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# effect of the union on the non-unionized East region

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1. For each year shown in the table, calculate the following: real Gross Domestic Product and per capita real GDP. (specify whether your answer is in \$dollars, millions, billions, etc.) (8 Marks)
year nominal GDP
(\$billions) price level
(GDP Deflator) population
(millions)
1994 465 120 25
1995 534 130 25.5
1996 563 138 26
1997 608 145 27
2. Consider the following data on Canadian GDP: (6 Marks)
year nominal GDP
(\$billions) GDP deflator
(base year 1992)
1993 \$725 101.2
1994 \$762 102.4

a. What was the growth rate of nominal income between 1993 and 1994? (Note: The growth rate is the percentage change from one period to the next.)
b. What was the growth rate of the GDP deflator between 1993 and 1994?
c. What was real income in 1993 measured in 1992 prices?
d. What was real income in 1994 measured in 1992 prices?
e. What was the growth rate of real income between 1993 and 1994?
f. Was the growth rate of nominal income higher or lower than the growth rate of real income? Explain.
3. Suppose that the residents of Veggieland spend all of their income on cauliflower, broccoli, and carrots. In 1998 they buy 100 heads of cauliflower for \$200,50 bunches of broccoli for \$75, and 500 carrots for \$50. In 1999 they buy 75 heads of cauliflower for \$225,80 bunches of broccoli for \$120, and 500 carrots for \$100. If the base year is 1998, what is the CPI in both years? What is the inflation rate in 1999? (5 Marks)
4. Suppose that people consume only three goods, as shown in this table: (5 Marks)
1998 price \$2 \$40 \$1
1998 quantity 100 10 200
1999 price \$2 \$60 \$2
1999 quantity 100 10 200
a. What is the percentage change in the price of each of the three goods?
b. What is the percentage change in the overall price level?
c. Do tennis racquets become more or less expensive relative to Gatorade?
d. Does the well-being of some people change relative to the well-being of others? Explain.

5. The demand for and supply of unskilled workers is as follows:(10 Marks - 2 marks each)
Wage rate per hour Labour demanded Labour supplied
\$4 3000 1000
5 2500 1500
6 2000 2000
7 1500 2500
8 1000 3000
Each question applies to the above data:
a. What is the equilibrium wage rate and level of employment, and unemployment?
b. If the supply of labour increased, what would happen to the equilibrium wage? Explain.
c. If the government imposes a minimum wage of \$5 per hour, how many teenagers are working? Explain what will happen in the market.
d. If the government imposes a minimum wage of \$7 per hour, what are the levels of unemployment and employment?
e. If there is a minimum wage of \$7 per hour and demand increases by 500 workers, what is the level of unemployment?
6. Consider an economy of two main manufacturing regions, East and West. Suppose neither region is unionized initially.
a. Suppose manufacturing in the West region is now unionized. Use a labour market diagram to illustrate the effect on employment and wages in the West region.
b. Show the effect of the union on the non-unionized East region. What happens to wages and employment? Explain