor. You have a big job ahead of you. Using your knowledge of aggregate demand and aggregate supply, can you explain what happened in these two time periods?Develop a response that includes examples and evidence to support your ideas, and which clearly communicates the required message to your audience. Organize your response in a clear and logical…
- The version of Okun's law discussed in class implies that with no change in unemployment, real GDP growth is 3 percent. If the unemployment rate rose by 2 percentage points, Okun's law predicts that real GDP would: a. decreased by 4 percent b. decrease by 2 percent c. increase by 1 percent d. decrease by 1 percentSuppose that output is produced according to the production function Y =Kα[(1 - u)L]1-α, where K is capital, L is the labor force, and u is the natural rate of unemployment. The national saving rate is s, the labor force grows at rate n, and capital depreciates at rate d. Express output per worker (y = Y/L) as a function of capital per worker (k = K/L) and the natural rate of unemployment (u). Write an equation that describes the steady state of this economy. Find the steady state capital per worker and steady state output per worker. Does this production function have constant returns to scale? Explain.The rate of output and planned expenditures for the economy of Timbuktu are shown in the following table: Total Output Planned Aggregate Expenditures (Two-Sector Economy)(Real GDP in billion dollars) (in billions) 5,000 5,250 5,500 5,500 6,000 5,750 6,500 6,000 7,000…
- Suppose you work for a multinational corporation that is considering starting a new subsidiary overseas. You are in charge of preparing a report about your recommendations regarding the potential new destination country. Your team has provided you with following macroeconomic data about this country. - GDP (nominal & real). - GNP (total & per-capita). - Economic growth rate. - Private consumption spending. - Government expenditures. - Unemployment rate and the dominant type of unemployment. - Inflation rate and the source of inflation. - Interest rates. - Foreign exchange rate. Show how each of the above macroeconomic data can help you in drawing a profile for this country. Moreover, are there any other additional information you need to know? You may select a hypothetical country to elaborate on your answerThe rate of output and planned expenditures for the economy of timbuktu are shown in the following table: Total Output(Real GDP in Billion dollars) Planned Aggregate Expenditures (Two-sector Economy) (in billions) 5,000 5,250 5,500 5,500 6,000 5,750 6,500 6,000 7,000 6,250 a. If the economy's full employment rate of output is 6.0 trillion, what will happen to the unemployment rate assuming that it will persist into future? b. What would happen to the equilibrium level of output/income if there will be an autonomous increase in investment of 250 billion?Which of the following are true of an economy operating with a negative GDP gap? Check all that apply. a)A worker with a college degree is more likely to be unemployed than a worker without one. b)The suicide rate, crime, and political unrest may be higher than in an economy with a similar potential GDP and a lower unemployment rate. c)Actual real GDP is less than potential real GDP. d)A teenage worker is more likely to be unemployed than an older worker.
- Suppose that the productivity of labor fell and that real wages were fixed (at least in short-run). Predict what would happen to equilibrium real wage, the equilibrium quantity of labor, and unemployment rate (relative to the natural rate).Many economists think that long-run economic growth is important for the welfare of a nation. Classify the statements below regarding long-run economic growth as true or false. No explanation is needed just whether or not is is true or false - An economy that has experienced long-run economic growth has avoided painful recessions - There has been more long-run economic growth in the last 100 years than occurred between the years 1000 and 1700 - Long-run economic growth is often a direct result of expansionary monetary policy - A nation with a shrinking population cannot experience long-run economic growth - Long-run economic growth can be measured with per capita GDP - Long-run economic growth is often a result of increases in productivitySuppose that the productivity of labor increased. Predict what would happen to the equilibrium real wage and the equilibrium quantity of labor. What happens to unemployment (relative to the natural rate)? Suppose that the productivity of labor fell and that real wages were fixed (at least in short-run). Predict what would happen to equilibrium real wage, the equilibrium quantity of labor, and unemployment rate (relative to the natural rate).
