Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Chapter 8, Problem 3WWMD
To determine
To evaluate the stock market to be a good economic
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According to the Bureau of Economic Analysis, the GDP Deflator for the 3rd Quarter 2021 is +5.7%. The U.S. Bureau of Labor Statistics reported the Consumer Price Index (CPI) as rising 5.4 percent over the last 12 months, not seasonally adjusted. Given this information:
1) Interpret these data and summarize its meaning.
2) What are these data measuring?
3) If you were a business economist, which would you use and why?
Construct the following graphs for the US economy using
the data from FRED, BEA, and BLS websites. Select the
period from 1945 (subject to data availability) until the
most recent year available. You have
to create each graph three different times by utilizing the
data from the three different websites. Be sure
to indicate the source of data for each graph.
Nominal GDP and real GDP levels on the same graph (two
curves on the same graph)
Real GDP growth rate Unemployment rate
Price Index (CPI or GDP deflator) Inflation rate
Using the data in the table, compare the percentage rates of change in nominal GDP, real GDP, and the GDP Price Index over these three time periods. Note changes in the magnitudes of each. Are there periods when prices grew more rapidly? Are there periods where real output grew more rapidly? Note how these affect the percentage change in nominal GDP. Make specific observations based on the information in the table.
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- Suppose you are reading a magazine showing a figure that plots the U.S. GDP from 1900 to 2012 in "2005 chained dollars" . It means: a) The GDP is calculated using 2005 prices; b) The GDP is calculated applying the variable-weighted price-index approach with 2005 as the base 9. year; c) The GDP is price-adjusted based on the chain-weighted price-index approach with 2005 as the base year. d) None of the above.arrow_forwardQuestion 5: Suppose you recently received the GDP numbers for the last quarter. When you calculated the change from the previous quarter, you observed the following: observed the following changes: Y ——> +1.5% C ——> +0.1% I ——> +3% G ——> +0.2% NX ——> unchanged How would you interpret each value in context with the whole of GDP? Is there anything in the data that is predictive (potentially) of future conditions? Question 6: You have a business that manufactures circuit boards for mobile phones. Suppose you received the GDP numbers for the quarter after those in problem 5: Y ——> +0.3% C ——> -2% I ——> +2.5% G ——> +0.2% NX ——> unchanged a. Using the data from both quarters (prob 5 and prob above), what do you expect is happening in the economy and what might this mean for your business? Explain why you came to this conclusion. b. What does this portend for the future of the economy (if anything) and how might you position your business given your…arrow_forwardQuestion 5: Suppose you recently received the GDP numbers for the last quarter. When you calculated the change from the previous quarter, you observed the following: observed the following changes: Y ——> +1.5% C ——> +0.1% I ——> +3% G ——> +0.2% NX ——> unchanged How would you interpret each value in context with the whole of GDP? Is there anything in the data that is predictive (potentially) of future conditions?arrow_forward
- Statistics Denmark monitors the development of economic variables and measures e.g. productivity development.In general, it is one of the laws of economics that employee productivity determines the ability of employers to pay employees wages. The higher the productivity (per capita output), the higher the wages that can be paid. In a recession, such as Covid, companies are generally reducing their use of labor. The latest statistics show the following: In the third quarter of 2020, labor productivity growth in Denmark was 2%. This increase alone does not say much, but is considered to be able to reflect an increase in productivity following a contraction in labor input. a. Show the relationship between production and labor use in the short term and at the same time explain with a picture what can cause the growth of productivity. b. What is happening to marginal production at the same time? c. Show how wages develop if companies keep marginal costs fixed in the above circumstances…arrow_forwardAt the end of the year 2020, Statistics Kenya estimated the total amount spent on consumption, government purchases, investment and net export of goods and services to arrive at the country’s GDP. What measurement approach is described above?arrow_forwardQUESTION 1 Below is a hypothetical table such as would be generated by the Bureau of Labor Statistics when reporting historical and forecasted levels of gross domestic product for the United States. Use the answer table to fill in the blanks for the missing estimates. Make sure you show your work. 1998 Gross Domestic Product Answer (Remember to show work): 2028 Personal Consumption Expenditures Answer (Remember to show work): 2008 Gross Private Domestic Investment Answer (Remember to show work): 2018 Exports Answer (Remember to show work):arrow_forward
- The business cycle is the economist's metric for describing the current state of the economy. How would you describe the U.S. economy's current position in the business cycle? Please use some data to back up your opinion (Hint: See recent newspaper or magazine for latest summary of economic conditions).arrow_forwardMariam and Ahmed are discussing current economic data printed in the Times of Oman newspaper. Mariam is quite happy about the fact that Oman nominal GDP has increased at a steady rate for the last two years and asserts that this is very good news, since it means they are better off than a few years ago. Ahmed warns Mariam about his conclusions and suggests that he has observed a steady increase in many prices during the same period, which might undermine Mariam's conclusion. Based on this information: 6. Who do you think is right? Explain why. b. Is it possible that Mariam and Ahmed could be worse off than two years ago? а.arrow_forwardHow many recessions has France undergone over the years plotted in the chart? What are the two biggest recessions in terms of length and magnitude? Answer the questions from the figure given.arrow_forward
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