Practice Problems 1 401
Practice Problems: Chapter 2, Chapter 3, and Chapter 4
Chapter 2:
1). Consider an economy that produces only hot dogs and hamburgers. In the following table are data for two different years.
2010
2015
Good
Quantity Price
Quantity Price
Hot Dogs
200
$2
250
$4
Hamburgers
200
$3
500
$4
a) Using 2010 as a base year, compute the following statistics for each year: nominal GDP, real GDP, and GDP deflator. Please show your work to get full credit.
b) By what percentage did prices rise between 2010 and 2015? Please use GDP deflator measure to calculate this and explain your answer in plain words as well. Show your work.
2). Consider whether each of the following events are likely to increase, or decrease real GDP. In each case, do you think the well-being of each of the average person in society is most likely changes in the same direction as real GDP? Why or why not? Please write at least 3 and at most 5 sentences to get full credit. Writing more or less that advised will result in partial credit. Make sure you answer the question completely.
a) A hurricane in Florida forces Disney World to shut down for a month.
b) The discovery of a new, easy-to-grow strain of wheat increases farm harvests.
c) Increased hostility between unions and management sparks a rash of strikes.
d) Firms throughout the economy experience falling demand, causing them to lay off workers.
e) Congress passes new environmental laws that prohibit firms from using production methods that emit large quantities of pollution.
f) More high school students drop out of school to take jobs mowing lawns.
g) Fathers around the country reduce their work weeks to spend more time with their children.
Chapter 3:
1). Suppose the production function in medieval England is Y=K0.5L0.5 (Assume A=1), where K is the amount of land (aka your medieval capital) and L is the amount of labor. The economy
Chapter 2:
1). Consider an economy that produces only hot dogs and hamburgers. In the following table are data for two different years.
2010
2015
Good
Quantity Price
Quantity Price
Hot Dogs
200
$2
250
$4
Hamburgers
200
$3
500
$4
a) Using 2010 as a base year, compute the following statistics for each year: nominal GDP, real GDP, and GDP deflator. Please show your work to get full credit.
b) By what percentage did prices rise between 2010 and 2015? Please use GDP deflator measure to calculate this and explain your answer in plain words as well. Show your work.
2). Consider whether each of the following events are likely to increase, or decrease real GDP. In each case, do you think the well-being of each of the average person in society is most likely changes in the same direction as real GDP? Why or why not? Please write at least 3 and at most 5 sentences to get full credit. Writing more or less that advised will result in partial credit. Make sure you answer the question completely.
a) A hurricane in Florida forces Disney World to shut down for a month.
b) The discovery of a new, easy-to-grow strain of wheat increases farm harvests.
c) Increased hostility between unions and management sparks a rash of strikes.
d) Firms throughout the economy experience falling demand, causing them to lay off workers.
e) Congress passes new environmental laws that prohibit firms from using production methods that emit large quantities of pollution.
f) More high school students drop out of school to take jobs mowing lawns.
g) Fathers around the country reduce their work weeks to spend more time with their children.
Chapter 3:
1). Suppose the production function in medieval England is Y=K0.5L0.5 (Assume A=1), where K is the amount of land (aka your medieval capital) and L is the amount of labor. The economy