31
Economics 101 Assignment #1 (20 Points) Name______
Part 1: 5 points
1. Assume that there are only four goods produced. The following represent the prices and quantities sold in the base year (2000) and the current year (2007):
Price00 Quantity00 Price07 Quantity07
A $5 10 $5 20
B 10 20 30 40
C 8 5 16 10
D 25 10 50 20
What was the Nominal Gross Domestic Product (GDP) in 2000? Show calculations.
What was the Nominal Gross Domestic Product (GDP) in 2007? Show calculations.
What was the Real Gross Domestic Product (Real GDP) in 2007? Show calculations.
2. In the calculation in question 1, by what percent did the Real GDP rise between 2000 and 2007?
3. Assume that Real GDP Per Capita is $10,000 in 2000. If it grows at 2% per year, what will the Real GDP per capita be in 2072? If it grows at 3% per year, what will the Real GDP Per Capita be in 2072? Notice how much of a difference a small change in the rate of growth can make. (Hint: Use the Rule of 72.)
Part 2: 5 points
4. Click on Nominal GDP and Real GDP on my Web Site
1. What is the Gross Domestic Product for the most recent quarter? What does this number tell you?
2. What was the Real GDP in the most recent year?
3. In what years did Real GDP decline from the previous year (this is the definition of a “recession”)?
5. This time, click on The Economic Report of the President on my web site
What was the American population in the most recent year? Therefore, what was the Real
GDP per capita in the most recent year (you need to calculate this)?
Continued on Page 2
6. Choose any country other than the United States. It may be a country that you family descends from. Or it may be a country in which you have an interest. You will use this country throughout this assignment. Do a search on Google (or something similar) to find information on the economy of this country.
What is the most recent Nominal GDP of this country in U.S. dollars? ______
What is the most recent Nominal GDP per capita in U.S. dollars? ______
Over the past few years, how fast has GDP been growing? ______
(Give the dates for your data.)
Part 3: 5 points
Follow the path:
Click on Unemployment Rate on my Web Site
Most Requested Series
Labor Force Statistics from the Current Population Survey
On the Form:
Click on all that are necessary to answer the questions below
Click on the most recent year
Click Retrieve Data (Click Continue if asked)
1. What is the overall unemployment rate in the most recent month?
2. What is the total civilian labor force? ______What is the total number of people unemployed? ______
3. How many of the unemployed have been unemployed 27 weeks or longer? ______What percent is this of the total number of unemployed people? (You need to calculate this.) ______
4. Pick a month in 2001, a month in 1999, and a month in 1997. Calculate the percent of unemployed that have been unemployed 27 weeks or longer as you did in Question 3. What has been happening to this percent in recent years? ______
5. What is the current unemployment rate for males age 20 and over? ______for females age 20 and over? ______
6. What is the current unemployment rate for whites overall? ______for African-Americans overall? ______For Latinos/Hispanics overall? ______
7. What is the current unemployment rate for people age 16 to 19?
Continued on Page 3
Go Back to Most Requested Series
Local Area Unemployment Statistics
California
A form appears. Click the box for CA Unemployment Rate and the box for
San Diego, CA MSA Unemployment Rate
Move down the form. Click on the most recent year.
Click on the Retrieve Button (Click on CONTINUE if you get a warning message)
8. What was the California unemployment rate for the most recent month? ______What was the San Diego unemployment rate for the most recent month? ______
9. Go back to the data for the country you have chosen. What is the most recent unemployment rate? ______Over the past few years, has unemployment in this country been greater or lower than the unemployment in the United States? ______
Part 4: 5 points
Follow the path: Consumer Price Index on my Web Site
Most Requested Series
Consumer Price Index --- All Urban Consumers
Fill-out the Form:
Click on U.S. All Items, 1982 - 1984 = 100
Move Down and Click on All Years in the Box
Click the Retrieve Data Button
10. What is the CPI in the most recent month? ______What does this mean? ______
11. What was the last year that prices fell from January to January?
What was the last time that prices fell for two + consecutive years from January to January?
12. By approximately what percent did prices rise from January, 1970 to January, 1980?
(You need to calculate this.)
13. How many years did it take for prices to triple from their January, 1913 value?
How many years did it take for prices to triple from their January, 1970 value?
14. In June, 1965, I started working at an accounting firm for $7,200 per year ($600 per month). I was straight out of college and had no significant work experience. Assume that you begin your work career in the most recent month noted. What starting salary do you need to have now to have the same purchasing power as I had in June, 1965?
Continued on Page 4
15. Follow the path: Economic Report of the President on my Web Site
Statistical Tables in Spreadsheet Format
2006
Tables B-3 and B-60
What was the GDP Deflator (called the Implicit Price Deflator) for 2006? ______
By what percent did the GDP Deflator rise in 2006? ______
What was the CPI for 2006? ______
By what percent did the CPI rise in 2006? ______
How do you account for the differences in the number and in the rise in prices between these two measures of inflation?
16. Go back to the data for the country you have chosen. What is the most recent inflation rate? ______Over the past few years, has inflation in this country been greater or lower than the inflation in the United States? ______
End of Assignment 1
Economics 101 Assignment #2 on Chapters 5 and 6 Name______
(10 points for the entire assignment)
1. In San Diego County, the price of homes rose greatly. The median price of a home rose from about $250,000 in 2000 to about $500,000 today. Explain why this has happened. Consider all of the factors that affect demand and all of the factors that affect supply that would seem relevant to explain this rise in home prices.
