CHAPTER 13

1. The components of GDP that the following transactions affect is:

a.Consumption: because this refrigerator was manufactured in domestic

b.Consumption: because Aunt Dolly hires a local contractor

c.Non-affected to GDP: because this transaction was a secondhand sales

d.Consumption: normal transaction between buyer and seller

e.Consumption was increase because this Mustang had been bought by a

household but Inventory(Investment factor) decrease 1 because this Mustang was
counted as a investments good before it was sold to Martinez family =>> GDP
unchanged

f.Investment increases because a car seem to be an investments good for car rental
company

g.Goverment purchases increases because government spent money for public

good

h.Non-affected to GDP: because this transaction was a transfer payment not gov’t
purchases

i.Consumption increases because this is a household purchased,

But net exported decreases because this bottle was imported

j. Investment increases because new factory was built

2.
1970:40

1980:3000

1990:6000

2000:8000/100

2010: 7500

2020: 30.000

2030: 250

3.

A transfer payment is a one-way payment to a person or organization which has

given or exchanged no goods or services for it, this kind of payment dose not
represent a form of final demand
So, once the recipient uses funds from one of these programs to buy something—
that is, makes a transfer payment to purchase a good or service, this will count into
GDP, so if we take transfer payment into consideration in the first time, it is
double-counting

4.If we count used good as a component of GDP, it will be a double-counting.

Because, this good appeared and resold often add more value than it really does.
For example, you bought an apple, after that you resold this apple to another guys,
so have 2 transactions but have only one good: an apple, the value of an apple has
been counted twice, so GDP not reflect the true value of the economy

5.

Nominal GDP Real GDP GDP deflator

2020 200 200 100

2021 400 400 100

2022 800 400 200

b.

The percentage Nominal GDP Real GDP GDP deflator

changes

2021 200% 200% 100

2022 200% 100% 200

In 2021, the percentage of GDP deflator does not change, because Nominal GDP
and Real GDP from each year have same value

In 2022, the percentage of Real GDP does not change, because of base year, the
quantity between 2021 and 2022 are unchange
c. Inflation rate in:

2021: 0%

2022: 100%

So, as you can see, the economic well-being is increase more in 2021 because due
to the increase of inflation, the value of money also decreaed, so the value of
money in 2021 is higher than that in 2022

6.

Price Quantity

1( base year) $4 3

2 $5 4

3 $6 5

a.b.c.

Nominal GDP Real GDP GDP deflator

1 12 12 100

2 20 16 125

3 30 20 150

d.The percentage growth rate of real GDP from year 2 to year 3 : 20/16-1=25%

e.Inflation rate from year 2 to year 3. (150-125)/125=20%

f. In one-good economy, i can answer question e. by counting price ratio between

year 2 and year 3: (6/5)-1= 0.2=20%

7.

a. The growth rate of nominal GDP between 1998 and 2018 : 8.505%
b.The growth rate of the GDP deflator between 1998 and 2018: 3.9%

c.Real GDP in 1998: 12,035.8

d.Real GDP in 2018: 18,569.7

e.The growth rate of real GDP between 1998 and 2018: 4.43%

f.The growth rate of nominal GDP higher than growth rate of real GDP because
when we took base year in 2012, price in 2012 dramatically higher than price in
1998, so real GDP in 1998 twice more than nominal GDP in 1998, in other hand,
real GDP in 2018 slightly less than nominal GDP in 2018

9.

a. GDP is total value of final goods and services in an economy in a period of time.
So, in this situation, the GDP is $180

b.

