9 Homework  Questions:



1. The size of the labor force in a community is 1,000, and 850 of these folks are gainfully employed. In this community, 50 people over the age of 16 do not have a job, and are not looking for work. In addition, 80 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 $14 trillion.Ê The general price index in 2005 was 100 and in 2006 it was 104.Ê Between 2005 and 2006 real GDP rose by what percent?


3. The consumer price index was 190.7 in January of 2005, and it was 198.3 in January of 2006.Ê Therefore, the rate of inflation in 2005 was about: 

4. As the Euro appreciates in value relative to the U.S. dollar, what happens to the price of U.S. goods in Europe?Ê What happens to the price of European goods in the U.S.?

Why would a country (for example China) choose to keep their currency relatively pegged to the U.S. dollar?Ê 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 Indian rupee price of oneÊBritish pound is 54.392 rupees for each pound.Ê A hotel room in London costs 120 pounds, while a similar hotel room in New Delhi costs 6,500 Indian rupees.Ê In which city is the hotel room cheaper, and by how much?

Cost in London = 120 pounds = 120 * 54.392 INR = 6527.04 INR

Cost in New Delhi = 6500 INR

The hotel is cheaper in New Delhi by 27.04 INR.

6. Answer the next question on the basis of the following production possibilities data for Landia and Scandia: 
Landia production possibilities:
ÊÊÊÊÊÊÊÊÊÊÊ ÊÊÊÊÊÊÊÊÊÊÊ AÊÊÊÊÊÊÊÊÊÊÊ BÊÊÊÊÊÊÊÊÊÊÊ CÊÊÊÊÊÊÊÊÊÊÊ DÊÊÊÊÊÊÊÊÊÊÊ E
FishÊÊÊÊÊ ÊÊÊÊÊÊÊÊÊÊÊ 8ÊÊÊÊÊÊÊÊÊÊÊ 6ÊÊÊÊÊÊÊÊÊÊÊÊ 4ÊÊÊÊÊÊÊÊÊÊÊÊ 2ÊÊÊÊÊÊÊÊÊÊÊÊÊ0
ChipsÊÊÊÊÊÊÊÊÊÊÊÊÊÊ 0ÊÊÊÊÊ ÊÊÊÊÊ 4ÊÊÊÊÊÊÊÊÊÊÊÊÊ 8ÊÊÊÊÊÊÊÊÊÊÊ12ÊÊÊÊÊÊÊÊÊÊÊ16
Scandia production possibilities:
ÊÊÊÊÊÊÊÊÊÊÊ ÊÊÊÊÊÊÊÊÊÊÊ AÊÊÊÊÊÊÊÊÊÊÊ BÊÊÊÊÊÊÊÊÊÊÊ CÊÊÊÊÊÊÊÊÊÊÊ DÊÊÊÊÊÊÊÊÊÊÊ E
FishÊÊÊÊÊÊÊÊÊÊÊÊÊÊÊÊ48ÊÊÊÊÊÊÊÊÊÊÊ 36ÊÊÊÊÊÊÊÊÊÊ24ÊÊÊÊÊÊÊÊÊÊ 12ÊÊÊÊÊÊÊÊÊÊÊÊ 0
ChipsÊÊ ÊÊÊÊÊÊÊÊÊÊÊ 0ÊÊÊÊÊÊÊÊÊÊÊ 12ÊÊÊÊÊÊÊÊÊÊÊ24ÊÊÊÊÊÊÊÊÊÊÊ36ÊÊÊÊÊÊÊÊÊÊÊ48
Refer to the above data.Ê 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 200 units of F produced sold for $3 per unit and the 500 units of C produced sold for $1 per unit.ÊIn 2007, the 300 units of F produced sold for $4 per unit, and the 600 units of C produced sold for $2 per unit. Calculate Real GDP for 2007, assuming that 2006 is the base year

8. Country AÊproduces two goods,ÊelephantsÊandÊsaddles. ÊIn the yearÊ2006, theÊ30 units of elephants produced sold for $3,000 per unit and theÊ50 units ofÊsaddles produced sold for $300 per unit. In 2007, theÊ40 units ofÊelephants produced sold for $4,000 per unit, and the 60 units ofÊsaddles produced sold for $250 per unit.ÊReal GDP for 2007, assuming thatÊ2006 is the base year is:

9. A Honda Accord sells for $24,000 in the United States and for SF29,500 in Switzerland.Ê Given an exchange rate of SF1.25 = $1, how do the car prices of both countries compare?

Cost in the U.S. = 24,000 USD

Cost in Switzerland = SF29500 = 29500 * (1/1.25) USD = 23600 USD

The car is cheaper in Switzerland by 400 USD.