Gm545 Quiz 2

1. (TCO F) The size of the labor force in a community is 500, and 400 of these folks are gainfully employed. In this community, 100 people over the age of 16 do not have a job and are not looking for work. In addition, 200 people in the community are under the age of 16. The unemployment rate is ______. (Points : 15)

The unemployment rate is figured by dividing the # of unemployed by the labor force and that is given to me here as 500. Since 100 are gainfully employed, (500-400) then 100/500=.2 and .2*100 gives us 20%, so the unemployment rate is 20 percent.

2. (TCO F) Suppose nominal GDP in 2005 was $12 trillion, and in 2006 it was $14 trillion. The general price index in 2005 was 100, and in 2006 it was 104. Between 2005 and 2006, real GDP rose by what percent? (Points : 20)

The inflation formula is what we have to use here.

2005GDP=12 and 2005GPI=100

2006GDP=14 and 2006GPI=104

2005GPI=100=12Trillion/100=.12*100=12=real GDP

2006GPI=104=14Trillion/104=.13*100=13.46=real GDP

So, the percentage increase in real GDP is 13.46-12/12*100. So, (1.46/12)*100=12.16%

So, 12.16 is what the real GDP increased between 2005/2006.

3. The consumer price index was 190.7 in January of 2005, and it was 198.3 in January of 2006. Therefore, the rate of inflation in 2005 was about ______. (Points : 15)

So, the rate of inflation is the new price index minus the old price index.

Therefore, CPI2nd year- base year/ CPIbase year * 100 is the rate of inflation for 2005.

198.3-190.7=7.6/198.3=.038325*100=3.833. So, the rate of inflation in 2005 was 3.8%

10. A Honda Accord sells for $24,000 in the United States and for SF28,500 in Switzerland. Given an exchange rate of SF1.20 = $1, how do the car prices of both countries compare? (Points : 15)

ok, at an exchange rate of SF1.20 to 1dollar, the swiss price would be less in the United States. 24000*1.20=28800SF. So, the car would be more expensive in Switzerland.

4. TCO E) (10 points) As the Mexican...