Scribd
Upload
231 views4 pages

ECO121 - Test 01 - Individual Assignment 01

The correct annual rate of inflation is: b. 12.5% Calculation: (New CPI - Original CPI)/Original CPI * 100 (225 - 200)/200 * 100 = 12.5%

Uploaded by

Dang Mai Linh (K16HL)
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
231 views4 pages

ECO121 - Test 01 - Individual Assignment 01

The correct annual rate of inflation is: b. 12.5% Calculation: (New CPI - Original CPI)/Original CPI * 100 (225 - 200)/200 * 100 = 12.5%

Uploaded by

Dang Mai Linh (K16HL)
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 4

Student Information

Name: DANG MAI LINH Roll number:


Room No: Class:

FOR TEACHER ONLY


MARK MARKED BY Signature of Proctor
(NAME AND SIGNATURE)

ECO121_Test 01_Individual Assignment 01

Question1. (3 points)

Fill in blanks in table below;


Year 1 (2000) Year 2 (2003) Year 3 (2006)
Market Basket Items # of Units $ per unit Total Cost $ per unit Total Cost $ per unit Total Cost
Cheese 2 lbs $1.75 $3.50 $1.50 3$ $1.50 3$
Blue Jeans 2 pairs $12.00 $24.0 $15.50 31$ $20.00 40$
Gasoline 10 gallons $1.25 $12.5 $1.60 16$ $2.70 27$
Total Cost of Basket --------- 40 $ 50 $ 70 $

Using year 1 as our base year, using the formula above to calculate the index

and compare the CPI inflation rate over those years

Year 1 = (40/40) * 100 = 100 index

Year 2 = (50/40) *100 = 125 index

Year 3 = (70/40)*100 = 175 index


CPI Year 1 to year 2 = (125 – 100) / 100 * 100 = 25%

CPI Year 1 to year 3 = (175 – 100) / 100 * 100 = 75%

CPI Year 2 to year 3 = (175 – 125) / 125 * 100 = 40%

Question 2 (3 points):
Suppose there is an economy that produces only two goods: tequila and peyote. In 2008, the
economy produced 100 litres of tequila and 200 peyote plants. The unit prices (per litre or per
plant) in 2008 were $100 and $500. 1000 people were employed in the tequila sector, and the
peyote sector employed 500.

In 2009, the weather was particular sunny and hot, which is good for tequila production but
bad for the cultivation of peyote. As a result, the economy produced 120 litres of tequila but
only 191 peyote plants in 2009.

The tequila and peyote sold for $90 per litre and $550 per plant that year. 1100 people were
employed in the tequila sector, while only 450 people worked in the peyote sector.

Answer the following questions:

a. How much is Nominal GDP in 2008 and 2009? What is the percentage change?

Nominal GDP in 2008= 100x100$ + 200x500$= $110000


Nominal GDP in 2009= 120x90$ + 191x250$ = $115850
%GDP= (115850-110000)/110000 = 5.32%

b. How much is Real GDP in 2008 and 2009, by considering 2008 as the base year?
What is the percentage change?

Real GDP(2008)= 100*100 + 200*500= $110000


Real GDP(2009)= 120*100 + 191*500= $107500
%GDP= (107500 – 110000)/110000= -2.27%

c. How much is the GDP deflator in the two years? By what percentage does the
price level change from the base year to 2009?

The GDP deflator is the ratio of nominal GDP to real GDP. In the base
year, nominal GDP equals real GDP, so the GDP deflator is 1. In 2009 it is
approximately 1.08, so the price level rose by about 8%.

d. What was the growth rate of average labour productivity for the whole economy
between 2008 and 2009?
The average labour productivity in 2008: 110000/(1000+500)= $73.333
per worker
The average labour productivity in 2009: 107500/(1100+450)= $69.35
per worker
=> Growth rates: (69.35 – 73.333)/73.333= -5.43%
Question 3 (2 points)
In the country of Kwaki, people produce canoes, fish for salmon, and grow corn. In one year
they produced 5000 canoes using labor and natural materials only, but sold only 4000, as the
economy entered a recession. The cost of producing each canoe was $1000, but the ones that
sold were priced at $1250. They fished $30 million worth of salmon. They used $3 million of
the salmon as fertilizer for corn. They grew and ate $55 million of corn. What was Kwaki's
GDP for the year?

Inventories are valued at the cost of production:


The 1000 canoes in inventory were valued at $1000 each for a total of $1000000.
The 4000 canoes at $1250 each totaled $5000000.
Salmon as a final good was worth $27000000 and corn worth $55000000 was
grown.-> GDP= $88000000.

Question 4. (2 points)
1. Indicate whether each of the following groups is helped or hurt by inflation
A. Banks who extend many fixed rate loans HURT

B. Students who put savings in a fixed rate savings account HURT

C. Mechanics who pay for new tools with a fixed rate loan HELPED

D. People who sign a four-year lease on an apartment HELPED

E. Homeowners who purchase a home and have a 30-year fixed rate mortgage HELPED

F. Homeowners who purchase a home and have a 30-year adjustable rate mortgage HURT

2. An increase in the CPI from 200 to 225 would indicate an annual rate of measured inflation
of
a. 1.3% b. 12.5% c. 25% d. 200% e. 225%

You might also like