1: when they grew to the wheat, that adds 100$

2: The miller bought the wheat for $100 , turn the wheat into flour and sold flour
for $150 => in this section, value added is 150-100=$50

3:Adds 180-150=$30 when the baker bought flour at 150 and sold bread at 180

c.The total value added of the three producers is 100+50+30=$180. It have same
value when compare with GDP. This example suggest us another way to
calculating GDP: according to Value added

10. Really it would lead to the discrepency in the estimation of GDP and wrong
impression would be formed about the health of economy. Generally income
which is not in formal sector is calculated based on samples and included in GDP.
But service provided by housewife etc at home are not recorded in GDP. Thus,
developing countries such as India has such economic activities which are not
included in GDP for want of data. Thus GDP does not show actual picture of
country GDP

11.

a.The increased participation of women in labor force will increase GDP. Because,
when more women join the labor force, total of supply will be increase with that
was an increase of GDP

b.More and more women joining labor force, there are a decrease in both leisure
and time spent working home. Since well-being is a measure of the time spent
home, it decreased in total as more women leaving home and join labor force.

c. I think that has variety of other aspects of well-being that are associated with the
rise in women’s labor-force participation. For example: Take care of children. In
reality, i think take others of aspects to contructs a measure of well-being that
includes these aspects is not possible because GDP itshelf does not measure many
aspects of life, it is just the most general measure of a country economics situation

12.

a. GDP increased 400

b. Net national product(the total of national products after depele

depreciation)=400-50=$350

c. National income excluded depreciation, includes the total income earned by

residents of the country=> national income is 350$

d. Personal income( Sources of personal income include money earned from

employment, dividends and distributions paid by investments, rents derived from
property ownership, and profit sharing from businesses)
Personal income= 350-30-100=$220

e. Disposable personal income is the amount of money that individual person save
after taxes( availability to use)=> disposable personal income is 220-70= $150

CHAPTER 24

1.If we use Inflation to caculator: $1 in 2002 = $1,54 in 2020

So today its cost : $154 when compare with 2002

2.

Cauliflower Broccoli Carrots

2020 2$/1=>200$/10 1.5$/1=>75$/50 0.1$/1=>50$/500

0

2021 3$/1=>225$/75 1.5$/1=>120$/8 0.2$/1=>100$/500

0

b. CPI for 2020: 100

CPI in 2021: (225+120+100)/(200+75+50)*100=445/325*100=137

c. Inflation rate in2021: (137-100)/100*100%=37%

3. The percentage of change in price in:

Tennis Ballls: 0%

Golf balls: 50%

Bottles of Gatorade: 100%

b. The percentage change in the overall price level:

(200+600+400)/(200+200+400)*100-1=50%
c. That infomation affect my caculatation because the value of the bottles of
Gatorade is different between 2020 and 2021. In this situation, The caculation
should be made on each pound

d. More flavors can satisfy more customers need, in other hand it can contributes in
changes of quality and affected to my calculation of the inflation rate

5.

a. Fix the basket at 1 karaoke machine and 3 CDs

Overall price level in 2020: 70

overall price level in 2021: 96

Use 2020 as the base year

CPI in 2020: 100

CPI in 2021: 96/70=137.14%

The percentage change in overall price level : 37.14%

b.Overall Price level in 2020: 700

Nominal GDP in 2021: 1320, Real GDP in 2021: 980

Use 2020 as the base year:

GDP deflator in 2020 :100

GDP deflator in 2021: 134.69%

The percentage change in overall price level : 34,69%

c. The inflation rate in 2021 not the same because in CPI mothod we use fixed
basket( in different year we use the same quantities). In other hand, when we use
GDP deflator it more accurate beacuse of wider computation limit
6.

a. New products: CPI contructions base on fixed basket and new cell phones do not
count into it

b. Quality: CPI don’t presentation the quality of car, it just expressed as a price

c.Quality: CPI misjudings about the value of the computers because of fixed basket

d.Quantity: Consumers will get more value for the same price.

e.Replayments: more people consume less of gasoline because of its higher price,
the amount of gasoline in basket is fixed

7. Percentage of eggs rising: (1.77-0.88)/0.88=101.133%

b. Percentage of wage riseing: (22.36-6.57)/6.57=240.33%

c.

IN 1980:

Wage per minutes: 6.57/60=0.1095$

=>> need to work 8.03 minutes to earn enough to buy a dozen eggs

IN 2018:

Wage per minutes: 0.3726

 Need to work 4,75 minutes to earrn enough to buy a dozen eggs

d. Rise, as we can transparenly seen that just need approximately 5 minutes worker
to buy a egg in 2018. That means, the purchasing power in terms of eggs rise

8.

a.Yes. Because the CPI overstates actual inflation and Social Security payments
are stick to CPI
b.To determine whether the elderly are actually better off from year to year, we
need to investigate in 2 steps:

Step 1: Creative an market basket of healthcare for the elder

Step 2: campare this basket with general basket of CPI

Because elders are consume more than younger does in Healthcare services and the
healthcare cost have rise faster than overall inflation, it is surely that the elderly are
worst off.

