-------------------------------------------------------------------------------------------------------------------------------
EC101: Principles of Macroeconomics
Semester 1, 2024
Tutorial 2
-------------------------------------------------------------------------------------------------------------------------------
Question 1
Classify each of the following statements as positive or normative AND explain why.
a) Society faces a short-run trade-off between inflation and unemployment.
b) A reduction in the rate of growth of money will reduce the rate of inflation.
c) The Federal Reserve should reduce the rate of growth of money.
d) Society ought to require welfare recipients to look for jobs.
e) Lower tax rates encourage more work and more savings.
Question 2
a) Why does GDP include net exports instead of simply exports?
b) What is the process used to separate the change in GDP due to an increased output of goods and
services from the change due to increased prices? Why do we make this distinction?
c) GDP is considered a good measure of economic well-being. However, GDP is not a perfect measure
of well-being. Why? Discuss factors that are not included in GDP but that affect whether people are
better off.
Question 3
Table 1 shows the following amounts for the years 2009 to 2011.
Year
Nominal GDP
Real GDP
2021
$500
$500
2022
$600
$545.5
2023
$720
$600
Prices in $billions
What is the GDP deflator for the three years?
