Question 1: Adding to Table, if in 2007 real GDP was $13,206.4 billion and nominal GDP was $14,028.7 billion, calculate the percentage change from 2006 to 2007 in nominal GDP, real GDP, and the price level. What is the value of the GDP deflator in 2007?
| TABLE: Nominal Versus Real GDP |
| VARIABLE |
2005 |
|
2006 |
|
| Nominal GDP |
$12,623.0 billion |
$13,377.2 billion |
| Percent change |
|
|
5.97 |
|
| Real GDP |
|
$12,632.0billion |
$12,958.5billion |
| Percent change |
|
|
2.66 |
|
| GDP deflator (price changes) |
100 |
|
103.23 |
|
| Percent change |
|
|
3.23 |
|
From the Bureau of Economic Analysis Web page (www.bea.gov), construct a table showing theannual percentage change in real GDP, gross privatedomestic investment (I), nonresidential fixedinvestment, and residential fixed investment from2002 to 2011. Which component of investment hadthe greatest impact on the recession of 2007 to 2009?
Question 2: Technical Questions in the textbook.
Explain how the aggregate expenditure function shifts in response to changes in each of the following variables:
a. The real interest rate increases.
b. Consumer confidence decreases.
c. Higher taxes are imposed on business profits.
d. The economies of many countries in the rest of the world go into recessions
Question 3:
Given the following variables in the open economy aggregate expenditure model, autonomous consumption (C0) = 200, autonomous investment (I0) = 200, government spending (G0) = 100,export spending (X0) = 100, autonomous import spending (M0) = 100, taxes (TP) = 0, marginal propensity to consume (c1) = 0.8, marginal propensity to invest (i1) = 0.1, and marginal propensityto import (m1) = 0.15,
a. Calculate the equilibrium level of income for the open economy aggregate expenditure model.
b. If there is an increase in autonomous import expenditure from 100 to 200 resulting from anincrease in the currency exchange rate, calculate the new equilibrium level of income andthe value of the multiplier.
c. Compared with the original equilibrium in part a, if the government decides to impose taxes(TP) of 100, calculate the new equilibrium level of income.
Question 4:
What were the key provisions of the AmericanRecovery and Reinvestment Act passed byCongress in February 2009? How has the impact ofthe Act been evaluated?
Reference:
Farnham, P.G. (2014). Economics for managers. Upper Saddle River, NJ: Pearson Education Inc.