9.

a. real interest = nominal interest – Inflation rate

=> when inflation rate turns out to be higher , the real interest on this loan
decreased

b.When the inflation rate turns out to be higher than expected

The lender will lose money because of decrease in real interest, lower in real
interest translate to lower purchase power of the interest that the lender will recive.

As a result, absolutly that borrower gain

c.We can understand that:

The homeowners is borrower

Banks is the lender

Because of unexpected inflation increase, The borrower( the homeowners) who

obtained fixed- rate mortgages will has benefits, when the lender ( banks) will loss
significant money as a result of unexpected inflation increase.

CHAPTER 28
1.

a. The adult population: 235.654.000

b. The labor force: 154.925.000

c. The labor-force participation rate: 154.925.000/235.654.000=65.74%

d. The unemployment rate: 14.729.000/154.925.000=9.507%

2.

a. Jon finds a job decrease unemployment rate because labor force stable while
unemployments decrease 1, Labor-force participation rate stable because Labor
force = unemployed + employed and when unemployed decrease 1, employed
increases 1
b.Unemployment rate: decrease because Tyrison were not count in unemployed
people

Labor- force participation rate incresed because employed people increased 1

c. Unemployment rate: decrease because people unemployed and labor force both
decreases 1

Labor-force participation rate: Decrease because labor force decrease 1

d.Unemployments rate: increases because labor force decrease

Labor-force participation ratee decrease because labor force decreases but

Daenerys still in adult population

e.Unemployment rate: unchange

Labor-force participation rate decrease because adult population increases 1

f.Unempoyment rate: idecrease because labor force increase

Labor force participation rate increase because labor force and adult population
both increase

g.unemployment rate: Unchange

Labor-force participation rate increases because adult population decreases

h. Unemployment increase because labor force decreases

Labor-force participation rate decrease because both labor force and adult
population increase

4. Pass throught 7 years and the number of employed increaesed by 17.3 million
workers, but the number of unemployed workers declined by only 6.3 million,
There was consistent because the growth of labor force when young people
become adult. One can expect a reduction in the number of people counted as
unemployed to be smaller than the increase in the number of people employed
because the labor force always growth due to the growth of population

=> the increase of employment always higher than the decrease of unemployed

5.

a. Unemployment rate increases and emloyment-population ratio decreases

b.Unemployment rate decreasees because labor force and unempoyled people

both decrease, employment-population ratio unchange

c.Unemployment rate increases because labor force and unemployed people both
increase, employment-population ratio remains constant

d.Unemployment rate decreases because labor force increase, employment-

population ratio increases

e.Unemployment rate increases because labor force decreases, employment-

population ratio decreases

f.Unemployment rate remains constant and employment- population ratio

decreases because adult population incerases

6.

a. Short-term unemployment becauser after bad weather time will passes

b.Long-term unemployment because worker need to finds new accommodation

c.Long-term unemployment because this industry is no longer popular

d.Short-term unemployment because he already has skills, he just need to find

another company

e.Long-term unemployment because he no longer availble with this automatic

industry
7.

Collectible Diagram
W* and Q* is the equilibrium of wages and labor supplies, respectively

W1 is the new wages when have adjustment increase, Qd1 is the quantity of labor
demands, Ds1 is the quantity of labor supplies

Qs1-Qd1= unemployment people

Similar with QD2

8.
a.If manufactuaring workers formed a union, the wages will adjustment
incremental around 10%, due to the declined in quantity labor demands because of
the increases in quantity labor supplies. ( Transparently seen from Diagram below)

b.Because of an increases in wages in manufactuaring markets, the unemployment

workers will be increases because of the declined in quantity labor demands =>
Quantity labor supplies in service markets will be increases by the unemployment
in other market moving to this side=> equilibrium wage will fall down