Teaching

Created: 1999-08-14
Last Modified: 1999-08-14
Go to
Brad DeLong's Home Page

Teaching | Writing | Career | Politics | Book Reviews | Information Economy | Economists | Multimedia | Students | Fine Print | Other | My Jobs

Feedback is always very welcome...


DRAFT ONLY: Econ 101b: Fall 1999: Problem Sets

J. Bradford DeLong; Jean-Philippe Stijns
delong@econ.berkeley.edu

Lecture: TuTh 2-3:30; Cory 241

Sections: MW 4-5, Wheeler 210; MW 5-6, Evans 47

Brad DeLong's Office Hours: Tuesday 12-2, Evans 601


DRAFT ONLY: Problem Set 1 (Data; chapter 3): Due Sep. 9

  1. What are the major components of GDP?

  2. Which interest rate concept--the nominal interest rate or the real interest rate--do lenders and borrowers care more about? Why?

  3. What is national saving? Is it the same thing as private saving?

  4. Which is the more important measure for assessing an economy's performance, real GDP or nominal GDP?

  5. Why are imports subtracted from the sum of consumption, government purchases, investment, and exports to get to GDP?

  6. What are the three ways that economic activity--national income, GDP, total output--can be measured? Do they always give the same answer?

  7. Why are so-called "intermediate" goods treated differently than "final" goods in the National Income and Product Accounts [NIPA]? By what means does the labor and other factors of production that go into producing intermediate goods get ultimately counted in GDP?

  8. Are capital goods--large turbine generators, jet airliners, bay-spanning bridges--intermediate goods or final goods? How are they included in GDP?

  9. In 1992 the implicit GDP deflator (in 1992 dollars) was equal to 100. In 1993 it was equal to 102.64. What was the annual rate of inflation between 1992 and 1993?

  10. In 1993 the implicit GDP deflator (in 1992 dollars) was equal to 102.64. In 1994 the implicit GDP deflator was 105.09. What was the annual rate of inflation between 1993 and 1994?

  11. In 1992 the implicit GDP deflator (in 1992 dollars) was equal to 100. In 1997 it was equal to 111.57. What was the average rate of annual inflation between 1992 and 1997? Why was it less than (11.57/100)/5--one fifth of the total change in the price level between 1992 and 1997?

  12. In 1992 both nominal GDP and real GDP (measured in 1992 dollars) were equal to $6.2444 trillion. By 1997 nominal GDP has risen to $8.1109 trillion, and the implicit GDP deflator had risen to 111.57. What was real GDP in 1997? What was the average rate of real GDP growth between 1992 and 1997?

  13. In 1997 nominal GDP was equal to $8.1109 trillion; consumption spending was $5.4937 trillion; gross investment spending was $1.256 trillion; and government purchases were $1.4546 trillion. What was the level of net exports?

  14. In 1992 the components of nominal (and real) GDP were as follows:
    $4.2198 trillion: consumption spending; $0.7904 trillion: gross investment spending; $0.6394 trillion: exports; $0.6690 trillion: imports; and $1.2638 trillion: government purchases. By 1993 these four componenets of spending had risen: $4.4592 trillion in consumption spending, $0.8762 trillion in gross investment spending, $0.6586 trillion in exports, $0.7193 trillion in imports, and $1.2834 trillion in government purchases.

    Moreover, prices had also risen: the price index for consumption rose from 100 to 102.8; the price index for investment rose from 100 to 107.6; the price index for government purchases fell from 100 to 99.1; the price index for exports rose from 100 to 102.9; and the price index for imports rose from 100 to 108.9.

    What was real GDP (measured at 1992 prices) in 1993? How much was real GDP growth between 1992 and 1993?

  15. Suppose that you purchase a refrigerator on November 1 for $750.00. What contribution does this transaction make to GDP? How is it accounted for in the NIPA?

