Introduction to Macroeconomics (ECONTWO)

Term/ Year: 3rd Term AY 2015-2016

Problem Set 1
Question 1: Real and Nominal GDP
GOOD
Clothing Accessories
Food
Supplies

Quantity in 2010
200 Socks
50 Seattles Coffee
100 Leone Pens

Quantity in 2011
135 Socks
80 Seattles Coffee
110 Leone Pens

Price in 2010
Php 30
Php 100
Php 10

Price in 2011
Php 35
Php 90
Php 20

Assuming that 2011 as the base year, calculate for the Real and Nominal GDP and their GDP growth for years 2010
and 2011.
Question 2: Consumer Price Index
Year
2010
2011

Banana
Php11 per bushel
Php10 per bushel

Buko
Php6 per bushel
Php12 per bushel

a) Suppose that the typical consumer basket consists of 10 bushels of banana and 15 bushels of buko and that
the base year is 2010. Based on the information in the table, what is the consumer price index for 2011?
b) Based on your answer in letter (a), what was the inflation rate for 2011?
Question 3: GDP Deflator
The data is listed per quarter, and the real GDP data was calculated using 2005 as the base year. Fill in the columns
for the GDP deflator and for the percent increase in price level.
Quarter

Nominal GDP

2008 Q1
2008 Q2
2008 Q3
2008 Q4
2009 Q1
2009 Q2
2009 Q3
2009 Q4

14,373.9
14,497.8
14,546.7
14,347.3
14,178.0
14,151.2
14,242.1
14,453.8

Real GDP

GDP Deflator

Increase in Price Level/ Inflation Rate

13,366.9
13,415.3
13,324.6
13,141.9
12,925.4
12,901.4
12,973.0
13,149.5

Question 4: Employment

Total Population
15 years and above Population
Labor force
Employed persons
a)
b)
c)
d)
e)
f)
g)

Year 2005
500 million
400 million
300 million
279 million

Year 2010
550 million
410 million
280 million
252 million

What is the number of unemployed persons in year 2005? Show your calculation.
What is the unemployment rate in year 2005? Show your formula.
What is the labor force participation rate in year 2005? Show your formula.
What is the number of unemployed persons in year 2010? Show your calculation.
What is the unemployment rate in year 2010? Show your formula.
What is the labor force participation rate in year 2010? Show your formula.
Assume the natural rate of unemployment is 5%. For the year 2010, how many people would be
unemployed in order for the economy to reach a targeted 5% unemployment rate? Show your calculation.

Question 5: Growth Rate

Thailands GDP increased from $997.5 billion in 2011 to $1,076.9 billion in 2012. Calculate the growth rate of
Thailands GDP in 2012.
Question 6: Table of GDP, Consumption and Planned Investment
Aggregate
Income/
Output
2000
2500
3000
3500
4000
4500
5000
5500

Consumption

Saving

Planned
Investment

2100
2500
2900
3300
3700
4100
4500
4900

Government
Spending

Unplanned
Inventory
Change

300
300
300
300
300
300
300
300

a) At each level of output, calculate saving. At each level of output, calculate unplanned investment change.
b) What is likely to happen to aggregate output if the economy produces at each of the levels indicated? What
is the equilibrium level of output?
Question 7: Table of GDP, Consumption, Planned Investment and Government Expenditure
For the data in the following table, the consumption function is C = 200 + 0.8(Y T). Fill in the columns in the table
and identify the equilibrium output.
Aggregate
Income/
Output
1050
1550
2050
2550
3050
3550
4050

Net
Taxes

Net
Income

Consumption

50
50
50
50
50
50
50

Saving

Planned
Investment

Government
Spending

150
150
150
150
150
150
150

200
200
200
200
200
200
200

Planned
Aggregate
Expenditure

Unplanned
Inventory
Change

Question 8: General Equilibrium Model

This is a 4-sector with tax:
Tax= .2Y+50
Exports= 150
Imports= 10 + .2Y
Planned Investment= 330
Government Purchases= 100
Savings= -250 + .5Yd
a)
b)
c)
d)

What is the equilibrium income by using the multiplier solution? Show derivation.
Suppose exports decreased to 120, what would be the new equilibrium income?
Suppose direct tax decreased by .05, what would be the new equilibrium income?
Based on your answer in (a), what is the budget standing of the economy?

* Please bring Lecture 2 notes on the day we are going to answer this since the one given in the exam would be slightly
different.