Scribd
Upload
7 views

Problem set 1 (2)

Uploaded by

afrynanabilahchemohdnazri
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
7 views

Problem set 1 (2)

Uploaded by

afrynanabilahchemohdnazri
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 5

EC1B3 Problem Set 1

due on Sunday at 6 PM

Important: if you have any doubts about the exercises, please post a question on the
EC1B3 Ed Discussion Forum.

Learning outcomes:
1. GDP calculations: the three different approaches to calculating the GDP, nominal
versus real GDP

2. Price indices and corresponding calculations: CPI and implicit GDP deflator

Question 1
Let’s consider the economy of Pickupia. The only two companies in Pickupia produce steel
(SteelCo) and trucks (TruckCo).

There are four different customers for TruckCo’s trucks:


• Pickupia’s consumers buy $200 worth of trucks for personal use.
• Pickupia’s businesses buy $100 worth of trucks to haul products and workers.
• Pickupia’s government buys $150 worth of trucks to haul products and workers.
• Foreign countries buy $50 worth of trucks for unknown reasons.
Pickupia’s consumers also import $100 worth of other goods and services from foreign
countries.
a. Calculate the GDP with the expenditure approach.
b. Calculate the GDP with the income approach.
c. Calculate the GDP with the value-added (or production) approach.

Question 2
Consider an economy that produces and consumes hot dogs and hamburgers. In the
following table are data for two different years.

Good/Year 2010 2018


Quantity Price Quantity Price
Hot dogs 200 $2 250 $4
Hamburgers 200 $3 500 $4

a. Using 2010 as the base year, compute the following statistics for each year: nominal GDP,
real GDP, the implicit price deflator for GDP, and the CPI.
b. By what percentage did prices rise between 2010 and 2018? Give the answer for each
good and for the two measures of the overall price level. Compare the answers given by
the Laspeyres and Paasche price indexes (check the readings for the definition: how do
they relate with the measures that you have calculated in the previous question?).
Explain the difference.
Question

a GDP expenditure

Y I G X M

C 200 Y 200 100 150 50 100


I 100 450 50

G 150 400

50
M 100

b GDP income

wages 70 250 sales tax 30


profit 30 120 cost of input

GDP 170 2507 30 120 100 30

320 150 100 30


400

c GDP production

GDP 500 100


400
Question 2

a nominal GDP 25064 50014 1 100


20012 20013

1000 2000 1 100

400 600

3000 1 100
1000

3 1 100

200

real GDP 250127 500137 1 100


no op 20012 200 3

500 1500 1 x 100

400 600
1 too

12 1 100
1004

implicit price deflator nominal GDP 100

real GDP
200 100

100

2 100

200

20014 20014 1 100


20012 20013
800 800 1 100
400 600

11.6 1 100

0.6 100
60

b 4 1 100

12 1 100

1001

price for hot dogs rise by 100 between 2010 and 2018

1 100
1
1 100

33.3

price for hamburgers rise


by 33.3 between 2010 and 2018

You might also like