Chapter 6 Assignment Problem
1. Suppose that the annual rates of growth of real GDP of Econoland over a five-year period were sequentially as follows: 3 percent, 1 percent, 2 percent, 4 percent, and 5 percent. What was the average of these growth rates in Econoland over these five years? What term would economists use to describe what happened in year 3? If the growth rate in year 3 had been a positive 2 percent rather than a negative 2 percent, what would have been the average growth rate?
2. A mathematical approximation called the rule of 70 tells us that the number of years that it will take something that is growing to double in size is approximately equal to the number 70 divided by its percentage rate of growth. Thus, if Mexicos real GDP per person is growing at 7 percent per year, it will take about 10 years (= 70/7) to double. Apply the rule of 70 to solve the following problem: Real GDP per person in Mexico in 2005 was about $11,000 per person, while it was about $44,000 per person in the United States. If real GDP per person in Mexico grows at the rate of 5 percent per year, about how long will it take Mexicos real GDP per person to reach the level that the United States was at in 2005? (Hint: How many times would Mexicos 2005 real GDP per person have to double to reach the United States 2005 real GDP per person?)
Chapter 7 Assignment Problem
1. Suppose GDP is $16 trillion, with $10 trillion coming from consumption, $2 trillion coming from gross investment, $3.5 trillion coming from government expenditures, and $500 billion coming from net exports. Also suppose that across the whole economy, depreciation (consumption of fixed capital) totals $1 trillion. From these figures, we see that net domestic product equals:
a. $17.0 trillion.
b. $16.0 trillion.
c. $15.5 trillion.
d. None of the above.
2. Suppose GDP is $15 trillion, with $8 trillion coming from consumption, $2.5 trillion coming from gross investment, $3.5 trillion coming from government expenditures, and $1 trillion coming from net exports. Also suppose that across the whole economy, personal income is $12 trillion. If the government collects $1.5 trillion in personal taxes, then disposable income will be:
a. $13.5 trillion.
b. $12.0 trillion.
c. $10.5 trillion.
d. None of the above.
3. Suppose that this years nominal GDP is $16 trillion. To account for the effects of inflation, we construct a price-level index in which an index value of 100 represents the price level 5 years ago. Using that index, we find that this years real GDP is $15 trillion. Given those numbers, we can conclude that the current value of the index is:
a. Higher than 100.
b. Lower than 100.
c. Still 100.
