1. The country of Khulna produces a fruit called Kathal and uses the Kaka as a currency unit. Macroeconomic information for this economy is given below:
1993 1994 Output (tonnes of Kathal) 10000 19000 Employment (workers) 1000 1500 Unemployment (workers) 400 500 Total Labour Force (workers) 1400 2000 Prices per Kathal $5.00 $6.00
(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 in the country of Myrule produce corn and provide entertainment services (banjo playing). In 1994 they produce $25 million worth of corn, with $18 million consumed domestically and the other $7 million sold to neighbouring countries. They provided $10 million worth of banjo-playing services, $8 million in Myrule and $ 2 million in neighbouring countries. They purchased $8 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 10%, today's price level is 180, and you expect the price level to be 196 one year from now. What is the expected inflation rate? What is the expected real interest rate? 5. For 1993 the country of Barishal had the following nominal quantities (in billions of dollars) and price indexes (1988=100) for each category of expenditure:
Nominal value Price index
Consumption 450.5 124.2
Fixed investment 150.4 115.0
Government purchases 178.8 135.5
Exports 196.5 128.9
Imports 205.6 100.0
Change in inventories -8.5 117.0
a. Calculate the real quantity for each category (to one decimal point).
b. Calculate nominal and real GDP.
c. Find the implict price deflator (1988=100).
6. Suppose the country of Kwaki has the production function with an exponent of 0.25 on capital, an exponent of 0.75 on labour, and total factor productivity denoted by A. Kwaki's macroeconomic data for 1993 and 1994:
Year Y K N 1993 2000 1700 70 1994 2100 1785 75
a. Calculate total factor productivity for 1993 and 1994.
b. By how much did TFP grow between 1993 to 1994?
c. If productivity remains constant from 1994 to 1995 and the labour force increase from 75 to 80 how large will the capital stock need to be to produce output of 2200 in 1995?
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. How would each of the following events affect the level of employment and the real wage rate?
(a) A treamendous boom occurs in the stock market, increasing people's wealth by $200 billion overnight.
(b) A major government loan-guarantee program goes bankrupt, losing $500 billion. To pay off the loss, the government announces that tax rates will rise 30% in the future.
(c) A nuclear mishap contaminates all auto plants in the Windsor area, destroying their capital
(d) Medical science cures the common cold, causing fewer work days lost due to illness, thus greatly increasing labour productivity.
1. (a) Average labour productivity: 1993:10000/100; 1994:19000/1500; growth rate = 26.67%;
(b) Inflation rate: 20%;
(c) Unemployment rates: 1993: 400/1400 = 28.57%; 1994: 500/2000 = 25%
2. GNP is 25+10=35; GDP is 25+8=33; NFP is 2; Net exports= Exports-Imports = 7-8=-1; the current account balance is NX+NFP = 1. Note that banjo playing abroad is not part of GDP or of exports.
3. (a) 3.22% (b) 0.73% (c) 2.47%
4. 8.89%; 1.11%
5. (a) Real quantity = Nominal quantity/Price index. Real consumption = 362.72; real investment = 130.78; real govt. pur. = 131.96; real exports = 152.44; real imports = 205.6 ; real inventories = -7.265.
(b) Nominal GDP = 762.1 ; Real GDP = 565.035
(c) Implicit price deflator = (Nominal GDP/Real GDP)x100 = 134.88
6. (a) 12.8704; 12.6769 ; (b) -1.5\% (c) 1771.61, a reduction.
7. (a) 10.1\% (b) 65.1\% (c) 58.5
8. (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.