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## 21 Jan Assignment 1 Macroeconomics – A country produces only bananas and

UNBC Macroeconomics Worksheet
Assignment 1 Macroeconomics
Problem 1: (20 Points) Use following data to answer following questions.
A country produces only bananas and coconuts. The base year is 2013. Quantities 2013 2014 Bananas Coconuts 800 bunches 400 bunches 900 bunches 500 bunches Prices 2013 2014 Bananas Coconuts \$4
a bunch \$5 a bunch \$2 a bunch \$10 a bunch a. Calculate the nominal GDP in 2013 and 2014.
b. Calculate real GDP in 2013 and 2014.
c. Calculate growth rate of real GDP.
d. Calculate the approximate number of years it will take for real GDP in this country to double if the current growth rate of real GDP is maintained.
Problem 2: (15 Points) The IMF World Economic Outlook reports the following unemployment rates: Region 2015 2016 United States Spain Venezuela Singapore 5.3 22.1 7.4 1.9 4.9 19.6 21.2 2.1
a. What do these numbers tell us about the phase of the business cycle in the three regions in 2016?
b. What do these number tell us about the relative size of their natural unemployment rate?
c. Do these numbers tell us anything about the relative size of their labor force participation rates and employment-to-population ratios?
Problem 3: (10 + 5 Points)
a. In Canada between June and July in 2016, the number of full-time jobs increased by 63,200 while part-time jobs fell by 108,800. The unemployment rate increased from 6.4 percent to 7.2 percent. The labor force participation rate increased from 66.5 percent to 66.6 percent.
i. Explain the link between the rise in the participation rate and the rise in the unemployment rate.
ii. If all the workers who entered the job market were discouraged searches, explain how the R5 unemployment would have changed.
b. An economy’s capital stock was \$46.3 billion at the end of 2016, \$46.6 billion at the end of 2017, and \$47.0 billion at the end of 2018. Depreciation in 2017 was \$2.4 billion, and gross investment during 2018 was \$2.8 billion (all in 2007 dollars).
i. Calculate net investment and gross investment during 2017.
ii. Calculate depreciation and net investment during 2018.
Problem 4: (10 + 10 Points) a. If a large increase in investment increases labor productivity, explain what happens to:
Potential GDP
Demand and supply of labor
iii. Employment
iv. The real wage rate
v. Real GDP per person
b. If a severe drought decreases labor productivity, explain what happens to:
i. Potential GDP
ii. Demand and supply of labor
iii. Employment
iv. The real wage rate
v. Real GDP per person
Problem 5: (7.5 + 7.5 Points) a. The IMF forecasted Australia’s real GDP at \$A1,730 billion in 2017 and \$A1,782 billion in 2018, and Australia’s population at 24.6 million in 2017 and 25.0 million in 2018. Calculate:
i. The growth rate of real GDP
ii. The growth rate of real GDP per person 2
iii. The approximate number of years it will take for real GDP per person in Australia to double if the current growth rate of real GDP is maintained.
b. A typical family on Sandy Island consumes only juice and cloth. Last year, which was the base year, the family spent \$40 on juice and \$25 on cloth. In the base year, juice \$4 a bottle and cloth is \$5 a length. This year, juice is \$4 a bottle and cloth is \$6 a length. Calculate:
ii. The CPI in the current year
iii. The inflation rate in the current year

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