Econ-545 Week 6 Quiz

1. inquiry (TCO F) The size of the labor force in a comm building blocky is 1,000, and 850 of these folks are gainfully employed. In this community, 50 plurality over the age of 16 do not have a job and are not looking for work. In addition, 80 people in the community are under the age of 16. The unemployment ramble is ______. Student tell Unemployment rate=unemployed/labor force*100 150/ mebibyte*100=15% 1000-850=150 (number of people unemployed) then divided by total labor force divided by 100 Instructor report The unemployment rate is calculated by dividing the number of unemployed by the labor force.The labor force is calculated by subtracting three things from the population ( under 16, of institutionalised adults, and not looking for work). In this example,you are given the size of the labor force (1,000), and you are also told that 850 are employed. Therefore, 150 are unemployed, and theunemployment rate is plain 150/1,000 or 15%. Points Received 15 of 15 Comments 2. Question (TCO F) Supposenominal gross domestic productin 2005 was $15 trillion, and in 2006 it was $16 trillion. The normal price index in 2005 was 100, and in 2006 it was 103.Between 2005 and 2006,real gross domestic productrose by what percent? Student Answer nominal gross domestic product and REAL GDP must be equal in the base year. 2005 15tr, price index = 100 since nominal and real GDP must be equal in the base year 15tr/1. 03=16. 56tr(16. 56-16. 00)/16. 00=4% or 3. 5% Instructor report You need to make use of the inflation formula for the GDP deflator here and equivalence results amidst the 2 years. For 2005 100 = $15 T / reliable GDP x 100 So, Real GDP must equal $15 T. You could also have sex that Real GDP and nominal GDP are the same in the base year.For 2006 103 = $16 T / Real GDP x 100 1. 03 = $16 T / Real GDP Real GDP = $16 T / 1. 03 So, Real GDP must equal $15. 534 T. The percentage increase in Real GDP testament then be (15. 534 15) / 15 x 100 = (0. 534 / 15) x 100 = 3. 56%Therefore Real GDP increases by 3. 56% between 2005 and 2006. Points Received 19 of 20 Comments 3. Question (TCO F) The consumer price index was 198. 3 in January of 2006, and it was 202. 4 in January of 2007. Therefore, the rate of inflation in 2006 was about ______. Student Answer 202. -198. 3=4. 1 4. 1/198. 3=. 02067 or 2. 07% Instructor story The rate of inflation is the rate of change of the inflation indicator, or more specifically (New impairment Index Old Price Index) / (Old Price Index) x 100 In this episode this equals, (202. 4 198. 3) / 198. 3 x 100 = (4. 1 / 198. 3) x 100 = 2. 07% or approximately 2%. Points Received 15 of 15 Comments 4. Question (TCO E) (10 points) As the U. S. dollar appreciates in value relative to the japanese Yen, what happens to the price of U. S. goods in Japan?What happens to the price of Nipp cardinalse goods in the U. S.? (10 points) Why would a country (for example Chi na) choose to keep their currentness relatively pegged to the U. S. dollar? If the U. S. dollar were to appreciate considerably against most currencies, what would be the effect on Chinese exports to countries other than the U. S.? Student Answer the price of goods in Japan start going up. the price Japanese goods in US start going down. China keeps its currency pegged in order to sell their goods for a cheaper price in the US and to make the US market dependent on their product. If dollar appreciate it will drag Chinas currency with it,in other words reducing China export. Instructor Explanation When a countrys currency appreciates, it becomes more valu able versus the other currency were comparing against. So, in this case, it would take fewer dollarsto purchase the same amount of Japanese Yen, U. S. goods become more dear(predicate) to Japanese buyers, and Japanese goods become cheaper to U. S. buyers. A country such as China might choose to peg their currency to the U. S. dollar to keep prices inactive for a keytrading partner like the U.S. If the U. S. dollar would appreciate considerably against mostcurrencies, this would not affect China trade with the U. S. , butChinese goods would become more expensive to their other trading partners, and could cause Chinese exports to these other markets to decrease. Points Received 17 of 20 Comments 5. Question (TCO E) Suppose the Indian rupee price of oneBritish pound is 54. 392 rupees for each pound. A hotel get on in London costs 120 pounds, while a similar hotel room in New Delhi costs 6,500 Indian rupees.In which city is the hotel room cheaper, and by how much? Student Answer London hotel room 120 pound or 6527 rupee (120*54. 392) India hotel room 119. 50 pounds (6500/54. 