Question

(a) Suppose the information in the following table is for a simple economy that produces only four goods and services: shoes, hamburgers, shirts, and cotton. Assume that 70% of cotton is used in the production of shirts. 2012 2022 2023 Product Quantity Price Quantity Price Quantity Price Shoes 90 $50 100 $60 100 $65 Hamburgers 75 $2 100 $2 120 $2.25 Shirts 50 $30 50 $25 65 $25 Cotton 100 $0.80 800 $0.60 120 $0.70 (i) Calculate the nominal GDP for 2022 and 2023. (3 marks) (ii) Calculate the real GDP for 2022 and 2023 (assume the base year is 2012). (3 marks) (iii) Calculate the GDP deflator for 2022 and 2023. (2 marks) (iv) Calculate the economic growth rate for 2023. (1 mark) (b) Provide a table with the nominal GDP for your assigned Caribbean country for 2020 and 2021. Using only the nominal GDP, what do you know about (i) Changes in the level of output during this period? Explain (2 marks) (ii) Changes in prices during this period? Explain. (2 marks) (iii) Would your answer change if you were using Real GDP? Explain. (2 marks) (c) Fill in the missing values in the table of data collected in the household survey. The working-age population, employment, unemployment, and labor force are measured in thousands. Show ALL your work. (5 marks) Working-age population 235,900 Employment Unemployment Unemployment rate 9.4% Labor force Labor force participation rate 65.5%

Answer 1

To calculate the nominal GDP for 2022 and 2023, you multiply the quantity of each good or service produced by its respective price and then sum up the values.

(i) To calculate the nominal GDP for 2022 and 2023, we multiply the quantity of each good or service produced by its respective price and then sum up the values. For 2022:
Nominal GDP = (Quantity of shoes * Price of shoes) + (Quantity of hamburgers * Price of hamburgers) + (Quantity of shirts * Price of shirts) + (Quantity of cotton * Price of cotton)
= (100 * $60) + (100 * $2) + (50 * $25) + (800 * $0.60)
= $6,000 + $200 + $1,250 + $480
= $7,930

For 2023:
Nominal GDP = (Quantity of shoes * Price of shoes) + (Quantity of hamburgers * Price of hamburgers) + (Quantity of shirts * Price of shirts) + (Quantity of cotton * Price of cotton)
= (100 * $65) + (120 * $2.25) + (65 * $25) + (120 * $0.70)
= $6,500 + $270 + $1,625 + $84
= $8,479