Trn Trung Kin MAMAIU13013

Introduction to Macro Economics

ASSIGNMENT 2

1./ CHAPTER 10 PROBLEM 5:
a/ CPI in 2
nd
year = ((2+6) / (1+3)) x 100 = 200%
CPI in 1
st
year = 100%
Inflation = ((200-100) / 100) x 100 = 100%
Both bob and Rita were unaffected

b/ CPI in 2
nd
year = ((2+4) / (1+3)) x 100 = 150%
CPI in 1
st
year = 100%
Inflation = ((150-100) / 100) x 100 = 50%
Bob was unaffeccted, Rita was worse off

c/ CPI in 2
nd
year = ((2+1.5) / (1+3)) x 100 = 87.5%
CPI in 1
st
year = 100%
Inflation = ((87.5-100) / 100) x 100 = -12.5%
Bob was better off, Rita was worse off

d/ Percentage growth rate of real GDP from year 2 to year 3 : (20-16)/16 x 100 = 25%

e/ Inflation rate as measured by GDP deflator from year 2 to year 3 : 150 - 120 = 30%

2./ CHAPTER 11 PROBLEM 3:
a/ Percentage change in the price of the products :
Tennis Balls : (2-2)/2 x 100 = 0%
Golf Balls : (6-4)/4 x 100 = 50%
Bottles of Gatorade : (2-1)/1 x 100 = 100%

b/ Overall Price Year 2011 : 100 x $2 + 100 x $4 + 200 x $1 = $800
Overall Price Year 2012 : 100 x $2 + 100 x $6 + 200 x $2 =$1200
Percentage change : (1200-800)/800 x 100 = 50%

c/ If a bottle of Gatorade increased in size, it will affect the calculation of the inflation rate:
Consider price of Gatorade is measured by volume, it will lead to an increasing in price of
that bottle

d/ If Gatorade introduced new flavores in 2012, it will affect my calculation because it may
occur a fact that there will be an increasing in consumption of Gatorade bottles.

3./ CHAPTER 12 PROBLEM 5:
a/ The foreign direct investment

b/ This will increase U.S GDP. And have a smaller effect on US GNP

4./ CHAPTER 13 PROBLEM 7:
a/ Harry : $50 Ron $80 Hermione: $200
b/ Interest rate
c/ At 7% : Supply : $1000, Demand : $2000
At 10% : S : $2000, D:$1000
d/ Equilibrium rate : (5 + 8 + 20)/3 = 11%. Hence, Hermione will borrow, Ron and Harry will
lend
e/ After a year, at E of 11% : Harry , Ron, Hermione : $110
Then, Hermione worses off

6./ CHAPTER 15 PROBLEM 4:
U-rate : Unemployment rate . E-P Ratio : Employment-Population Ratio
a/ The employment decrease, unemployment increase. => U-rate
b/ The workers are not considered in labor force. => E-P Ratio
c/ Those students then will be considered in labor force => U-rate
d/ Be considered in labor force and employed. => U-rate ( U-rate will be decreased )
e/ He will not be considered in labor force. => U-rate
f/ Theyre not considered in labor force. => E-P ratio
7./ CHAPTER 16 PROBLEM 10:
a/ The money multiplier : 1 : 10% = 10
Deposits : $100 billions x 10 = $1000 billions
Money Supply : 1000 x 10 = $10000 billions
b/ Reserve : 20% x $1000 billions = $200 billions
The money multiplier : 1 : 20% = 20
Money Supply : 1000 x 20 = $20000 billions