392) or 6500 rupee the hotel room is cheaper in India for . 50 cent in pound or 27 rupees Instructor Explanation Since the exchange rate is 1pound = 54. 392 Indian rupees, we can convert the price of the hotel room i n London to Indian rupees and then be able to compare. 120 pounds = rupees(120 x 54. 392) = 6,527 rupees.Since the hotel room in New Delhicosts 6,500 rupees, it must be that the hotel room costs 27 rupeesmore in London than in New Delhi. Points Received 15 of 15 Comments 6. Question (TCO E) Answer the next question on the basis of the following production possibilities data for Egypt and Greece Egypt production possibilities ABCDE Shirts 0 36 912 Pants 2418 12 60 Greece production possibilitiesABCDE Shirts4030 2010 0 Pants 0 40 80 120160 Refer to the above data. What would be feasible terms of trade between Egypt and Greece? Student Answer terms of trade between 2 countries lie somewhere between the opportunity costs in the 2 countries. in this case Egypt 1 shirt= 2 pants and in Greece case 1 shirt=4 pants, so the only feasible term of trade between the 2 countries would be anywhere in between these limits anything between 2 and 4 shirts and pants would work. t any terms of trade higher or lower than 2 or 4 pants per shirt , one of the countries would be able to do better than the terms of trade simply by trading off resources in their own country. Instructor Explanation Feasible terms of trade between 2 countries lie somewhere between the opportunity costs in the 2 countries. In this case, in Egypt 1 Shirt = 2 Pants, and in Greece 1 Shirt = 4 Pants. So,the only feasible terms of trade between the 2 countries would be anywhere in between these limits anything between 2 and 4 Pants per Shirts would work.At any terms of trade higher or lower than2 to 4 Pants per Shirts, one of the countries would be able to do better than the terms of trade simply by trading off resources in their own country. Points Received 20 of 20 Comments 7. Question (TCO F) The Republic of Republic produces two goods/services, fish (F) and chips (C). In 2006, the 1000 units of F produced sold for $8 per unit and the 5000 units of C produced sold for $1 per unit. In 2007, the 1500 units of F produced sold for $10 per unit, and the 6,000 units of C produced sold for $2 per unit.Calculate Real GDP for 2007, assuming that 2006 is the base year. Student Answer base year 2006 1,000 units of fish at 8/unit =8,000 5,000 units of chips at 1/unit =5,000 GDP=13,000 2007 1,500 units of fish at 10/unit-15,000 6,000 units of chips at 2/ units at 2/unit =12000 GDP =27,000 Real GDP with 2006 as the base year 1500 units of fish at 8/unit =12,000 6,000 unit chips at 1/unit = 6,000 Real GDP =18,000 18,000-13,000/18,000 GDP grew by 28% Instructor Explanation For 2006, Nomimal GDP= ($8 x 1000) + ($1 x 5000) = $13,000.Real GDP for 2006 would be the same ($13,000). For 2007, Nominal GDP = ($10 x 1500) + ($2 x 6000) = $27,000. Real GDP for 2007 would be ($8 x 1500) + ($1 x 6000) = $18,000. That is, when calculating real GDP for a given year you use the production numbers for that year and the prices from the baseyear. Points Received 12 of 15 Comments 8. Question (TCO F)Country Aproduces two goods,elephantsandsaddles. In the year2006, the10 units of elephants produced sold for $2,000 per unit and the25 units ofsaddles produced sold for $200 per unit.In 2007, the20 units ofelephants produced sold for $3,000 per unit, and the 50 units ofsaddles produced sold for $300 per unit. Real GDP for 2007, assuming that2006 is the base year, is ______. Student Answer base year 2006 10 units at 2000 per unit =20,000 25 saddles at 200=5000 GDP=25,000 2007 20 units at 3,000 per unit =6,000 50 saddles at 300=15000 GDP=21,000 real GDP with 2006 as the base year 20 units of elephants at 3000 = 60000 for 50 units of saddles at 25 =1250 real GDP 61250 61250-21000/61250 real GDP grew by 65%. Instructor Explanation Real GDP is calculated for a given year by using the quantities produced in that year and substituting the base year prices. In this example we get 20 ($2,000) +50 ($200) = $40,000 + $10,000 = $50,000. Points Receiv ed 12 of 15 Comments 9. Question (TCO E) A Honda Accord sells for $28,000 in the United States and for SF35,520 in Switzerland. Given an exchange rate of SF1. 5 = $1, how do the car prices of both countries compare? Student Answer with an exchange rate of SF1. 25=$1 28,000*1. 25=35,000 SF price is 35,520 the car sells for SF520 more in Switzerland that it does in the US. Instructor Explanation At an exchange rate of $1 = SF1. 25 $28,000 would equal (1. 25 x 28,000) Swiss Francs = SF35,000, meaning that the car sells for SF520 more in Switzerland than it does in the U. S. Points 15 of 15