Microeconomics

Oluwatobi Onibatedo
Eco 301
08/24.2013
WEEK 1 HOMEWORK
Problem 1

1.a. Suppose the real GDP is currently $97 billion per year and natural real GDP is currently $100 billion. Measured as a percentage, what is the real GDP gap?

Solutions
Actual real GDP- Natural Real GDP =GDP gap over 100
= $97- $100= -3/100 = -3%
GDP GAP is -3%
The negative answer means the economy as a whole is in a recession.

1(b) Suppose natural real GDP is growing by $4 billion per year. By how much must real GDP have risen after two years to close the real GDP gap?

Real GDP is $4billion Per Year
In 2 years = 4b * 2 = $8billion
The real GDP must have risen in two years by 8 billion to close the gap Y- ($100+8) =
(97+8)-108=
-2.5/108= -2.3%

Problem 2: Assume that gross private domestic investment is $800 billion and the government is currently running a $400 billion deficit. If households and businesses are saving $1,000 billion, what is the value of net exports? Use equation 2.6 to explain answer.

T – G = (I + NX) – S.

100-800- 400= -200. In conclusion the value of net exports is – 200.

Problem 5: if nominal GDP is $10,608 and real GDP is $10,400, what is the value of the GDP deflator?

Solution

GDP Deflator is Nominal GDP Over Real GDP. You divide
$10,608/$10,400
Answer = 1.02

Problem 10 :
In 2009,civilian employment was 139,877,000 and unemployment was
14,265,000. What was the unemployment rate?

Solution

14,265,000 / (139,877,000+14,265,000) x 100 = 9.1
The unemployment rate is 9.1