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Economics 101 Assignment #1 Name______
1. Assume that there are only four goods produced. The following represent the prices and quantities sold in the base year (1996) and the current year (2004):
Price00 Quantity00 Price04 Quantity04
Pizza $5 10 $10 20
Cola 10 20 30 30
T - Shirts 5 5 10 15
Bus. Equipment 30 10 40 20
What was the Nominal Gross Domestic Product (GDP) in 2000? Show calculations.
What was the Nominal Gross Domestic Product (GDP) in 2004? Show calculations.
What was the Real Gross Domestic Product (Real GDP) in 2004? Show calculations.
2. In the calculation above, by what percent did the Real GDP rise between 2000 and 2004?
3. Assume that Real GDP Per Capita is $10,000 in 2000. If it grows at 2% per year, what will the Real GDP per capita be in 2072? If it grows at 3% per year, what will the Real GDP Per Capita be in 2072? Notice how much of a difference a small change in the rate of growth can make.
4. Click on Nominal GDP and Real GDP on my Web Site
1. What is the Gross Domestic Product for the most recent quarter? What does this number tell you?
2. What was the Real GDP in the most recent year?
3. In what years did Real GDP decline from the previous year (this is the
definition of a “recession”)?
5. This time, click on The Economic Report of the President
1. What was the American population in the most recent year? Therefore, what was the Real GDP per capita in the most recent year (you need to calculate this)?
6. President Bill Clinton took office in 1993. As noted in the text, he was elected largely to solve the problem of the slow growth of productivity and the resulting slow growth of income. “Surf” the Economic Report of the President online --- the above site --- (or find other sources) and answer the following: Was the problem significantly reduced while Bill Clinton was President (1993 to 2000)? Back up your answer with data on productivity growth from 1993 to 2000, on income growth from 1993 to 2000, on the percent of Americans officially in poverty from 1993 to 2000, and any other data you can find that would help answer the question.
Economics 101 Assignment #2
Follow the path:
Click on Unemployment Rate on my Web Site
Most Requested Series
Labor Force Statistics from the Current Population Survey
On the Form:
Click on all that are necessary to answer the questions below
Click on the most recent year
Click Retrieve Data (Click Continue if asked)
1. What is the most recent month? What is the overall unemployment rate in the most recent month?
2. What is the total civilian labor force? What is the total number of people unemployed?
3. How many of the unemployed have been unemployed 27 weeks or longer? What percent is this of the total number of unemployed people?
4. Pick a month in 2001, a month in 1999, and a month in 1997. Calculate the percent of unemployed that have been unemployed 27 weeks or longer as you did in Question 3. What has been happening to this percent in recent years?
5. What is the current unemployment rate for males age 20 and over? for females age 20 and over?
6. What is the current unemployment rate for whites overall? for blacks overall? for Hispanics overall?
7. What is the current unemployment rate for people age 16 to 19?
Go Back to Most Requested Series
Local Area Unemployment Statistics
California
A form appears. Click the box for CA Unemployment Rate and the box for
San Diego, CA MSA Unemployment Rate
Move down the form. Click on the most recent year.
Click on the Retrieve Button (Click on CONTINUE if you get a warning message)
8. What is the most recent month available in each case? What was the California unemployment rate for this month? What was the San Diego unemployment rate for this month?
Economics 101 Assignment #3
Follow the path: Consumer Price Index on my Web Site
Most Requested Series
Consumer Price Index --- All Urban Consumers
Fill-out the Form:
Click on U.S. All Items, 1982 - 1984 = 100
Move Down and Click on All Years in the Box
Click the Retrieve Data Button
1. What is the most recent month? What is the CPI in this month?
2. Considering the January figure alone, a market basket that cost $9.80 in 1913 would cost how much in the most recent month?
3. What was the last year that prices fell from January to January?
What was the last time that prices fell for two + consecutive years from January to January?
4. By approximately what percent did prices rise from January, 1970 to January, 1980?
(You need to calculate this.)
5. How many years did it take for prices to triple from their January, 1913 value?
How many years did it take for prices to triple from their January, 1970 value?
6. In June, 1965, I started working at an accounting firm for $7,200 per year. I was straight out of college and had no significant work experience. Assume that you begin your work career in the most recent month noted. What starting salary do you need to have now to have the same purchasing power as I had in June, 1965?
7. Follow the path: Economic Report of the President on my Web Site
Statistical Tables in Spreadsheet Format
2003
Tables B-3 and B-60
What was the GDP Deflator (called the Implicit Price Deflator) for 2002? ______
By what percent did the GDP Deflator rise in 2002? ______
What was the CPI for 2002? ______
By what percent did the CPI rise in 2002? ______
How do you account for the differences in the Index and in the rise in prices between these two measures of inflation?
Economics 101 Assignment #4
This chapter has considered factors that affect the demand for homes. Consider the demand for homes in California. Go to the California Statistical Abstract site on my Links to the Internet on my web site
If you have trouble with this address, go to the department of Finance of the State of California http://www.dof.ca.gov and navigate to the Statistical Abstract and then to the Tables.
In each of the following cases, describe what the data say has been happening over time. Then, explain how these changes would affect the demand for homes in California.
1. The population of California (Table B1)
2. The per capita income of California (You can get the income data in Table D4. You
then have to divide by the population from question 1 to have the per capita income.)
3. The prices of homes in California (Table I11) The table gives only the prices of
existing homes. But the prices of new homes have been changing in the same
direction.
