EBK MACROECONOMICS
10th Edition
ISBN: 9780134896571
Author: CROUSHORE
Publisher: VST
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Chapter 8, Problem 3WWMD
To determine
To evaluate the stock market to be a good economic
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According to the Bureau of Economic Analysis, the GDP Deflator for the 3rd Quarter 2021 is +5.7%. The U.S. Bureau of Labor Statistics reported the Consumer Price Index (CPI) as rising 5.4 percent over the last 12 months, not seasonally adjusted. Given this information:
1) Interpret these data and summarize its meaning.
2) What are these data measuring?
3) If you were a business economist, which would you use and why?
Suppose you are reading a magazine showing a figure that plots the U.S. GDP from 1900 to 2012
in "2005 chained dollars" . It means:
a) The GDP is calculated using 2005 prices;
b) The GDP is calculated applying the variable-weighted price-index approach with 2005 as the base
9.
year;
c) The GDP is price-adjusted based on the chain-weighted price-index approach with 2005 as the base
year.
d) None of the above.
Construct the following graphs for the US economy using
the data from FRED, BEA, and BLS websites. Select the
period from 1945 (subject to data availability) until the
most recent year available. You have
to create each graph three different times by utilizing the
data from the three different websites. Be sure
to indicate the source of data for each graph.
Nominal GDP and real GDP levels on the same graph (two
curves on the same graph)
Real GDP growth rate Unemployment rate
Price Index (CPI or GDP deflator) Inflation rate
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- Using the data in the table, compare the percentage rates of change in nominal GDP, real GDP, and the GDP Price Index over these three time periods. Note changes in the magnitudes of each. Are there periods when prices grew more rapidly? Are there periods where real output grew more rapidly? Note how these affect the percentage change in nominal GDP. Make specific observations based on the information in the table.arrow_forwardQuestion 5: Suppose you recently received the GDP numbers for the last quarter. When you calculated the change from the previous quarter, you observed the following: observed the following changes: Y ——> +1.5% C ——> +0.1% I ——> +3% G ——> +0.2% NX ——> unchanged How would you interpret each value in context with the whole of GDP? Is there anything in the data that is predictive (potentially) of future conditions? Question 6: You have a business that manufactures circuit boards for mobile phones. Suppose you received the GDP numbers for the quarter after those in problem 5: Y ——> +0.3% C ——> -2% I ——> +2.5% G ——> +0.2% NX ——> unchanged a. Using the data from both quarters (prob 5 and prob above), what do you expect is happening in the economy and what might this mean for your business? Explain why you came to this conclusion. b. What does this portend for the future of the economy (if anything) and how might you position your business given your…arrow_forwardAt the end of the year 2020, Statistics Kenya estimated the total amount spent on consumption, government purchases, investment and net export of goods and services to arrive at the country’s GDP. What measurement approach is described above?arrow_forward
- Question 5: Suppose you recently received the GDP numbers for the last quarter. When you calculated the change from the previous quarter, you observed the following: observed the following changes: Y ——> +1.5% C ——> +0.1% I ——> +3% G ——> +0.2% NX ——> unchanged How would you interpret each value in context with the whole of GDP? Is there anything in the data that is predictive (potentially) of future conditions?arrow_forwardStatistics Denmark monitors the development of economic variables and measures e.g. productivity development.In general, it is one of the laws of economics that employee productivity determines the ability of employers to pay employees wages. The higher the productivity (per capita output), the higher the wages that can be paid. In a recession, such as Covid, companies are generally reducing their use of labor. The latest statistics show the following: In the third quarter of 2020, labor productivity growth in Denmark was 2%. This increase alone does not say much, but is considered to be able to reflect an increase in productivity following a contraction in labor input. a. Show the relationship between production and labor use in the short term and at the same time explain with a picture what can cause the growth of productivity. b. What is happening to marginal production at the same time? c. Show how wages develop if companies keep marginal costs fixed in the above circumstances…arrow_forwardThe business cycle is the economist's metric for describing the current state of the economy. How would you describe the U.S. economy's current position in the business cycle? Please use some data to back up your opinion (Hint: See recent newspaper or magazine for latest summary of economic conditions).arrow_forward
- QUESTION 1 Below is a hypothetical table such as would be generated by the Bureau of Labor Statistics when reporting historical and forecasted levels of gross domestic product for the United States. Use the answer table to fill in the blanks for the missing estimates. Make sure you show your work. 1998 Gross Domestic Product Answer (Remember to show work): 2028 Personal Consumption Expenditures Answer (Remember to show work): 2008 Gross Private Domestic Investment Answer (Remember to show work): 2018 Exports Answer (Remember to show work):arrow_forwardMariam and Ahmed are discussing current economic data printed in the Times of Oman newspaper. Mariam is quite happy about the fact that Oman nominal GDP has increased at a steady rate for the last two years and asserts that this is very good news, since it means they are better off than a few years ago. Ahmed warns Mariam about his conclusions and suggests that he has observed a steady increase in many prices during the same period, which might undermine Mariam's conclusion. Based on this information: 6. Who do you think is right? Explain why. b. Is it possible that Mariam and Ahmed could be worse off than two years ago? а.arrow_forwardHow many recessions has France undergone over the years plotted in the chart? What are the two biggest recessions in terms of length and magnitude? Answer the questions from the figure given.arrow_forward
- The following table shows data on a hypothetical country's real GDP from 1980 through 1988: Real GDP Year (Billions of Dollars) 1980 372 1981 380 1982 384 404 400 388 392 400 404 Use the blue points (circle symbol) to plot the real GDP in each of the years listed. (Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.) Next, place the black point (plus symbol) on the graph to indicate the point on the real GDP curve that definitely represents a peak. Finally, place the grey point (star symbol) on the graph to indicate the point on the real GDP curve that definitely represents a trough. REAL GDP (Billions of cordis 1983 1984 1985 1986 1987 1988 ROWTH RATE (Percent 440 432 424 410 408 400 382 304 378 388 360 -1 -3 -4 Growth trend 5 1980 1981 1982 1983 1984 1081 Once you've calculated the percentage change for each of the years, use the orange points (square symbol) to plot your results on the following graph,…arrow_forwardConsider an economy producing the following products: bread and cars. Use the information provided in the following table to answer the question below: Product Quantity Base Year Price (2012) Price (2019) Price (2020) Bread 1000 $20.00 $22 $24 Cars 2000 $8.00 $10 $12 Refer to the table above to answer the questions below: a) Compute the consumer Price Index for years 2019 and 2020 using 2012 as the base year and the consumption basket that consist of 1000 bread and 2000 cars. You will need to round your answer to the nearest whole number. b) Compute the Inflation rate for 2020arrow_forwardYou are employed by the state bureau of economic development. There is a demand for a leading economic index to review past economic activity and to forecast future economic trends in the state. You decide that several key factors should be included in the index: number of new businesses started during the year, number of business failures, state income tax receipts, college enrollment, and the state sales tax receipts. Here are the data for 2000 and 2018. New businesses Business failures State income tax receipts ($ millions) College student enrollment State sales tax ($ millions) Click here for the Excel Data File Leading economic indicator The weights you assign are: new businesses 17%, business failures 10%, income tax 34%, enrollment 14% and sales tax 25%. b. Compute the leading economic indicator for 2018. (Round your answer to 2 decimal places.) 2000 1,125 592 196.2 242,159 46.1 Economic activity has 2018 1,059 286 178.8 291,079 66.7 c. Interpret the indexes. (Round your answer…arrow_forward
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