(a.) (20 points) Suppose nominal GDP in 1999 was $100 billion and in 2001 it was
ID: 1230750 • Letter: #
Question
(a.) (20 points) Suppose nominal GDP in 1999 was $100 billion and in 2001 it was $260 billion. The general price index in 1999 was 100, and in 2001 it was 180. Between 1999 and 2001, the real GDP rose by what percent?(b.) Use the following scenario to answer questions (b1) and (b2).
In a given year in the United States, the total number of residents is 230 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 12 million.
(b1.) Refer to the data in the above scenario. What is the size of the labor force in the United States for the given year?
(b2.) Refer to the data in the above scenario. What is the unemployment rate in the United States for the given year?
Explanation / Answer
(a) Calculate the real GDP for each year: 1999: Real GDP = Nominal GDP / Price index = $100 bil / 100 = $1 bil 2001 Real GDP= $260 bil/ 180 = $1.44 bil => Real GDP change : (1.44-1)/1= 44 % (b) 1.Size of labor force : Total residents - Residents who do not take part in the work force = 230- (38+15+27)= 150 mil 2.Unemployment rate = Number of unemployed/ Total labor cost = 12/150= 8%
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