# 1 - Difference Between Real and Nominal GDP - Suppose there is an economy with only 1000 people in it and it only produces 5000 boxes of pasta that cost $1 each and 2500 jars of spaghetti sauce that cost $5 each. The next year the economy has a population of 1500 people and it makes 7000 boxes of pasta that cost $2 each and 4000 jars of spaghetti sauce that cost $6 each.
A. How much did nominal GDP grow during this period?
B. How much did nominal GDP per capita grow during this period?
C. How much did real GDP grow during this period?
D. How much did real GDP per capita grow during this period?
# 2 - Calculating Inflation - Consider an economy that produces three goods: boxes of pasta, jars of spaghetti sauce and loaves of garlic bread. In the first year, the price of a box of pasta is $2, the price of a jar of spaghetti sauce is $5 and the price of a loaf of garlic bread is $2. In the second year, the price of a box of pasta is $1, the price of a jar of spaghetti sauce is $6 and the price of a loaf of garlic bread is $3. The "market basket" of goods is three boxes of pasta, two jars of spaghetti sauce and four loaves of garlic bread.
A. What is the cost of a market basket in the first year?
B. What is the cost of a market basket in the second year?
C. What was the rate of inflation in this economy between year one and year two?
# 3 - Unemployment - Use the following information to calculate the size of the labor force and the official unemployment rate in a society. Total population is 500, the population under age 16 is 120, the population of retirees not in the labor force is 150, and the number of unemployed is: 15.
A. What is the labor force participation rate - the percent of the population in the labor force?
B. What is the unemployment rate in this society?
C. Suppose the population of the society changes and the number of retirees increases to 180. What effect will this have on the labor force participation rate and the unemployment rate? Should economists and society be concerned with this?
D. Now, suppose there is a large influx of 70 immigrants of working age into this population and the number of unemployed goes up to 20. Should economists and society be concerned by this?