Qrb501 - Week One Problems
WEEK ONE PROBLEMS
QRB501
McConnell & Brue Text
Chapter 7: Study Question 12
The following table shows nominal GDP and an appropriate price index for a group of selected years. Compute real GDP. Indicate in each calculation whether you are inflating or deflating the nominal GDP data.
[pic]
Chapter 8: Study Question 2
Suppose an economy’s real GDP is $30,000 in year 1 and $31,200 in year 2. What is the growth rate of its real GDP?
[(31,200 – 30,000) / 30,000] * 100 = 4.00%
Assume that population is 100 in year 1 and 102 in year 2. What is the growth rate of GDP per capita?
(30,000 / 100) = 300.00
(31,200 / 102) = 305.88
[(305.88 – 300.00) / 300.00)] * 100 = 1.96%
Chapter 8: Study Question 11
If the CPI was 110 last year and is 121 this year, what is this year’s rate of inflation?
[(121 – 110) / 110] * 100 = 10.00%
What is the “rule of 70”?
The rule of 70 is a mathematical approximation of the number of years it will take a given measure to double, given a fixed annual percentage increase. To calculate the rule of 70, divide the annual percentage of increase into the constant 70.
How long would it take the price level to double if inflation persisted at the following rates?
a) 2%
70 / 2 = approximately 35 years
b) 5%
70 / 5 = approximately 14 years
c) 10%
70 / 10 = approximately 7 years
Chapter 20: Study Question 2
Graph the accompanying demand data, and then use the midpoint formula Ed to determine price elasticity of demand for each of the four possible $ price changes. What can you conclude about the relationship between the slope of a curve and its elasticity? Explain in a non-technical way why demand is elastic in the northwest segment of the demand curve and inelastic in the southwest segment.
[pic]
[pic]
For down-sloping straight-line demand curves, price-elasticity in highest in the upper left portion of the curve and becomes more inelastic as the
QRB501
McConnell & Brue Text
Chapter 7: Study Question 12
The following table shows nominal GDP and an appropriate price index for a group of selected years. Compute real GDP. Indicate in each calculation whether you are inflating or deflating the nominal GDP data.
[pic]
Chapter 8: Study Question 2
Suppose an economy’s real GDP is $30,000 in year 1 and $31,200 in year 2. What is the growth rate of its real GDP?
[(31,200 – 30,000) / 30,000] * 100 = 4.00%
Assume that population is 100 in year 1 and 102 in year 2. What is the growth rate of GDP per capita?
(30,000 / 100) = 300.00
(31,200 / 102) = 305.88
[(305.88 – 300.00) / 300.00)] * 100 = 1.96%
Chapter 8: Study Question 11
If the CPI was 110 last year and is 121 this year, what is this year’s rate of inflation?
[(121 – 110) / 110] * 100 = 10.00%
What is the “rule of 70”?
The rule of 70 is a mathematical approximation of the number of years it will take a given measure to double, given a fixed annual percentage increase. To calculate the rule of 70, divide the annual percentage of increase into the constant 70.
How long would it take the price level to double if inflation persisted at the following rates?
a) 2%
70 / 2 = approximately 35 years
b) 5%
70 / 5 = approximately 14 years
c) 10%
70 / 10 = approximately 7 years
Chapter 20: Study Question 2
Graph the accompanying demand data, and then use the midpoint formula Ed to determine price elasticity of demand for each of the four possible $ price changes. What can you conclude about the relationship between the slope of a curve and its elasticity? Explain in a non-technical way why demand is elastic in the northwest segment of the demand curve and inelastic in the southwest segment.
[pic]
[pic]
For down-sloping straight-line demand curves, price-elasticity in highest in the upper left portion of the curve and becomes more inelastic as the