2. We all know that the price of gasoline has risen greatly. Gasoline that once sold for less than $2 per gallon has sold for as much as $3.50 per gallon. Explain why this has happened. Consider all of the factors that affect demand and all of the factors that affect supply that would seem relevant to explain this rise in gasoline prices.
3. Most people who buy a home pay for it by borrowing money from a bank, savings and loan, or other such institution. Such a loan is called a mortgage. At present, the interest on a mortgage is deductible for tax purposes.
To illustrate how this works, assume that a person is in a tax rate of 25% and has a mortgage of $200,000 at 6% interest with 25 years left to be paid. The annual interest payment is $12,000
(6% of $200,000). Of this, the taxes are reduced by $3,000 (25% of $12,000). Thus, the actual cost to the borrower is not $12,000, but $9,000 ($12,000 - $3,000).
Some people have proposed that the mortgage interest would no longer de tax deductible. Therefore the actual cost to the borrower would now be the full $12,000. There would be no offsetting savings of the $3,000.
a. First, show what will occur in the market to borrow money. Explain what will happen to the equilibrium price (or interest rate) and to the equilibrium quantity.
Interest Rate
Supply
Demand
______
0 Quantity of Money to Borrow (Lend)
Continued on Page 6
b. Second, show what will occur in the market for homes (homes and borrowing money are complements). Again, explain what will happen to the equilibrium price (or interest rate) and to the equilibrium quantity.
Price of Homes
Supply of Homes
Demand for Homes
______
0 Quantity of Homes
c. Finally, state whether you would favor or oppose this proposal to eliminate the tax deduction for mortgage interest if you were a
(1) homeowner;
(2) owner of a bank;
(3) prospective homebuyer who does not now own a home;
(4) renter who intends to continue renting an apartment;
(5) someone who intends to borrow from a bank to buy a new car.
In each case, explain why.
End of Assignment 2
Economics 101 Assignment #3 (20 Points) Name______
Part 1: (5 points)
The cases discussed in class have analyzed the effects on foreign exchange markets of an increase in interest rates in the United States and of an increase in inflation in the United States. Do the same analysis for each of the following cases. Show using the demand and supply graph for foreign exchange. Which money appreciates and which money depreciates? (Show the graphs on the back of the page.)
1. Incomes rise in the United States and fall in Japan
2. Both Americans and Japanese believe that American goods are of higher quality than before
3. Both Americans and Japanese believe that the Japanese yen will depreciate in the near future
4. Laws change in Japan making it easier for Americans to buy or build companies in Japan
Part 2: (5 points)
1. Go to the site of the Federal Reserve Bank of New York. This is linked as “Foreign Exchange Rates” on my web site. Or go to http://www.ny.frb.org/pihome/statistics/forex12.shtml
From this site, what is the most recent exchange rate for each of the following foreign monies?
The Canadian Dollar ______
The European Monetary Union Euro ______
The Japanese Yen ______
The Mexican Peso ______
The British Pound ______
The Chinese Renminbi ______
2. Assume a six pack of Labatts Beer sold in Windsor Ontario Canada for $6.00 Canadian. The same six pack of Labatts Beer sold in Detroit Michigan (directly across the river) for $4.50 American. Using the exchange rate you found in question 1, is the six pack cheaper in Windsor or in Detroit?
Part 3: (5 points)
In 1998, two factors happened regarding Russia. First, prices in Russia were rising at a very rapid rate (hyperinflation) while prices in the United States were hardly rising at all. Second, for a variety of reasons, those who had made portfolio investments in Russia decided to take their money elsewhere. This means that they demanded that the loans they had made in Russia be paid off. When the loans were repaid, the money would be loaned to people in a different country. On the graph on the next page, show the demand for and the supply of Rubles as of 1997. Then, show the results of these two events in 1998. Make the appropriate shifts in either demand or in supply or in both. State what would happen to the Russian Ruble as a result of the 2 changes. Finally, state what would happen to the Russian economy as a result of this change in the exchange rate.
Continued on Page 9
.$/Ruble
Supply1
P1 E1
Demand1
______
0 Quantity of Rubles
The Russian Ruble would ______. The effect of this on the
Russian economy would be ______
Part 4: (5 points)
Pick out the stock of a particular company (any company). Find the value of the stock of that company in the most recent week. You will find this information either in a newspaper or on the Internet. Then, find the value of that stock one year ago (or as close to that date as you can).
The company I chose is ______
Value Now $______
Value Then $______
You will need to do some research as to what has been happening concerning this company. You know that the price is affected by the demand for and the supply of that stock. Demanders are those who wish to buy the stock. Suppliers are those who own the stock and are considering selling. There are six possible determinants of the demand and four possible determinants of the supply. Based on your research, explain what might be responsible for the change in the price you have discovered. Show your reasoning on the graph below.
Price of the Stock
Supply1
P1 E1
Demand1
______
0 Quantity of Shares of the Stock
I shifted demand to the (right, left, or neither?) ______because ______
I shifted supply to the (right, left, or neither?) ______because ______
End of Assignment 3
Economics 101 Assignment #4 Name______
(15 Points Total)
1. In Mexico in 1982, prices were rising very rapidly. On the graph, show aggregate demand, aggregate supply, and the equilibrium Real GDP and GDP Deflator. Show your graph with a large inflationary gap.