  16. Suppose that the applicance store buys a refrigerator from the manufacturer on November 1 for $600, and that the refrigerator is still unsold by the appliance store as of December 31. What contribution does this transaction make to GDP? How is it accounted for in the NIPA?

  17. Suppose that the applicance store buys a refrigerator from the manufacturer on December 15, 2003 for $600, and that you then buy that refrigerator on January 15, 2004 for $750. What is the contribution to GDP in 2003? How is the refrigerator accounted for in the NIPA in 2003? What is the contribution to GDP in 2004? How is the refrigerator accounted for in the NIPA in 2004?

  18. In 1960 real GDP (in 1992 dollars) was $2.2629, in 1970 it was $3.3976 trillion, in 1980 it was $4.615 trillion, and in 1990 it was $6.1363 trillion. Also, in 1960 the labor force was 69.6 million, in 1970 82.8 million, in 1980 106.9 million, and in 1990 125.8 million.

    What was real GDP per worker in 1960, 1970, 1980, and 1990? How fast did real GDP per worker grow between 1960 and 1970? Between 1970 and 1980? Between 1980 and 1990?

  19. In 1998 the GDP deflator rose at an annual rate of 2.6%, and the short-term interest rate on three-month Treasury bills averaged 4.8% What was the (short-term) nominal interest rate in 1998? What was the (short-term) real interest rate in 1998?

  20. In 1979 the (short-term) nominal interest rate on three-month Treasury bills averaged 10.0%, and the GDP deflator rose from 50.88 to 55.22. What was the annual rate of inflation in 1979? Wht was the real interest rate in 1979? Were real interest rates higher in 1979, or in 1998 (when the (short-term) nominal interest rate on three-month Treasury bills was 4.8%, and the inflation rate was 2.6%?


DRAFT ONLY: Problem Set 2 (Growth Theory; chapter 4): Due Sep. 16

  1. Consider an economy in which the depreciation rate is 3% per year, the rate of population increase is 1% per year, the rate of technological progress is 1% per year, and the private savings rate is 16% of GDP. Suppose that the government increases its budget deficit--which had been at 1% of GDP for a long time--to 3.5% of GDP and keeps it there indefinitely.

    What will be the effect of this shift in policy on the economy's steady-state capital-output ratio?

    What will be the effect of this shift in policy on the economy's steady state growth path for output per worker?

    Suppose that your forecast of output per worker 20 years in the future had been $100,000. What is your new forecast of output per worker twenty years hence?

  2. Suppose that a country has the production function:

    Y = {K^(1/2)} x {(A x L)^(1/2)}

    What is output Y considered as a function of the level of labor-augmenting technology A, the size of the labor force L, and the capital-output ratio (K/Y)?

    What is output per worker Y/L?

  3. Suppose that with the production function:

    Y = {K^(1/2)} x {(A x L)^(1/2)}

    the depreciation rate on capital is three percent per year, the rate of population growth is one percent per year, and the rate of growth of labor-augmenting technology is one percent per year.

    Suppose that the savings rate is ten percent of GDP. What is the steady-state capital-output ratio? What is the value of output per worker on the steady-state growth path written as a function of the level of labor-augmenting technology A?

    Suppose that the savings rate is fifteen percent of GDP. What is the steady-state capital-output ratio? What is the value of output per worker on the steady-state growth path written as a function of the level of labor-augmenting technology A?

    Suppose that the savings rate is twenty percent of GDP. What is the steady-state capital-output ratio? What is the value of output per worker on the steady-state growth path written as a function of the level of labor-augmenting technology A?



  4. What happens to the steady-state capital-output ratio if the rate of technological progress increases? Would the steady-state growth path of output per worker for the economy shift upward, downward, or remain in the same position?

  5. Discuss the following proposition: "An increase in the savings rate will increase the steady-state capital output ratio, and so increase both output per worker and the rate of economic growth in both the short run and the long run."

  6. Would the steady-state growth path of output per worker for the economy shift upward, downward, or remain the same if capital were to become more durable--if the rate of depreciation on capital were to fall?

