Macro-Economic Indicators

GDP

Questions:

1. Assume that consumer spending is $1,000, government expenditures are $300, investments by industry are $150, and the excess of exports over imports is $200. Compute the GDP. (Please show your work)

Answer

Y = I + C + G + E

Where

Y = GDP

I = Investment made by industry

C = Consumer Spending

G = Government Spending

E = Excess of Exports over Imports

Y= $150+$1000+$300+$200

Y= $1650

2. If we are able to increase our domestic energy production, and that allows us to import less oil from foreign countries, briefly explain what will happen to the GDP.

Answer

There is one more component in GDP it is called E, it shows the difference between value of all imports and value of all exports, if imports is less than exports, it increases the GDP. In above assumption domestic production is increasing that means people are working harder, less import from foreign countries will increase the GDP of nation. (Frumkin, N. 2006)

Inflation

Questions:

1. If the CPI went from 100 to 104 during the past year, the rate of inflation, in percent, was? (Please show your work)

For calculating inflation rate, we use consumer price index,

Formula for calculating inflation rate

((B-A)/A)*100

B=104

A=100

=104-100/100*100

Inflation Rate = 4%

2. If the CPI went from 231 to 234 over the past year, the rate of inflation was? (Please show your work)

I will use same formula in this case:

B=231

A=234

=231-234/234*100

Inflation Rate = -1.282

Unemployment rate

Questions:

1. Assume the entire civilian labor force is 20,000 people and the number of unemployed is 2,000 people. Compute the unemployment rate, in percent. (Please show your work)

Formula for calculating Unemployment rate is

Unemployment Rate = Number of people unemployed/ number of people in the civil labor force.

=2000/20000*100

=10%

2. Assume the entire civilian labor force is 20,000 people, the number of unemployed is 2,000 people but, 500 of the unemployed have now stopped looking for work. Compute the unemployment rate, ...