These are Macroeconomic questions a. Farmers in Country A grow $150 worth peanuts which are sold to cooking oil manufacturer as input. Peanut oil are sold to households for $320. Farmers in Country B grow vegetables valued at $130 which are sold to their cooking oil business, with the latter’s output amount to $280. Half of these vegetable oil go to households and the rest go the restaurants. The restaurants have receipts of $500. Find the GDP of Country A and B using the value of final good approach and the expenditure approach. Explain the details of your calculation. b. With a change in the taste of customers, restaurants in Country B now decided to import $40 peanut oil from Country A, using only $100 locally produced vegetable oil. Income of Country B restaurants remain unchanged, and Country B households buy the same amount of vegetable oil. Find the GDP of both countries using the value of final good approach and the expenditure approach. Explain the details of your calculation. c. The government economist estimated the Okun’s Law for Economy A: Okun’s Law: where is unemployment rate in percentage point and is real GDP growth in percentage point. Because of the social distancing measures, the economist initially believed that there would be a 2% increase in unemployment. What would be the resulting growth in real output based on this estimation?

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter5: An Introduction To Macroeconomics

Section: Chapter Questions

Problem 3TY

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These are Macroeconomic questions a. Farmers in Country A grow $150 worth peanuts which are sold to cooking oil manufacturer as input. Peanut oil are sold to households for $320. Farmers in Country B grow vegetables valued at $130 which are sold to their cooking oil business, with the latter’s output amount to $280. Half of these vegetable oil go to households and the rest go the restaurants. The restaurants have receipts of $500. Find the GDP of Country A and B using the value of final good approach and the expenditure approach. Explain the details of your calculation. b. With a change in the taste of customers, restaurants in Country B now decided to import $40 peanut oil from Country A, using only $100 locally produced vegetable oil. Income of Country B restaurants remain unchanged, and Country B households buy the same amount of vegetable oil. Find the GDP of both countries using the value of final good approach and the expenditure approach. Explain the details of your calculation. c. The government economist estimated the Okun’s Law for Economy A: Okun’s Law: where is unemployment rate in percentage point and is real GDP growth in percentage point. Because of the social distancing measures, the economist initially believed that there would be a 2% increase in unemployment. What would be the resulting growth in real output based on this estimation? d. To avoid the negative results of c, the government decided to introduce a fiscal package by helping the employers to pay their workers’ salaries as long as they did not fire their employees. Assuming the policy is effective, what would the estimated effect of this policy on real economic growth? If the actual turnout is that grew by (+)2% instead and there is no change in the Okun coefficient, what has happened to the Okun’s relationship [Hint: Think geometrically]?

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