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# terms of trade between Landia and Scandia

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1. The size of the labor force in a community is 800, and 720 of these folks are gainfully employed. In this community, 200 people over the age of 16 do not have a job, and are not looking for work. In addition, 100 people in the community are under the age of 16. The unemployment rate is:
2. Suppose nominal GDP in 2005 was \$12 trillion and in 2006 it was \$15 trillion. The general price index in 2005 was 100 and in 2006 it was 102. Between 2005 and 2006 real GDP rose by what percent?
3. The consumer price index was 198.3 in January of 2006, and it was 202.4 in January of 2007. Therefore, the rate of inflation in 2006 was about

4. As the Mexican Peso depreciates in value relative to the U.S. dollar, what happens to the price of U.S. goods in Mexico? What happens to the price of Mexican goods in the U.S.? Why would a country (for example China) choose to keep their currency relatively pegged to the U.S. dollar? If the U.S. dollar were to appreciate considerably against most currencies, what would be the effect on Chinese exports to countries other than the U.S.?
5. Suppose the Japanese yen price of one British pound is 163.78 yen for each pound. A hotel room in London costs 120 pounds, while a similar hotel room in Tokyo costs 20,000 Japanese yen. In which city is the hotel room cheaper, and by how much?
6. Answer the next question on the basis of the following production possibilities data for Landia and Scandia:
Landia production possibilities:
A B C D E
Fish 8 6 4 2 0
Chips 0 20 40 60 80
Scandia production possibilities:
A B C D E
Fish 8 6 4 2 0
Chips 0 12 24 36 48
Refer to the above data. What would be feasible terms of trade between Landia and Scandia?
7. The Republic of Republic produces two goods/services, fish (F) and chips (C). In 2006, the 2000 units of F produced sold for \$5 per unit and the 5000 units of C produced sold for \$2 per unit. In 2007, the 2500 units of F produced sold for \$7 per unit, and the 6,000 units of C produced sold for \$3 per unit. Calculate Real GDP for 2007, assuming that 2006 is the base year.
8. Country A produces two goods, elephants and saddles. In the year 2006, the 100 units of elephants produced sold for \$2,500 per unit and the 30 units of saddles produced sold for \$200 per unit. In 2007, the 120 units of elephants produced sold for \$3,000 per unit, and the 50 units of saddles produced sold for \$300 per unit. Real GDP for 2007, assuming that 2006 is the base year is:
9. A Honda Accord sells for \$24,000 in the United States and for SF28,500 in Switzerland. Given an exchange rate of SF1.20 = \$1, how do the car prices of both countries compare?