Given Change in Economic Real GDP Price Level Factor Depreciation of American dollar (1) (2) Increase in wage rates Decrease (3) Beneficial supply shock Increase Decrease Decrease in government (4) (5) purchases Increase in personal income (6) Decrease taxes Decrease in labor productivity (7) (8) 1. Based on the given economic factor condition, fill in the missing blanks with the corresponding effects to Real GDP and the Price Level. (identify "decrease" or "increase") 2. Explain the graphical representation for any 2 of the conditions listed above (except beneficial supply shock) and be sure to represent the effects to Real GDP and the Price Level based on the changing economic factor. Mike earns $60,000 in Year 1. He receives a raise in Year 2 where he earns $63,000. The CPI in Year 1 is 122 and the CPI in Year 2 is 132. a) What is the inflation rate between the two years? b) The nominal value in Year 2 was $63,000 but what is its real value? c) By what percentage has Mike's salary increased from Year 1 to Year 2? d) Has the increase in salary kept up with inflation, exceeded inflation, or been below inflation? e) Explain your answer in Part (d). Are you happy? Why or why not? 40

The Consumer Price Index is subject to the substitution bias and me quality/new goods bias. Are the Producer Price index and the GDP deflator also subject to these biases? Why or why not?

Why is the GDP deflator not an accurate measure of inflation as it impacts a household?

How to Measure Changes in the Cost of Living introduced a number of different price indices. Which price index would be best to use to adjust your paycheck for inflation?

Without looking at Table 19.7, return to Figure 19.10. If we define a recession as a significant decline in national output, can you identify any post-1960 recessions in addition to the 20082009 recession? (This requires a judgment call.)

As technological change makes us more sedentary and food costs increase, obesity is likely. What factors do you think may limit obesity?

Construct the price index for a fruit basket in each year using 2003 as the base year.

According to Table 19.7, how often have recessions occurred since the end of World War II (1945)?

Over the last century, during what periods was the U.S. inflation late highest and lowest?

If you an? out of school but working part time, are you considered employed or unemployed in U.S. labor statistics? If you are a full time student and working 12 hours a week at the college cafeteria are you considered employed or not in the labor force? If you are a senior citizen who is collecting social security and a pension and working as a greater at Wal-Mart are you considered employed or not in the labor force?