  7. Suppose that a sudden disaster--an epidemic, say--reduces a country's population and labor force, but does not affect its capital stock. Suppose further that the economy was on its steady-state growth path before the epidemic.

    What is the immediate effect of the epidemic on output per worker? On the total economy-wide level of output? What happens subsequently?

  8. Begin with the production function Y = A x L x (K/Y)^{a/(1-a)}. Solve for output as a function not of A, L, and (K/Y) but as a function of A, L, and K. Show your steps. If your answer is not:

    Y = {K^a} x {(A x L)^(1-a)}

    go back and do it again until you get it right.

  9. Begin with the production function:

    Y = {K^a} x {(A x L)^(1-a)}

    Consider the impact on Y--the amount dY by which Y is raised--of increasing K by one unit--from K to K+1. (You are thus calculating the marginal product of capital.) Do so using the facts that (K+1) = K x (1 + 1/K), that (X x Y)^z = (X^z) x (Y^z), and the approximation that (1+x)^a is almost equal to 1 + ax (the smaller the values of a and x, the better the approximation).

    If your answer is not:

    dY = a x (Y/K)

    go back and do it again until you get it right.

  10. According to the marginal productivity theory of distribution, in a competitive economy the rate of return on a dollar's worth of capital--its profits or interest--is equal to capital's marginal productivity. If this theory holds and the marginal productivity of capital is indeed:

    dY = a x (Y/K)

    how large are the total earnings received by capital? What share of total output will be received by the owners of capital as their income?

 


DRAFT ONLY: Problem Set 3 (Pace of Long Run Growth; chapter 5): Due Sep. 23

  1. Why do many economists think that the consumer price index overstates the true rate of inflation?

  2. Would an increase in the saving and investment share of U.S. total output raise growth in productivity and living standards?

  3. Many project that by the end of the twenty-first century the population of the United States will be stable. Using the Solow growth model, what would such a downward shift in the growth rate of the labor force do to the growth of output per worker and to the growth of total output (consider both the effect on the steady-state growth path, and the transition from the "old" positive population growth to the "new" zero population growth steady-state growth path)?

  4. In the United States in recent years

 


DRAFT ONLY: Problem Set 4 (World Relative Distribution of Wealth; chapter 6): Due Sep. 30

  1. Suppose that a disaster--an epidemic, say

 

 


DRAFT ONLY: Problem Set 5 (Full-Employment Aggregate Demand; chapter 7): Due Oct. 7

 

 


Mock Midterm Exam: Distributed Tues. Oct. 5

 

 


Problem Set 6 (IS; chapter 9): Due Tues. Nov. 2

 

 


Problem Set 7 (LM and Equilibrium; chapter 10): Due Tues. Nov. 9

 

 


Problem Set 8 (Phillips Curve and Expectations; chapter 11): Due Tues. Nov. 16

 

 


Problem Set 9 (Monetary and Fiscal Policy; chapter 12): Due Tues. Nov. 23

 

 


Mock Final Exam: Distributed Tues. Nov. 30

 

 


Problem Set Suggested Answers will be posted at the appropriate times...


Sign up for Brad Delong's (general) mailing list

Visit Brad DeLong's Discussion Forum


Related Links


Comment on this page...

Do you have a perspective to offer? Please contribute it. That's the most exciting thing about Web publishing, automatically combining intelligent thoughts from many people.

   

Your Email:

Your Name:

Your Comment:

View other people's comments on this page


Professor of Economics J. Bradford DeLong, 601 Evans Hall, #3880
University of California at Berkeley
Berkeley, CA 94720-3880
(510) 643-4027 phone (510) 642-6615 fax
delong@econ.berkeley.edu
http://www.j-bradford-delong.net/

This document: http://www.j-bradford-delong.net/Teaching_Folder/Econ_101b_F99/P_Sets.html

Search This Website