Problem Set 1

Problem Set 1
1. (Star Wars) Real GDP = 461.0(214.5/60.6) = 1,631.76
(E.T.) Real GDP = 399.9(214.5/96.5) = 888.90
(Titanic) Real GDP = 600.8(214.5/160.5) = 802.94
(Shrek 2) Real GDP = 437.2(214.5/188.9) = 496.45
(Avatar) Real GDP = 760.5(214.5/214.5) = 760.5

Real GDP in Order of Largest to Smallest
Movies
Nominal
Box Office Receipts (millions)
CPI in Year Released
Real Box Office Receipts (millions)
Star Wars (1977)
461.0
60.6
1,631.76
E.T. The Extra-Terrestrial (1982)
399.9
96.5
888.90
Titanic (1997)
600.8
160.5
802.94
Avatar (2009)
760.5
214.5
760.50
Shrek 2 (2004)
437.2
188.9
496.45

2. Classify each of the following as employed, unemployed, or not in the labor force.

a. Juanita has two part-time jobs but hopes to get one full-time job instead.
EMPLOYED
b. Bob teaches 1 class at the University at night and volunteers 20 hours a week at the hospital.
EMPLOYED
c. Jaime babysits her younger sister while her mother works.
NOT IN THE LABOR FORCE
d. Emma is retired. She volunteers at the library 10 hours each week.
NOT IN THE LABOR FORCE
e. Alex is 15 years old and hopes to find a part-time job soon but has not applied anywhere.
NOT IN THE LABOR FORCE
f. Rolando is not working but he has submitted an application to work at the local grocery store and is available to start work immediately.
UNEMPLOYED

3. Use the following data to calculate (a) the labor force participation rate, (b) the unemployment rate, and (c) the employment/population ratio.
a. .53% is the labor force participation rate
b. .15% is the unemployment rate
c. .45% is the employment/population ratio

Population age 16 and over
15,000
Labor force
7,900
Not currently working
4,500
Employed Full-time
5,600
Employed Part-time
1,100
Unemployed
1,200

4. Consider an economy with the following aggregate demand (AD) and short-run aggregate supply (SRAS) schedules. Decision-makers have previously made decisions anticipating that the price level during the current period will be P105.

a. Indicate the quantity of GDP that will be produced during the period.
5,400 is the quantity of GDP that will produce during this period.
b. Is it a long-run equilibrium level of GDP? Why or why not?
Yes, it is a long-run equilibrium because the expected price level equals the actual price level of 105. What the schedule tells us is how much demanders demand and how much supplier supply when the EXPECT price level to be 105. So we know that expected price is 105.
c. How will the unemployment rate during the current period compare with the natural rate of unemployment?
The natural rate of unemployment is equal to the unemployment rate at the long-run equilibrium, which is what we are at.The unemployment rate here is at the natural rate of unemployment.
d. Will the current rate of GDP be sustainable into the future? Why or why not?
At long run equilibrium, we (as an economy) are using all of our resources to produce things which means we are at full employment. So the GDP is definitely sustainable into the future.

AD
105
Price Level
SRAS 105
6300
90
4500
6000
95
4800
5700
100
5100
5400
105
5400
5100
110
5700
4800
115
6000