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macro_bade_exam1.docx
macro_bade_exam1.docx
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Macro Exam 1
Name: LaToya Flood
PLEASE SHOW YOUR WORK TO RECEIVE A FULL CREDIT
1) The table above shows how the number of books Katie buys each year depends on her income
a. What kind of relationship exists between Katie’s income and the number of books she
purchases?
b. Plot the relationship (Draw a graph) between Katie’s income and the number of books she
purchases. Measure income along the vertical axis and the number of books along the horizontal
axis. Be sure to label the axes.
c. What is the slope of the relationship between $50,000 and $70,000 of income?
d. What is the slope of the relationship between $90,000 and $110,000 of income?
e. Comment on the similarity or dissimilarity of your answers to parts (c) and (d).
2) The diagram above illustrates the market for apartments in Victoria, British Columbia.
a. If the current rent is $300 per month, is there a shortage or surplus in the apartment market
and how much is the shortage or surplus?
b. What is the equilibrium rent and quantity of apartments?
Answer:
GDP
Nominal GDP
Real GDP
Data for 2010 (in billions)
3,300
3,300
Data for 2011(in billions)
4,200
3,600
3) The table above has real and nominal GDP for two years for a foreign country.
a. What does the GDP price index equal in 2010? What does the value of the GDP price index
tell you about 2010?
b. What does the GDP price index equal in 2011?
4) The figure above shows Prakash’s and Gail’s production possibilities frontiers for writing
books and magazine articles.
a. What is Prakash’s opportunity cost of a book? What is Gail’s opportunity cost? Who has the
comparative advantage in writing books?
b. Who has the comparative advantage in writing magazine articles?
c. According to their comparative advantages, who should write books and who should write
magazine articles?
5) Real GDP can increase either because the quantity of labor increases or because labor
productivity increases. What is the effect on the standard of living if real GDP increases because
a. the quantity of labor increases?
b. labor productivity increases?
6) The above table gives the demand and supply schedules for cat food. If the price is $3.00 per
pound of cat food, will there be a shortage, a surplus, or is this price the equilibrium price? If
there is a shortage, how much is the shortage? If there is a surplus, how much is the surplus? If
$3.00 is the equilibrium price, what is the equilibrium quantity?
7) Last year a very severe ice storm hit the north counties of New York state, and the states of
Vermont and Maine. Electric poles were down and no one had power for days. It was reported
that the price of kerosene heaters skyrocketed and the number purchased increased during this
time. Using a supply and demand diagram, show the impact of the ice storm on the market for
kerosene heaters.
8) The table gives data on the production and prices in a small economy. Use 2012 as the base
period.
a. What does nominal GDP equal in 2012?
b. What does real GDP equal in 2012?
c. What does nominal GDP equal in 2013?
d. Using the chained-price method, what does real GDP equal in 2013?
9) If you buy a new water skis and other new equipment for $2,500 and take a week off of your
job, where you earn $1,000 a week, to go water skiing. The equipment you purchased was all
produced in the United States. You think that the week was worth $4,000. As a result of your
vacation, GDP changes by how much?
10) Explain the relationship between real GDP and potential GDP and between the
unemployment rate and the natural unemployment rate as the economy moves through a business
cycle.
11) Labor productivity is $30 per hour and aggregate hours are 165 billion hours. What does real
GDP equal?
12) Scott worked in a large foreign country. He retired in 2008 and his pension income is fixed at
$1,500 per month. The table above gives the CPI in this country. What is the real monthly value
of his pension in the years between 2008 and 2011?
13) Suppose the base reference period is 1982-1984. If your nominal wage rate is $8.00 per hour
when the CPI is 180, what is your real wage rate in 1982-1984 dollars?
14) Two nations can produce computers and software in the amounts given in the table above.
Does either nation have an absolute advantage in producing the products? Which nation has a
comparative advantage in computers? Which nation has a comparative advantage in software?
15) For spring break, Melanie will either stay home or go to Daytona Beach. At home, Melanie
pays $10 per day for food and earns $90 a day at her job. At Daytona Beach, Melanie will stay
with friends and so has no lodging cost. She will pay $20 per day for food. In terms of dollars,
Melanie’s opportunity cost per day of going to Daytona Beach is how much?
…
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