1. Macroeconomic information for the economy of Anchovy is given below:
1993 1994
Output (pizzas) 8000 9000
Employment (workers) 700 800
Unemployed (workers) 70 100
Labour Force (workers) 770 900
Price per pizza $8.00 $9.00
(a) What was the growth rate of average labour productivity between 1993 and 1994?
(b) What was the inflation rate between 1993 and 1994?
(c) What was the unemployment rate in each year?
2. Citizens of the country of Heehaw produce hay and provide entertainment services (banjo playing). In 1994 they produced $15 million worth of hay, with $11 million consumed domestically and the other $4 million sold to neighbouring countries. They provided $7 million worth of banjo-playing services, $5 million in Heehaw and $ 2 million in neighbouring countries. They purchased $6 million worth of soda pop from neighbouring countries.
Calculate GNP, GDP, net factor payments from abroad, net exports, and the current account balance.
3. Nominal GDP in Canada was $688.541 billion in 1992 and $710.723 billion in 1993. The GDP deflator was 123.0 in 1992 and 123.9 in 1993.
(a) What was the growth rate of nominal GDP between 1992 and 1993?
(b) What was the inflation rate from 1992 to 1993?
(c) What was the growth rate of real GDP?
4. Today's nominal interest rate is 7%, today's price level is 150, and you expect the price level to be 156 one year from now. What is the expected inflation rate? What is the expected real interest rate?
5. Suppose the country of Prescott has the production function Y=AK^0.25N^0.75. The following table shows Prescott's macroeconomic data for 1993 and 1994:
Year Y K N 1993 2000 1700 70 1994 2100 1785 75
(a) By how much did productivity grow between 1993 and 1994?
(b) If productivity remains constant from 1994 to 1995 and the labour force increases from 75 to 80 how large will the capital stock need to be to produce output of 2200 in 1995?
6. How would each of the following events affect the level of employment and the real wage rate?
(a) A tremendous boom occurs in the stock market, increasing people's wealth by $100 billion overnight.
(b) A major government loan-guarantee program goes bankrupt, losing $50 billion. To pay off the loss, the government announces that tax rates will rise sharply in the future.
(c) A nuclear mishap contaminates all auto plants in the Oshawa area, destroying their capital.
(d) Medical science cures the common cold, causing fewer work days lost due to illness, thus greatly increasing labour productivity.
7. In September 1994, Canada had a labour force of 14.174 million people, employment of 12.746 million, and there were 7.599 million people not in the labour force.
(a) Calculate the unemployment rate.
(b) Calculate the participation rate.
(c) Calculate the employment ratio.
8. Keewatin, Ontario has a labour force of 1000 people. Twenty people lose their jobs each month and remain unemployed for exactly one month before finding jobs. On January 1, May 1, and September 1 of each year 50 people lose their jobs for a period of four months before finding new jobs.
(a) What is the unemployment rate in any month?
(b) How many unemployment spells are there in a year?
(c) What is the average duration of an unemployment spell?
(d) On any date, how many people are experiencing short spells and how many are experiencing long spells?
1. (a) -1.6%
(b) 12.5%
(c) 9.1%, 11.1%
2. GNP is 22; GDP is 20; NFP is 2; Net exports are -2; the current account balance is zero. Note that banjo playing abroad is not part of GDP or of exports.
3. (a) 3.22% (b) 0.73 % (c) 2.49%
4. 4%; 3%
5. (a) -1.5% (b) 1771.61, a reduction.
6. (a) Increased wealth reduces labour supply; the shift left lowers employment and raises the real wage.
(b) The loss of wealth increases labour supply, leading to higher employment and lower real wages.
(c) The loss of capital lowers the marginal product of labour, which shifts labour demand left lowering employment and the real wage.
(d) The demand for labour rises, in equilibrium employment and the real wage rise.
7. (a) 10.1% (b) 65.1% (c) 58.5
8. (a) 7% (b) Total spells = 240+150 = 390 (c) Average duration is 2.15 months (d) 20 short, 50 long