Eco 214 Real and Nominal GDP

PROBLEM SET 1Complete all questions listed below. Clearly label your answers.

1. The receipts and year of release of the five movies with the largest nominal box office revenues, along with the CPI data of each year are presented below. Assuming that the receipts for each of the movies were derived during their year of release, convert the receipts for each to real dollars for the year 2010 (2010 CPI 218.1). Put the movies in order from largest to smallest real box office receipts.

Nominal Box OfficeMovies Receipts (millions) Yr. Released CPI in Yr. Rel.Avatar $760.50 2009 214.5Titanic 600.8 1997 160.5Star Wars 461 1977 60.5Shrek 2 437.2 2004 188.9E.T. The Extra- 399.9 1982 96.5Terrestrial

2. Classify each of the following as employed, unemployed, or not in the labor force.

a. Beth is not working; she applied for a job at Wal-Mart last week and is awaiting the result of her application.b. Juan is vacationing in Florida during a layoff at General Motors plant due to a model changeover, but he expects to be recalled in a couple of weeks.c. Bob was laid off as a carpenter when a construction project was completed. He is looking for work but has been unable to find anything except a $10 per hour job which he turned down.d. Jade works 70 hours per week as a homemaker for her family of 6.e. Carson, a 17-year-old, works six hours per week as a delivery person for the local newspaper.f. Brady works three hours in the mornings at the clinic and for the last two weeks has spent the afternoons looking for a full-time job.

3. Use the following data to calculate (a) the labor force participation rate, (b) the unemployment rate, and (c) the employment/population ratio.

Population age 16 and over 15,000Labor force 7,300Not currently working 4,500Employed Full-time 5,000Employed Part-time 1,100Unemployed. 1,200

4. Consider an economy with the following aggregate demand (AD) and short-run aggregate supply (SRAS) schedules. Decision-makers have previously made decisions anticipating that the price level during the current period will be P105.

a. Indicate the quantity of GDP that will be produced during the period.b. Is it a long-run equilibrium level of GDP? Why or why not?c. How will the unemployment rate during the current period compare with the natural rate of unemployment?d. Will the current rate of GDP be sustainable into the future? Why or why not?

AD Price SRAS105 Level 105

6300 90 45006000 95 48005700 100 51005400 105 54005100 110 57004800 115 6000