Macro-Economic

Macro-Economic

Ques 1)Assume that consumer spending is $1,000, government expenditures are $250, investments by industry are $200, and the excess of exports over imports is $300. Compute the GDP.

Answer 1)

In order to calculate GDP considering the information given are:

C = Consumer Spending = $1,000

I = Investment made by industry = $200

E = Excess of Exports over Imports =$300

G = Government Spending = $250

Y = GDP

The following for calculating GDP is: Y = C + I + E + G

Y = C + I + E + G

= 1000+200+300+250

Y = 1750

Question 2)

a) If the CPI went from 106 to 111 during the past year, the rate of inflation, in percent, was?

If the CPI went from 106 to 111 during the past year, the rate of inflation would be calculated through the formula of: ((B - A)/A)*100

A: Starting number = 106

B: Ending number = 111

((B - A)/A)*100

((111-106)/106*100

4.72%

Hence, 4.72 % inflation rate is over the sample year.

b) If the CPI went from 217 to 234 over the past year, the rate of inflation was?

CPI went from 217 to 234 over the past year; the rate of inflation would be as followed:

((B - A)/A)*100

((234-217/217)*100

7.8%

Hence, 7.8 % inflation rate is over the sample year.

Questions 3)

Assume the total civilian labor force is 30,000 people and the number of unemployed is 2,500 people. Compute the unemployment rate, in percent.

Labor force: 30,000 people

Unemployed force: 2,500 people

Formula: Unemployment Rate = Number of Unemployed / Total Labor Force

= 2500/30000

= 8.33%

Hence, the unemployed rate is 8.33%.

With the above problem, assume the total civilian labor force is 30,000 people, but, 500 of the unemployed have now given up and have stopped looking for work. Compute the unemployment rate, in percent. (please show your work)

Formula: Unemployment Rate = Number of Unemployed / Total Labor Force

= 2000/29500

= 6.8%

As 500 people have stopped working, the total number of unemployment would be 2000 while total labor force will be 29500. Therefore, the unemployment rate would be 6.8%.

Yield Curve Links

Answer 1) The differences in rates among these bonds are caused due to the default risk difference and inflation difference. This is due to the difference in the maturities. If the maturities were same then it would be due to the liquidity and default risk difference (Deepashree &Agarwal V., 2011).

Question 2) Which statement is False

The liquidity premium requires that an asset can be sold both quickly and for fair market value is aisle state as the ...