Global Economy EMBA Spring 2021 Prof. Joe Foudy Name: Homework/Problem Set 1: Supply and Demand (15%) 1. Measuring GDP (2 pts): A simple economy has four industries: · The agricultural industry sells...

This is a very tight schedule but can this be completed by 1pm Eastern Standard today.




Global Economy EMBA Spring 2021 Prof. Joe Foudy Name: Homework/Problem Set 1: Supply and Demand (15%) 1. Measuring GDP (2 pts): A simple economy has four industries: · The agricultural industry sells 45 million USD in food products directly to households as well as 35 million USD to the steel industry, which turns the food into biofuel for their factories. · The iron mining industry produces iron, all of which is sold to the steel industry. Total sales to the steel industry are 200 million USD per year. · The coke industry produces coke which is combined with iron to make steel. Total sales to the steel industry are 45 million USD per year. · The steel industry processes the iron and coke together to make steel. The steel industry sells 300 million USD to the auto industry to make cars per year. Assume another 60 million USD is sold directly to consumers/households and companies to put up steel fencing around their properties. · The auto industry uses steel from the steel industry as well as other inputs (that it creates on its own) to sell 775 million USD in vehicles to the public. What is GDP? 2. National Accounts (2 pts) Assuming the economy was in equilibrium, use the following information to determine government purchases and the total amount of funds supplied in the loanable funds market. Consumption Spending (C) $10.5 trillion Taxes (T) $9.5 trillion Household Saving (SP) $7.5 trillion Investment Spending (I) $_____ trillion Government Purchases (G) $11.0 trillion Exports (X) $3 trillion Imports (M) $3.5 trillion (HINT: What did we learn about GDP accounting and the flow of funds from Chapter 2 of the textbook?) What is Investment?______________________________ Total Savings (Sp+Sg) :_____________________________________ 3. Measuring CPI Part 1 (2 pts): CPI Data for a basket of goods –EMBA vs. Recent Graduates (Hint: recall fixed basked approach from chapter 2) Year 1 (EMBA ) Year 2 (Free from Stern ) Coffee 200 units $4 Each 70 units $6 Each Pizza 150 units $5 Each 50 units $4 Each Movies 1 units $15 Each 15 units $20 Each What is the inflation rate between year 1 and year 2?____________(3pts) 4. Measuring CPI Part 2 (2 pts): Suppose the US consumer price index in 2020 was 257 (it was) and the CPI for 2030 is equal to 355. What was the rate of inflation over this period? 5. Measuring Unemployment (2 pts) Let’s look at some labor market data for Chile (altered slightly from official data):   2020 Age 15 or more (non institutionalized) 14,000,000 Labor Force 8,000,000 Labor Force Participation Rate   Unemployed 450,000 Unemployment Rate What is the labor force participation rate? What is the unemployment rate? 6. Short Answer 1 (2.5 Points) What are the limitations of unemployment rates as a useful measure of the health of the labor market in general? What are the limitations today in the age of COVID? (in 100 words or less) 7. Short Answer 2 (2.5 Points) What are the limitations of the CPI as a useful measure inflation? In particular, what are the limitations of using the CPI to assess the CPI during COVID? (in 100 words or less)