Boston EC 202 – Investment and Consumption goods

Boston EC 202 – Investment and Consumption goods

Subject: Economics    / General Economics
Question
EC 202, Spring 2017, Boston University Name: ___________________________
Problem Set#1 based on Chapters 2 and 3
100 points
Instructions: Complete these questions at home. One question worth 10 points will be provided in class on W,
02/08.
i)
You may discuss with others but write in your own words/steps.
ii)
Show all your work/steps/formulas.
iii)
Label all graphs.
iv)
Please write legibly.
v)
It is advisable that you read your notes and book and work on the practice questions before attempting
this problem set.
vi)
If you are using sources other than the book (including online sources) to complete this problem set,
please cite.
vii)
Problem sets with no name will earn 0 points.
viii)
10% of the points will be deducted if problem sets are not stapled.
1. Investment and Consumption goods (20 points):
a) Distinguish between investment goods and consumption goods. (10 points)
b) If you buy a hammer for repairs in your house, is it investment or consumption? What if you buy a
hammer for your construction business? (5 points)
c) If you buy a house for your own use and a building for your company. Which one is investment and
which one is a consumption good? Explain. (5 points) 2. Calculate the unemployment rate using the labor force statistics given below for December 2016: (10 points)
Employed: 147,283,000
Labor force participation rate: 62.7
Not in the labor force: 95,102,000
Source: BLS 3. In the table below, you are given the price per unit of the 3 items in 2011, 2012 and 2013. You are also given
the quantities produced in 2012 and 2013. Assume that these are the only items that are produced in this
country. 2011 is the base year. (30 points)
Units
produced
in 2013
8
5
3 Blueberries
Pineapples
Cheese
a)
b)
c)
d) Units
produced
in 2012
5
7
3 Units
produced
in 2011
4
8
2 Price/
unit in
2013
$2.10
$2.50
$3.50 Price/
unit in
2012
$2.00
$2.50
$3.00 Price/
unit
in
2011
$2.00
$2.00
$2.50 Find the Nominal GDP, Real GDP in base year prices and the GDP Deflator in 2013. (7 points)
Find the Nominal GDP, Real GDP in base year prices and the GDP Deflator in 2012. (7 points)
Calculate the inflation rate between 2012 and 2013 using GDP deflators. (2 points)
Calculate the chain weighted real GDP in 2012 and 2013. (14 points)
N2 W 4. If Y = 20N where N stands for labor hours, Y is output. If = 5, how many hours should the firm hire
2
P
labor for? Should the firm hire labor for the 10th hour? Should the firm hire labor for the 20 th hour? Why or
why not? (10 points) 5. Suppose Y = 40+30N- and Labor Supply: = 10 + 3 (20 points)
2 a) Write the equation for the Labor Demand curve. (10 points)
b) Find the equilibrium real wage, employment and output. (10 points) 2 1