# Problem Set 1

**Topics:**Macroeconomics, Gross domestic product, Economics

**Pages:**2 (622 words)

**Published:**December 3, 2014

Macroeconomics, ECON 2123

(Instructor: Partha Sen; TA: Peter Tsui)

------------------------------------------------------------------------------------------------------------------------------------ Posted: Friday, 19 September 2014

Due: 5:00 PM Friday, 26 September 2014

(Submit your homework into the homework collection box outside the department office)

100 marks total

Part I: True/False/Uncertain (20 marks, 4 marks each)

1. GDP is the value of all goods and services produced in the economy during a given period. 2. When disposable income equals zero, consumption equals zero. 3. The multiplier is greater than 1 if T = 0 and G = 0.

4. Paradox of saving occurs when the attempts by people to save more lead to a decline in output and an increase in saving in the short run. 5. When MPC (marginal propensity to consume) increases and investment decreases, goods market equilibrium output increases.

Part II: NATIONAL ACCOUNTS (25 marks)

For Part II, consider an artificial economy and assume the following:

1. Fill in the following table: (6 marks)

year

Output of Rice

Price (per ton of rice)

Nominal GDP

Real GDP

(in 1990 $)

Real GDP

(in 2000 $)

1990

600

1,000

2000

1800

10,000

2001

2,000

10,500

2002

2,200

11,500

2. Find the growth rate of real GDP (using 2000$ as common price) for 2001 and 2002. (Express as percentage change and round to the nearest tenth, i.e., XX.X%, hereafter in Part II). (2 marks) 3. Find the growth rate of real GDP (using 1990$ as common price) for 2001 and 2002. (Express as percentage change). (2 marks) 4. Given GDP deflator in 2000 is 100, compute inflation rate using GDP deflator (using 2000$) for 2001 and 2002. (3 marks) 5. Calculate the real GDP for 2001 in chained (2000) dollars by constructing a chain-type index, if the index for 2000 is 1. Compare them with your answers in Question 1 on real GDP for 2001 (in 2000$, i.e., not chained). Are your answers in...

Please join StudyMode to read the full document