Homework Problems

Chp 5.

3. Year 1 Year 2
Quantity Price Quantity Price
Oranges 100 $5 150 $5
Pears 100 $3 75 $4

a. What is the growth rate of constant-dollar real
GDP using year 1 as the base year?
b. What is the growth rate of constant-dollar real
GDP using year 2 as the base year?

13. Why has nominal GDP increased faster than real
GDP in the United States over time? What would it
mean if an economy had real GDP increasing faster
than nominal GDP?

Chp 6.

3. The U.S. dollar price of a Swedish krona changes
from $.1572 to $.1730.
a. Has the dollar depreciated or appreciated against
the krona?
b. Has the krona appreciated or depreciated against
the dollar?

8. How did the United States become the world’s
largest debtor nation in the 1980s?

15. Use the national income identity GDP . C . I .
G . X to explain what a current account deficit
(negative net exports) means in terms of domestic
spending, production, and borrowing.

Chp 7.

12. Suppose 500 people were surveyed, and of those
500, 450 were working full time. Of the 50 not
working, 10 were full-time college students, 18
were retired, 5 were under 16 years of age, 7 had
stopped looking for work because they believed
there were no jobs for them, and 10 were actively
looking for work.
a. How many of the 500 surveyed are in the labor
force?
b. What is the unemployment rate among the 500
surveyed people?

13. Consider the following price information:
Year 1 Year 2
Cup of coffee $ .50 $1.00
Glass of milk $1.00 $2.00
a. Based on the information given, what was the
inflation rate between year 1 and year 2?
b. What happened to the price of coffee relative to
that of milk between year 1 and year 2?

Chp 11.

7. How can a larger government fiscal deficit cause a
larger international trade deficit?