Problem 1 (25 points): GDP and its Components
You have the following nominal GDP (and its components) and real GDP (chained 2012 dollars) quarterly data for the US economy:
US Gross Domestic Product: Level and Change from Preceding Period
Billions of dollars 2020Q1 2020Q2 2020Q3 2020Q4 2021Q1
Gross domestic product (GDP) 21,561 19,520 21,170 21,495 22,061
Personal consumption expenditures 14,546 13,097 14,402 14,537 15,069
Gross private domestic investment 3,676 3,129 3,688 3,926 3,907
Net exports of goods and services -494 -545 -736 -804 -862
Government consumption expenditures and gross investment 3,834 3,839 3,817 3,835 3,947
Billions of chained (2012) dollars 2020Q1 2020Q2 2020Q3 2020Q4 2021Q1
Gross domestic product (GDP) 19,011 17,303 18,597 18,794 19,088
Personal consumption expenditures 13,118 11,860 12,925 12,999 13,352
Gross private domestic investment 3,334 2,850 3,330 3,540 3,498
Net exports of goods and services -788 -775 -1,019 -1,122 -1,194
Government consumption expenditures and gross investment 3,348 3,369 3,327 3,320 3,367
Source: U.S. Bureau of Economic Analysis Seasonally adjusted at annual rates
1. Calculate the percentage (the proportion) of each category in nominal GDP and in real GDP.
2. Why was the nominal GDP greater than the real GDP? By how much?
3. GDP is composed of a number of categories. What category makes up the largest portion of GDP? What category makes up the smallest portion of GDP?
4. What is “Gross private domestic investment”? What does gross private domestic investment measure?
5. What is “Net exports of goods and services”? Why it is negative?
Problem 2 (30 points): Inflation, Deflator
Let’s take an economy with 3 products: Apple, Orange and Banana. Suppose that the prices and produced quantities are as follow:
1. Calculate the Nominal GDP for each year
2. Calculate the Economic Growth
3. Calculate the Real GDP (Base Year 2000)
4. Calculate the Deflator and Inflation for each year (Base Year 2000)
5. Comment the obtained results in the previous question
Problem 3 (25 points): Multiple Choice Questions
Coaches have obtained from the canton an exceptional subsidy following the excellent sports results. It was decided that part of this grant was going to be used to provide sportswear. Contact is therefore made with companies in the region, to purchase
large quantities of tracksuits; these companies are put into competition through a "call for tenders"
Demand: Various choices are made: they specify how much the coaches were willing to pay for tracksuits, at what price.
The offer: Company E, which won the tender, offers various possibilities. These possibilities specify how E diversifies its range of tracksuits at given prices.
1. Graphically represent the relationship between the price (on the y-axis) and the quantities (on the x-axis).
2. From these data, establish the relationship between the price and the quantity offered by the seller (quantities on the abscissa),
3. Represent on the same graph the supply curve and the demand curve.
4. Compare the demand curve and the supply curve.
Problem 4 (20 points): Multiple Choice Questions
1. Which of the following statements about factors of production is false?
a) The term 'factors of production' is another term for resources.
b) The factor of production termed labor means human resources.
c) The factor or production termed land means natural resources.
d) The factor of production termed capital means the money which the owners of firms need in order to set their firms up.
2. Which of the following statements about the use of resources is not one of the key questions in economics?
a) How are resources used?
b) Where are resources used?
c) For what are resources used?
d) For whom are resources used?
3. Which of the following statements about producers is false?
a) Households produce many goods and services for themselves
b) People set up some producers who do not aim to make profits.
c) All the goods and services consumed in any country are produced by its own producers.
d) Governments arrange the production of some goods and services.
4. Which of the following statements is true?
a) Despite the problem of scarcity, people do not always want producers to use the most efficient production methods.
b) The problem of scarcity would disappear if the world's population grew to ensure more labour was available.
c) A producer who uses no more resources than it needs must display productive efficiency.
d) The world's economies were as integrated 50 years ago as they are today
5. What is meant by intermediate goods and services?
a) The same as capital goods, such as plant, buildings, vehicles and machinery.
b) Products which one firm buys off another and then uses up in its own products.
c) All inputs bought by firms, including labour and raw materials.
d) Imports.
6. What is meant by the term final goods and services?
a) The same as the term intermediate goods and services.
b) The same as the term consumer goods and services.
c) All goods and services except those traded second hand.
d) Goods and services which are finished as far as the economy is concerned.
7. Which of the following statements is false?
a) Purchases of capital goods are called investment
b) GDP equals the total value of wages received by households.
c) In a simple economy with just households and firms, the value of investment equals the value of saving.
d) In a simple economy with just households and firms, the value of investment plus consumers' expenditure equals GDP.
8. Which of the following statements is false?
a) GDP measures the value of all the goods and services produced in the economy.
b) GDP stands for gross domestic product.
c) GDP excludes intermediate goods and services.
d) GDP equals wages plus trading profits.
9. Which of the following statements is true?
a) Microeconomics is concerned chiefly with the economy as a whole.
b) Macroeconomics is concerned chiefly with individual markets.
c) Governments have no influence over market prices.
d) When economists study the price in a market, their chief aims are to understand why the price is what it is and why it may change.
10. Which of the following statements is false?
a) An economic model is a theory based on key variables and expressed in formal terms.
b) An economic model is tested by seeing how accurate its predictions are.
c) Testing economic models is rarely tricky.
d) The words 'ceteris paribus' mean other things remaining the same.
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