[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

produces two products, lectures and coffee. Output and prices
of these two goods for 2002 and 2003 are given in the table:
Quantities
Prices
2002: Lectures 1,400 lectures $75 per lecture
2002: Coffee 35,000 cups $1.55 per cup
2003: Lectures 1,450 lectures $76 per lecture
2003: Coffee 40,000 cups $1.45 per cup
1. What was nominal GDP in 2002 for this economy? What
was it in 2003? What was the percentage rate of change
in nominal GDP between 2002 and 2003?
2. Using 2002 prices as your base year, what was real GDP
in 2002? What was real GDP in 2003? What was the
percentage rate of change in real GDP between 2002
and 2003?
3. What was the percentage rate of increase in prices in
this economy between 2002 and 2003 as measured by
the GDP price deflator?
4. Given the following information about the U.S. economy,
how much did real GDP grow between 1980 and 1990?
Between 1990 and 2000?
1980 1985 1990 1995 2000
Nominal GDP
(trillions) $2.80 $4.21 $5.80 $7.40 $9.96
GDP deflator
(1996=100) 57 73.7 86.5 98.1 106.9
5. Go to the Web site of the National Income Accounts at the
Bureau of Economic Analysis (www.bea.doc.gov/bea/
dn1.htm). What is the latest figure on the economy’s
nominal GDP? On real GDP? What was the growth rate
of real GDP during the most recently available quarter?
6. Go to the Web site of the Bureau of Labor Statistics
(www.bls.gov/) and find the latest data on the unemployment
rate. What was the unemployment rate for the most
recently available month? How has the unemployment
rate changed over the past year?
7. For each of the cases listed, state whether the person is
in the labor force or not. If the person is in the labor
force, is he or she employed or unemployed? Give your
reasons in each case.
(a) John recently retired from IBM and is looking for a
part-time job to supplement his retirement income.
(b) Christina works 10 hours each week at Starbucks;
she would like to find a full-time job.
(c) Ben recently quit his job at the campus bookstore to
have more time to surf.
(d) Michelle just graduated from college; she has been
sending out her resumé but has yet to land a job.
8. Are you currently in the labor force? If so, are you
employed or are you unemployed? Explain.
9. If the output gap is a negative 2 percent, what does Okun’s
Law tell us will be the level of cyclical unemployment?
10. Firms typically do not fire workers quickly as the economy
goes into a recession—at least not as quickly as their output
is reduced. How might you expect output per worker
and output per hour to move over the business cycle?
11. Suppose the Farsighted Forecasting Group, an organization
of private economists, predicts that the output gap
will fall by 4 percent over the next year. According to
Okun’s Law, by how much is the unemployment rate
likely to rise?
REVIEW AND PRACTICE ∂ 507