(Part A) (20 points) Suppose nominal GDP in 2012 was $100 billion and in 2014 it
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Question
(Part A) (20 points) Suppose nominal GDP in 2012 was $100 billion and in 2014 it was $220 billion. The general price index in 2012 was 100, and in 2014 it was 140. Between 2012 and 2014, the real GDP rose by what percent?
(Part B) Use the following scenario to answer questions (Part B1) and (part B2).
In a given year in the United States, the total number of residents is 190 million, the number of residents under the age of 16 is 38 million, the number of institutionalized adults is 15 million, the number of adults who are not looking for work is 27 million, and the number of unemployed is 5 million.
(Part B1) (5 points) Refer to the data in the above scenario. What is the size of the labor force in the United States for the given year?
(Part B2) (5 points) Refer to the data in the above scenario. What is the unemployment rate in the United States for the given year? (Points : 30)
Explanation / Answer
(A)
Real GDP in 2012 = $100 bn/100 = $1 bn
Real GDP in 2014 = $220 bn/140 = $1.571 bn
Rise in real GDP= [(1.571 - 1)/1] = 0.571 (or 57.10%)
(B1)
Population = under 16 + above 16
Population = under 16 + institutionalized and above 16 + noninstitutionalized and above 16
Population = under 16 + institutionalized and above 16 + noninstitutionalized, above 16 & looking for work + noninstitutionalized, above
16 & not looking for work
Population = under 16 + institutionalized and above 16 + labor force + noninstitutionalized, above 16 & not looking for work
190mn = 38mn + 15mn + labor force + 27mn
Labor force = 190mn - 38mn - 15mn - 27mn
Labor force = 110mn (or 110,000,000)
(B2)
Unemployment rate = unemployment people / labor force = 5mn/110mn = 5,000,000/110,000,000 = 0.0455 (or 4.55%)
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