show and explain your work
1. (20 points) Nominal GDP GDP Deflator Year (tlillions 5) (base year 2005) 2020 $15 2002 $10 92
a. Calculate the growth rate of nominal GDP between 2002 and 2020. You may use the formula 100 x over an N-year period and then a calculator on the web, but make sure you show how you set the problem up. Or, you may also use the simple formula that I use to approximate the growth rate.
b. What was real GDP in 2012? What was real GDP in 2002?
c. What was the growth rate in real GDP between 2002 and 2020? d. Why was there a difference between the growth rate in nominal GDP and real GDP?
2. (15 points) List five limitations of using GDP as a measure of economic well-being.
3. (15 points) List and explain the three limitations of using the CPI to measure the cost of living
4. (10 points) Suppose spending on the market basket in the base year (2005) is $7 trillion and spending in 2021 is $14 trillion. Calculate the inflation rate
5. (10 points) Henry Ford paid his workers $5 a day in 1914. If the consumer price index was 10 in 1914 and 260 in 2021, how much is the Ford paycheck worth in today’s dollars?
6. (20 points) The BLS announced that of the population of 100, 40 work full-time, 20 work half-time but would prefer to work full-time, 10 would like to work but are so discouraged that they have give up looking, 10 are full-time students who don’t work and 10 are retired.
a. Calculate the labor force
b. Calculate the unemployment rate
c. How would you characterize the part-time workers who want full-time work?
d. How would you characterize the discourage workers? 7. (10 points) Congress is currently considering raising the minimum wage to $15. What effect is this likely to have on the demand for labor? What effect is this likely to have on the supply of labor? What overall effect will these effects have on unemployment?
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