Econ Homework

Econ303 Homework 2B 1

1. 4 points Assume an economy in which only Iphone and Samsung Galaxy are produced. In year one, 500 million Iphone are produced and consumed and its price is $260, while 1300 million Galaxy are produced and consumed and its price is $200. In year two, 600 million Iphone are produced and consumed and its price is $240, while 1250 million Galaxy are produced and its price is $190.

(a) Using year 1 as the base year, calculate the GDP price deflator in years 1 and 2, and calculate the rate of inflation between years 1 and 2 from the GDP deflator.

(b) Using year 1 as the base year, calculate the CPI in years 1 and 2, and calculate the CPI rate of inflation. Explain any differences in your results between parts (a) and (b).

2. 2 points Suppose that the labor force participate rate is 79%, the total working-age population is 100 million, and the number of unemployed is 2.5 million. Determine: (i) the labor force; (ii) the number of employed workers; (iii) the unemployment rate; and (iv) the employment/population ratio.

3. 6 points Using the following data on GDP per capita in the United Kingdom, compute the average annual growth rates during each of the 5 decades and the average annual growth rates over the 50 years.

Year Real GDP per capita (2011 dollars)

1960 $11,879 1970 $15,308 1980 $18,571 1990 $24,799 2000 $31,640 2010 $35,689

4. 8 points The production function takes the following form

Y = F (K,N) = zK0.3N0.7

(a) Write the expressions for marginal product of labor and marginal product of capital.

(b) Suppose that z = 150 and K = 2000. Compute the marginal product of labor for N = 1, 2, 3, 4, 5. Draw the marginal product of labor curve.

(c) Suppose that the total factor productivity increases. z = 180 while K = 2000 as before. Recompute the marginal product of labor for N = 1, 2, 3, 4, 5. Draw the new marginal product of labor curve and compare it with the curve you obtained in part (a).

Econ303 Homework 2B 2

(d) Suppose that the total factor productivity stays the same while capital input increases. Now z = 150 but K = 4000. Recompute the marginal product of labor for N = 1, 2, 3, 4, 5. Draw the new marginal product of labor curve and compare it with the curve you obtained in part (a).