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Drake University, Spring 2002 William M. Boal
HOMEWORK ASSIGNMENT 1: INSTRUCTIONS
“GDP”
Due Thursday, January 31, 2002
Procedure:
- Work the problems below outside of class (individually or in groups) before the due date.
- On the due date, discuss the problems with your group at the beginning of class and agree on common answers.
- Write your group’s answers on one answer sheet that I will supply.
- Have all members sign that sheet.
- Turn in the group’s sheet.
- I then grade the answer sheets. All members of each group receive the same grade.
If you miss class on the due date: No one may sign your name on the group’s answer sheet. However, you can still get credit if you turn in your own sheet before class on the due date —you will be graded as your own group of one!
Group assignments:
Group A Allred Grimm Larcher Parajuli Group B Anderson Harnden Larson Paul Group C Armstrong Harshbarger Marshall Qureshi Group D Bhatia Hujairi Maul Rickert Group E Black Isgor McGill Shah Group F Charlson Jacobsen McLean Steen Group G Dickmeyer Jorgenson Miller Stocking Group H Dixon Kite Mintle Taylor Group I Doran Knapp Moore Group J Faal Kotlarczyk Muhammad Wendt Group K Greene Lander Odorzynski Group L Vattaks
Don’t like to work in groups? Let me know by email. Next time I will put you in your own group of one.
Problems:
(1) [Components of GDP] The imaginary country of Woodland has just four industries. The Lumber Industry produces lumber which it sells to the other three industries. The Furniture Industry produces wood furniture for consumers. The Construction Industry produces factories and homes. The Bridge Industry builds wooden bridges for the government. There are no other goods and no foreign trade. Classify Woodland’s industries by completing the following table.
Does this industry produce a final good or an intermediate good?
If a final good, which kind: consumption ( C ), investment ( I ), government purchases ( G ), or net exports ( X )? (If not a final good, just draw a line through this box.) a. Lumber Industry [pts]
b. Furniture Industry [pts]
c. Construction Industry [pts]
d. Bridge Industry
Drake University, Spring 2002 William M. Boal
In a recent year,
- The Lumber Industry produced and sold $15 billion of lumber to the Furniture Industry, $10 billion to the Construction Industry, and $1 billion to the Bridge Industry, for a total of $26 billion in sales.
- The Furniture Industry produced and sold $35 billion of furniture to consumers.
- The Construction Industry produced and sold $3 billion of factories to each of the four industries (including itself) and also $15 billion in homes, for a total of $27 billion in sales.
- The Bridge Industry produced $5 billion in bridges for the government.
(e) [pts] Compute the spending components of Woodland’s GDP.
(f) [pts] Compute value added by each industry. [Hint: Total value-added must equal total GDP.]
Consumption (C) $ billion Value-added by the
Lumber Industry
$ billion
Investment (I) $ billion Value-added by the
Furniture Industry
$ billion
Government purchases (G) $ billion Value-added by the
Construction Industry
$ billion
Total GDP (Y) $ billion Value-added by the
Bridge Industry
$ billion
(2) [GDP and real GDP: 48 pts] In an imaginary country, only two final goods are produced—food and clothing—as shown in the following table.
Year Food Clothing GDP in GDP in Price Quantity Price Quantity 1999 prices 2000 prices
a. Compute GDP valued in 1999 prices and fill in the boxes in the next-to-last column in the table above. b. Compute GDP valued in 2000 prices and fill in the boxes in the last column in the table above. c. Compute the annual growth rate of nominal (or “current-dollar”) GDP from 1999 to 2000 to the nearest tenth of a percentage point.
d. Compute the annual growth rate of real GDP valued in 1999 prices from 1999 to 2000 to the nearest tenth of a percentage point.
e. Compute the annual growth rate of real GDP valued in 2000 prices from 1999 to 2000 to the nearest tenth of a percentage point.
f. Compute the annual growth rate of real GDP from 1999 to 2000 as it would be calculated by the Bureau of Economic Analysis.
g. Compute real GDP for 2000 in chained 1999 dollars. %
h. Compute the value of the GDP deflator in 2000.
[end of assignment]
Drake University, Spring 2002 William M. Boal
(2) [GDP and real GDP: 48 pts] In an imaginary country, only two final goods are produced—food and clothing—as shown in the following table.
Year Food Clothing GDP in GDP in Price Quantity Price Quantity 1999 prices 2000 prices
a. Compute GDP in 1999 prices and fill in the boxes in the next-to-last column in the table above. b. Compute GDP in 2000 prices and fill in the boxes in the last column in the table above. c. Compute the annual growth rate of nominal (or “current-dollar”) GDP from 1999 to 2000 to the nearest tenth of a percentage point.
d. Compute the annual growth rate of real GDP in 1999 prices from 1999 to 2000 to the nearest tenth of a percentage point.
e. Compute the annual growth rate of real GDP in 2000 prices from 1999 to 2000 to the nearest tenth of a percentage point.
f. Compute the annual growth rate of real GDP from 1999 to 2000 as it would be calculated by the Bureau of Economic Analysis.
g. Compute real GDP in year 2000, assuming that 1999 is the base year (that is, that nominal GDP=real GDP in 1999).
h. Compute the value of the GDP deflator in 2000.
[end of assignment]
