EBK PRINCIPLES OF MACROECONOMICS
12th Edition
ISBN: 8220101472298
Author: Oster
Publisher: PEARSON
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Chapter 1.A, Problem 2P
To determine
Relationship between income and consumption.
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Consider an economy that produces and consumes bread and automobiles. In the following table are data for two different years.
Year
2000
2010
Price of an automobile
$40,000
$50,000
Price of a loaf bread
$20
$30
Number of auto-mobiles produced
100 cars
120 cars
Number of loaves of bread produced
600,000 loaves
500,000 loaves
Using the year 2000, compute the following statistics for each year: nominal GDP, real GDP, the implicit price deflator for GDP, and a fixed-weight price index such as CPI.
How much have prices risen between year 2000 and year 2010? Compare answers given by Laspeyres and Passche price indices.
Suppose you are a senior public servant writing a bill to index Social Security and pensions. That is your bill will adjust these benefits to offset changes in the cost of living. Will you use the GDP deflator or the CPI? Explain
emphasis on questions 2 and 3 .
Calculate the four components of expenditure and GDP for the following economy using data from the table below.Instructions: Enter your responses as whole numbers.
GDP
Consumption expenditures
$600
Exports
$75
Government purchases of goods and services
$200
Construction of new homes and apartments
$200
Sales of existing homes and apartments
$200
Imports
$50
Beginning-of-year inventory stocks
$100
End-of-year inventory stocks
$125
Business fixed investment
$100
Government payments to retirees
$100
Household purchases of durable goods
$150
Consumption expenditures: $
Investment expenditures: $
Government Purchases: $Net Exports: $GDP: $
From 2007 to 2009, calculate the percentage change in
(Enter your responses as a percentage rounded to one decimal place. If you are entering any negative numbers be sure to include a negative sign (−) in front of those numbers.)
a. real consumption.
__%
b. real investment.
__ %
c. real government spending.
__ %
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