4. Rents on Apartments (Table I2)
5. Mortgage Interest Rates. (Interest rates in California are basically the same as in the rest of the country. For this, you need to go to the following site:
http://www.census.gov/statab/freq/98s0827.txt Or you will find mortgage rates in any
newspaper.
6. Then, write a brief conclusion. What has been happening to the demand for homes
in California (see Table I3)? Based on your answers above, why might this have
been happening?
Economics 101 Assignment #5
Most people who buy a home pay for it by borrowing money from a bank, savings and loan, or other such institution. Such a loan is called a mortgage. At present, the interest on a mortgage is deductible for tax purposes.
To illustrate how this works, assume that a person is in a tax rate of 28% and has a mortgage of $200,000 at 6% interest with 25 years left to be paid. The annual interest payment is $12,000
(6% of $200,000). Of this, the taxes are reduced by $3,360 (28% of $12,000). Thus, the actual cost to the borrower is not $12,000, but $8,640 ($12,000 - $3,360).
President Bush has proposed that the tax rate be reduced. Let us suppose that the tax rate is reduced to 20%, down from the 28%. First, recalculate how much the actual cost to the borrower would now be. Then, show what will occur in the market to borrow money. Finally, show what will occur in the market for homes (homes and borrowing money are complements). In each case, explain what will happen to the equilibrium price (or interest rate) and to the equilibrium quantity.
Interest Rate
Supply
Demand
______
0 Quantity of Money to Borrow (Lend)
Price of Homes
Supply of Homes
Demand for Homes
______
0 Quantity of Homes
State whether you would favor or oppose this proposal is you were a (1) homeowner;
(2) owner of a bank; (3) prospective homebuyer who does not now own a home;
(4) renter who intends to continue renting an apartment; (5) someone who intends to borrow from a bank to buy a new car. WHY?
Economics 101 Assignment #6
The cases discussed in class have analyzed the effects on foreign exchange markets of an increase in interest rates in the United States and of an increase in inflation in the United States. Do the same analysis for each of the following cases. Show using the demand and supply graph for foreign exchange.
1. Incomes rise in the United States and fall in Japan
2. Both Americans and Japanese believe that American goods are of higher quality than before
3. Both Americans and Japanese believe that the Japanese yen will depreciate in the near future
4. Laws change in Japan making it easier for Americans to buy or build companies in Japan
5. Interest rates fall in the United States while they rise in Japan
6. Go to the site of the Federal Reserve Bank of New York.
http://www.ny.frb.org/pihome/statistics/forex12.shtml
From this site, what is the most recent exchange rate for each of the following foreign monies?
The Canadian Dollar
The European Monetary Union Euro
The Korean Won
The Mexican Peso
The British Pound
7. A six pack of Labatts Beer sold in Windsor Ontario Canada for $6.60 Canadian. The same six pack of Labatts Beer sold in Detroit Michigan (directly across the river) for $3.50 American. Using the exchange rate you found in question 1, is the six pack cheaper in Windsor or in Detroit?
8. Analysis Case:
In 1998, two factors happened regarding Russia. First, prices in Russia were rising at a very rapid rate (hyperinflation) while prices in the United States were hardly rising at all. Second, for a variety of reasons, those who had made portfolio investments in Russia decided to take their money elsewhere. This means that they demanded that the loans they had made in Russia be paid off. When the loans were repaid, the money was not loaned to people in a different country. On the graph below, show the demand for and the supply of Rubles as of 1997. Then, show the results of these two events in 1998. Make the appropriate shifts in either demand or in supply or in both. State what would happen to the Russian Ruble. Finally, state what would happen to the Russian economy as a result of this change in the exchange rate.
.$/Ruble
Supply1
P1 E1
Demand1
______
0 Quantity of Rupiahs
Economics 101 Assignment #7
Form into groups of two to three people, if you can.
Pick out the stock of a particular company (any company). Find the value of the stock of that company in the most recent week. You will find this information either in a newspaper or on the Internet. Then, find the value of that stock one year ago (or as close to that date as you can).
Value Now $______
Value Then $______
You will need to do some research as to what has been happening concerning this company. You know that the price is affected by the demand for and the supply of that stock. Demanded are those who wish to buy the stock. Suppliers are those who own the stock and are considering selling. There are six possible determinants of the demand and four possible determinants of the supply. Based on your research, explain what might be responsible for the change in the price you have discovered. Show your reasoning on the graph below.
Price of the Stock
Supply
P1
Demand
0 Quantity of the Stock
Economics 101 Assignment #8
In Mexico in 1982, prices were rising very rapidly. On the graph, show aggregate demand, short-run aggregate supply, and the equilibrium Real GDP and GDP Deflator. Show your graph with a large inflationary gap.
GDP Deflator
0 Real GDP
a. The government of Mexico responded to the problem with a program. First, it significantly reduced government spending. Second, it raised taxes. And third, it decreased the money supply. Show the result of these three changes on the graph above. Since all three of these changes have the same effect, you may show them as only one change. As a result of these policies, what happened to Real GDP in Mexico? What happened to the GDP Deflator?
b. Another part of the government’s program was to create a large depreciation of the
Mexican peso. On the graph below, draw the original situation again. Then, draw the changes caused by the depreciation of the peso. There will be both a change in aggregate demand and also a change in aggregate supply. Draw both. Assume, as actually was the case, that the shift in short-run aggregate supply was the larger shift. As a result of this depreciation of the peso, what happened to Real GDP in Mexico? What happened to the GDP Deflator?
GDP Deflator