macroeconomic module 6

Homework 06

The Macroeconomic Perspective and Economic Growth

Answer the following based on chapter 06 and chapter 07 of Macroeconomics. Ensure that any formulas used are clearly shown by either using a formula in Excel or writing the formula out—as you would for a math class.

Using data from the Bureau of Economic Analysis (bea.gov), answer the following questions.

1. Graph the quarterly GDP from 1929 to present.

2. Identify at least 5 major troughs in the business cycles using the graph.

Answer the following questions.

1. An economy has an initial GDP per capita of $5,000 in year 2000. Graph the GDP in year 2100 at the following growth rates.

1. 1. 1%

   2. 2%

   3. 3%

   4. 5%

   5. 7%

1. An economy has an initial GDP per capita of $40,000 in year 2000. Graph the GDP in year 2100 at a growth rate of 2% and compare to the economy with initial GDP per capita of $5,000 growing at 5%.

2. What do the results in part b mean in the context of the real world?

Use the following data in your calculations.

1. Compute GDP

2. Compute net exports

Answer the following questions regarding the production of paper.

1. Calculate the value added for each step.

2. Assuming that all steps occur in the same year, what is the contribution to GDP of creating the paper?

3. Assuming that the paper is made in 2013, but not sold until 2014, what is the contribution to GDP for 2013 and 2014?

Answer the following questions using the tables below.

1. The “prime” interest rate is the rate that banks charge their best customers. Based on the nominal interest rates and inflation rates given in the first table above, in which of the years given would it have been best to be a lender? Based on the nominal interest rates and inflation rates given in first table above, in which of the years given would it have been best to be a borrower?

2. A mortgage loan is a loan that a person makes to purchase a house. The second table above provides a list of the mortgage interest rate being charged for several different years and the rate of inflation for each of those years. In which years would it have been better to be a person borrowing money from a bank to buy a home? In which years would it have been better to be a bank lending money?

Answer the following questions.

1. Ethiopia has a GDP of $8 billion (measured in U.S. dollars) and a population of 55 million. Costa Rica has a GDP of $9 billion (measured in U.S. dollars) and a population of 4 million. Calculate the per capita GDP for each country and identify which one is higher.

2. In 1980, Denmark had a GDP of $70 billion (measured in U.S. dollars) and a population of 5.1 million. In 2000, Denmark had a GDP of $160 billion (measured in U.S. dollars) and a population of 5.3 million. By what percentage did Denmark’s GDP per capita rise between 1980 and 2000?

3. The Czech Republic has a GDP of 1,800 billion koruny. The exchange rate is 20 koruny per US dollar. The Czech population is 20 million. What is the GDP per capita of the Czech Republic expressed in U.S. dollars?

Answer the following questions.

1. Say that the average worker in Canada has a productivity level of $30 per hour while the average worker in the United Kingdom has a productivity level of $25 per hour (both measured in U.S. dollars). Over the next five years, say that worker productivity in Canada grows at 1% per year while worker productivity in the UK grows 3% per year. After five years, who will have the higher productivity level, and by how much?

2. Say that the average worker in the U.S. economy is eight times as productive as an average worker in Mexico. If the productivity of U.S. workers grows at 2% for 25 years and the productivity of Mexico’s workers grows at 6% for 25 years, which country will have higher worker productivity at that point?

Gapminder is a free online tool founded by medical doctor Hans Rosling that allows people to visually explore datasets over time. In one video, Rosling shows how the world has changed over the past 200 years by examining life expectancy and income per person:

http://www.youtube.com/watch?v=BPt8ElTQMIg

Use Rosling’s video to compare the world 200 years ago to present by answering the following questions.

1. What patterns in the data existed initially (around 1809)?

2. What patterns in the data do we have today (around 2007)?

3. How has the range (the highest value minus the lowest value) of life expectancy and income per person changed over the past 200 years?

4. In which ways can one say the world is definitely better off now versus 200 years ago?