Question

PART 1Introduction c. A homemaker enters the workforce, taking a job year (a few years ago), the production and price da ta that will pay $40,000 over the year. The home were as follows: maker must pay $16,000 over the year for profes- Quantity 3000 bags 6000 bunches 8000 bags Fruit Price sional child care services Apples Bananas ag d. A Japanese company builds an auto plant in Tennessee for $100,000,000, using only local labor and materials. (Hint: The auto plant is a capital good produced by Americans and purchased by $3 per bunch $4 per bag In the current year the production and price data are as follows: the Japanese.) e. You are informed that you have won $3,000,000 in the New Jersey State Lottery, to be paid to you, in Quantity 4000 bags 14,000 bunches 32,000 bags Price total, immediately f. The New Jersey state government pays you an Oranges $3 per bag $2 per bunch $5 per bag additional $5000 fee to appear in a TV commercial publicizing the state lottery a. Find nominal GDP in the current year and in the base year. What is the percentage increase since g. Hertz Rent-a-Car replaces its rental fleet by buy ing $100,000,000 worth of new cars from General Motors. It sells its old fleet to a consortium of used-car dealers for $40,000,000. The consortium resells the used cars to the public for a total of base year? b. Find real GDP in the current year and in the base year. By what percentage does real GDP increase from the base year to the current year? $60,000,000 Find the GDP deflator for the current year and the base year. By what percentage does the price level 5. You are given the following information about an change from the base year to the current year? d. Would you say that the percentage increase in Gross private domestic investment 40 Government purchases of goods and services Gross national product (GNP) 200 Current account balance-20 30 nominal GDP in this economy since the base year is due more to increases in prices or incre the physical volume of output? For the consumer price index values shown, calculate the rate of inflation in each year from 1930 to 198 What is unusual about this period, relative to recent experience? 60 Government transfer payments to the domes pri ate sector 25 Interest payments from the government to the domesti Year 1929 1930 1931 1932 1933 CPI 51.3 50.0 45.6 40.9 388 private sector 15 (Assume all interest payments by the government go to domestic households.) Factor income received from rest of world7 Factor payments made to rest of world9 Find the following, assuming that government invest 8. Hy Marks buys a one-year government January 1, 2015, for $500. He receives principal plus interest totaling $545 on January 1, 2016. Suppose that the CPI is 200 on January 1, 2015, and 214 on January 2016. This increase in prices is more than Hy anticipated; his guess was that the CPI would be 210a the beginning of 2016. Find the nominal interest ra the inflation rate, the real interest rate, Hy's expec inflation rate, and Hy's expected real interest rate zero had b. Net exports c. GDP d. Net factor payments from abroad e. Private saving ted 9. The GDP deflator in Econoland is 200 on January 2014. The deflator rises to 242 by January 1, 2016, a to 266.2 by January 1, 2017. Government saving National saving g. of fruit: apples, oranges, and bananas. In the base 6. Consider an economy that produces only three types a. What is the annual rate of inflation ver nd wo-year period between January 1, 2014

PLEASE HELP WITH QUESTION 6,7,8 THANK YOU!

Answer 1

SOLUTION: 6)

A) Solution: Nominal GDP in the base year = $56 000; Nominal GDP in the current year = $200,000; Nominal GDP grew 257%.

Working:

Base-year quantities at current-year price:

	Quantity	Current Year Price	Total	Quantity	Base Year Price	Total
Apples	3000	3	9000	3000	2	6,000
Bananas	6000	2	12000	6000	3	18,000
Oranges	8000	5	40000	8000	4	32,000
			61000			56,000

Current-year quantities at current-year prices: at base-year prices

	Quantity	Current Year Price	Total	Quantity	Base Year Price	Total
Apples	4000	3	12,000	4000	2	8,000
Bananas	14000	2	28,000	14000	3	42,000
Oranges	32000	5	160,000	32000	4	128,000
						178,000

Nominal GDP: [($200 000 /$56 000) -1] * 100% = 257%

　

B) Solution: Real GDP in the base year = $56,000; Real GDP in the current year = $178,000. Nominal GDP grew 218%.

Working: [($178 000 / $56 000) - 1]* 100

C) Solution: GDP deflator for the current year = 1; GDP deflator for the base year = 1.124; Price level change % = 12.4%

Working: In the base year GDP equals real GDP, thus GDP deflator is 1.

In the current year, GDP deflator = $200 000 / $178 000 = 1.124.

Price level change = [(1.124 / 1) - 1] * 100% = 12.4%

D) Solution: Nominal GDP increased 257%, prices increases 12.4%, and real GDP increased 218%, thus majority of hike is in nominal GDP due to the increase in real output, not prices.