Intermediate Macroeconomics
PRACTICAL EXERCISES
CHAPTER 1
1. Which of the following are included in this year’s U.S. GDP? Explain.
a. General Motors paid interest on its bonds.
b. Social security payments received by a retired factory worker.
c. The unpaid services of a family member in painting the family home.
d. The income of a dentist.
e. The money received by Smith when she sells her economics textbook to a book buyer.
f. The monthly allowance a college student receives from home.
g. Rent received on a two-bedroom apartment.
h. The publication of a college textbook.
i. A 2-hour decrease in the length of the workweek.
j. The purchase of the Microsoft bonds.
k. A $2 billion increase in business inventories.
l. The purchase of 100 shares of GM stock.
2. The following is the National Income Data for a particular country (amount in billions of
dollars).
Personal consumption expenditures $310
Receipt of factor income from overseas 6
Payment of factor income to foreigners 14
Gross private domestic investment 65
Compensation of employees 250
Rents 14
Depreciation 32
Interests 20
Proprietors’ income 36
Exports 30
Indirect business taxes 35
Imports 35
Government spending 78
Corporate profits 53
Calculate
a. GDP using the expenditure method.
b. GDP using the income method.
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c. GNP.
3. Below are some data for an economy
Year Quantity of Price of Quantity of Price of
milk milk honey honey
2010 100 $10 50 $20
2020 210 $13 80 $25
2021 215 $13 85 $26
2022 215 $14 90 $26
Take 2010 as a base year.
a. Compute nominal GDP and real GDP in each year.
b. What is the growth rate of nominal GDP in 2021? In 2022?
c. What is the growth rate of real GDP in 2021? In 2022?
d. Why the growth rate of nominal GDP is different from the growth rate of real GDP?
4. Below are some data for an economy
Year Quantity of Price of Quantity of Price of
milk milk honey honey
2010 100 $10 50 $20
2020 210 $13 80 $25
2021 215 $13 85 $26
2022 215 $14 90 $26
Take 2010 as a base year.
a. Compute nominal GDP, real GDP and GDP deflator in each year.
b. What is the inflation rate in 2021? In 2022?
5. Suppose that the market basket includes three goods: 1000 bushels of rice, 2000 bushels of
wheat and 3000 bushels of corn. Their prices in each year are given as
Year Price of Rice Price of Wheat Price of Corn
2010 $20 $12 $10
2020 $30 $18 $15
2021 $31 $18 $15
2022 $31 $19 $16
Take 2010 as a base year.
a. Compute the cost to purchase the market basket in each year.
b. Calculate the CPI in year 2020, 2021 and 2022.
c. What is the inflation rate in 2021? In 2022?
6. An economy records the following data:
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Population: 86,000 Retired people: 1,200
Children: 12,100 Discouraged workers: 60
Full time students: 1,800 People in hospitals: 120
People in prison: 50 Employed people: 69,050
a. How many people are not in the labor force?
b. How many people are in the labor force?
c. Calculate the labor force participation rate and the unemployment rate.
7. Suppose:
the adult population increases by 1.2%
the labor force increases by 2%
the number of unemployed persons increases by 1.5%
What happen to
a. the labor force participation rate?
b. the unemployment rate?
