NAME EMAIL ECON 104 5 Spring 2015 Date Due Tues Feb 10 HOMEWORK 2 Important This assignment is due at the beginning of class on Tuesday February 10 After the assignment is collected we will go over it as part of the review for Exam 1 You can work together however you are expected to write up your answers individually If you cannot make it to class on 2 10 send your homework with a friend or turn it in early during office hours with your name and section time clearly marked Note We will not accept assignments that are sent via email No late assignments will be accepted 1 Please review text Chapter 8 and your class notes especially from 1 29 2 3 on calculating real and nominal GDP the GDP deflator and inflation percent change in the GDP deflator 2 Suppose the simple economy of Northland produces three goods horned helmets long boats and pickled herring Over 2011 2012 and 2013 the quantities produced and prices of these three goods are as follows Table 1 The Economy of Northland 2011 2012 Base Year 2013 Price Quantity Price Quantity Price Quantity Horned Helmets 2 00 1000 3 00 800 4 00 900 Long Boats 4 00 200 6 00 200 6 00 300 Pickled Herring 5 00 300 6 00 500 7 00 500 a Using the information in the table above show how you would calculate NGDP nominal GDP for 2011 2012 and 2013 fill in the blanks below NGDP2011 2 x 1000 4 x 200 5 x 300 NGDP2012 3 x 800 6 x 200 6 x 500 NGDP2013 4 x 900 6 x 300 7 x 500 b Suppose the base year is 2012 Show how you would calculate real GDP RGDP for 2011 2012 and 2013 fill in the blanks below RGDP2011 3 x 1000 6 x 200 6 x 300 RGDP2012 3 x 800 6 x 200 6 x 500 RGDP2013 3 x 900 6 x 300 6 x 500 over 3 Table 2 NGDP and RGDP in billions of dollars for the U S Year 2011 2012 2013 a NGDP 15 517 16 163 16 768 RGDP 15 020 15 369 15 710 In the space below write down the formula for calculating the GDP deflator measures average prices of goods and services in the U S for year x fill in the blanks below GDP Deflator PYear x NGDPYear x RGDPYear x 100 b Using the data in Table 2 show how you would calculate the GDP deflator for 2011 2012 and 2013 P2011 15 517 15 020 100 P2012 16 163 15 369 100 P2013 16 768 15 710 100 4 Suppose the GDP deflators for the U S economy for 2011 2012 and 2013 are as follows Year GDP Deflator 2011 103 2012 105 2013 107 In the space below please show how you would calculate the rate of inflation which is defined as the percentage change in the GDP Deflator price level from 2011 to 2012 and from 2012 to 2013 2012 P 2011 to 2012 105 103 103 100 2013 P 2012 to 2013 107 105 105 100