Project #86239 - E

1. Consider an economy that produces only rice, fish and sugar. The following table provides annual production data for three consecutive years. The output quantities are measured in the same unit across the goods and the years. The unit prices are nominal. Rice Fish Sugar Year Unit price Output Unit price Output Unit price Output 2012/ 3 600 10 50 8 100

2013/ 4 600 12 70 9 150

2014/ 5 620 15 110 11 300

a) Calculate the nominal GDP for each year.

b) Calculate the real GDP for 2013 and for 2014, using 2012 as the base year.

c) Calculate the annual real‐GDP growth rate from 2012 to 2013 and from 2013 to 2014, using 2012 as the base year.

d) Calculate the GDP deflator for 2013 and for 2014, using 2012 as the base year.

e) Calculate the annual inflation rate from 2013 to 2014, using the GDP deflators you obtained.

2. Minimum wage laws can cause classical unemployment.

a) What is classical unemployment? Explain in one or two sentences.

b) Using one diagram, illustrate and briefly explain how the introduction of a minimum wage generates unemployment. (Label every elements in your diagram appropriately. Do not use more than five sentences.)

c) Will an unemployment‐causing minimum wage affect everyone in the labour force equally in terms of the likelihood of being unemployed? Briefly explain your answer (either “Yes” or “No”, or “That depends on …”). Do not use more than ten sentences.

Subject Business
Due By (Pacific Time) 10/12/2015 12:00 am
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