Assignment:
1. According to the BEA with 2009 as a base year Nominal and real gdp are as follows.
NGDP in billions RGDP in billions GDP Deflator Inflation Rate
Q1 2013 16440.7 15457.2
Q2 2013 16526.8 15500.2
Q3 2013 16727.5 15614.4
Q4 2013 16957.6 15761.5
Q1 2014 16984.3 15724.9
Q2 2014 17270.0 15901.5
Q3 2014 17522.1 16068.8
Q4 2014 17615.9 16151.4
Q1 2015 17649.3 16177.3
Q2 2015 17913.7 16333.6
Q3 2015 18060.2 16414.0
Q4 2015 18164.8 16470.6
Q1 2016 18221.1 16492.7
a. Which variable would you use to find growth in overall goods and services.
b. What equation would you use to find growth.
c. Fill out GDP deflator column.
d. Fill out inflation rate column.
e. Graph the Inflation rate with time on the horizontal axis and inflation rate on vertical axis.
f. Graph the GDP growth rate in overall goods and services with time on the horizontal axis and growth rate on the vertical axis.
g. Do the two graphs you made for part e and f correlate? Does inflation and growth in goods and services go together?
2. Eric can produce 10 books an hour and 10lbs of barley an hour. Frank can produce 20 books an hour and 5lbs of barley an hour. Provide their opportunity costs, who would specialize in what and the prices where trade would occur.
3. If consumption rises $200,000 and government expenditures fall $300,000 holding all else constant what happens to GDP. Does GDP rise or fall? by how much?
4. (30 pts) Japan's lost decade was caused by the crash of the 80's asset price bubble. In class we spoke of this when talking about interest rates and stimulating the economy with Monetary Policy. What policy actions would you have taken to ease the pain of the following recession? How would these policies affect the aggregate demand curve, short run aggregate supply curve and long run aggregate supply curve? How is the lost decade similar to the America's subprime loan crisis? Would you have the same policy actions for the subprime loan crisis that you proposed for the lost decade? Do you think we will have a lost decade?
5. Consider the markets for mp3s, music streaming sites, and concert ticket prices.
a. For each pair, identify whether they are compliments or substitutes, explain your answer.
i. Mp3 and music streaming sites
ii. Mp3 and concert tickets
iii. Music streaming sites and concert tickets
iv. Are any of these normal goods/inferior goods?
What is your recommendation for class format (lecture only or solving problems).