ECON 1311- Macroeconomics

1) GDP (Gross Domestic Product)

Newspaper article:

Focus Economics August 24, 2016:Europe’s largest economy lost some steam but outperformed expectations in the second quarter of this year. GDP grew 0.4% quarter-on-quarter, down from Q1’s two-year high of 0.7%. Trends within the domestic economy were divergent, with investment performing weakly and consumption remaining robust. Fixed investment deteriorated, swinging from Q1’s 1.7% increase to a sharp 1.5% drop in Q2, marking the largest fall in over four years. A temporary decline in construction investment was partly behind this fall: construction activity was exceptionally strong in Q1 as a mild winder allowed it to be front-loaded and Q2’s drop reflects normalization in construction. Conversely, household and public spending continued to support growth in Q1, though to a lesser extent than in the previous quarter. Private consumption slowed but still grew 0.2%. A strong labor market, rising wages and subdued inflation have been fueling private consumption in recent quarters and continued to do so in Q2. Government consumption decelerated but remained solid at a 0.6% growth rate in Q2.

a.) According to the above news article by how much did the German economy grew in the second quarter of 2016? (0.5 Points)

b.) List the components of the GDP equation that are mentioned in the news article. (1 Point)

c.) By how much did each of the components of the GDP equation grew in Q2 2016?(2 Points)

2.) Calculate GDP

Item Billions of $
Consumption expenditure 8,000
Investment 3,000
Government Expenditure 2,000
Exports 10,000
Imports 6,000

a.) Calculate the GDP of the economy in the table above.(1.5 Points)

3.) Unemployment

The table below shows the results of a labor survey for an imaginary country. Use the numbers to answer the questions below.

Population Working age population Non-working age population Labor force employed unemployed
Total 500,000 380,000 120,000 250,000 220,000 30,000
Men 230,000 180,000 50,000 150,000 140,000 10,000
Women 270,000 200,000 70,000 100,000 80,000 20,000

a.) Calculate the unemployment rate for the whole countryandcalculate the unemployment rate for men and woman separate. (1.5 Points)
Unemployment Total:

Unemployment Men:

Unemployment Women:

b.) Calculate the labor force participation rate for the whole countryand calculate the labor force participation rate for men and woman separate. (1.5 Points)
Labor ForceParticipation Rate Total:

Labor ForceParticipation Rate Men:

Labor ForceParticipation Rate Women:

4.) Inflation
A typical family in forest country consumes only nuts and orange juice. Last year, which was the base year, the family bought 35 tons of nuts and 50 gallons of orange juice. In the base year, nuts cost $600 a ton and orange juice cost $300 per gallon. This year, a ton of nuts costs $625 and a gallon of orange juice costs $310. Calculate the Consumer Price Index (CPI) and calculate the inflation rate.(2 Points)