Question

What is the underlying concept behind future price level uncertainty?

Consider the following data that gives the quantity produced and unit price for three different goods across two different years to answer the next six questions. Assume that goods A, B and C are the economy’s entire output and that the base year is 2017.'

Good	2017 Price	2017 Quantity	2018 Price	2018 Quantity
A	$2.00	500	$2.00	600
B	$1.00	750	$1.50	800
C	$2.00	300	$3.00	300

What was the rate of inflation between 2017 and 2018?

Group of answer choices

2.8%

26.9%

7.9%

30.1%

16.7%

Consider the following data, which show the quantities and prices of two goods produced in an economy, to answer the next three questions.

	Quantity produced	Price
Wheat	50 million bushels	$2/bushel
Televisions	1 million	$500/television

Assuming these are the only two goods produced in an economy, what is the value of the gross domestic product (GDP)?

Group of answer choices

$100 million

$750 million

$250 million

$800 million

$600 million

Group	# in Millions
Work-eligible population	247
Labor force	159
Not in labor force	88
Employed	144
Unemployed	15

According to the above table, the unemployment rate in this economy is equal to

Group of answer choices

9.4%.

10.4%.

90.6%.

64.8%.

12.6%.

According to the given table, the labor force participation rate in this economy is equal to ________.

Group of answer choices

90.1%

36.9%

88.3%

11.7%

65.8%

Answer 1

Question 1]

Nominal GDP 2017 = 2*500 + 1*750 + 2*300 = 2350

Nominal GDP 2018 = 2*600 + 1.50*800 + 3*300 = 3300

Real GDP = Sum of base year price * current year quantity

Real GDP for 2017:

2*500 + 1*750 + 2*300 = 2350

Real GDP for 2018:

2*600 + 1*800 + 2*300 = 2600

GDP deflator for 2017: ( Nominal GDP / Real GDP ) * 100 = 2350 / 2350 * 100 = 100

GDP deflator for 2018: ( Nominal GDP / Real GDP ) * 100 = 3300 / 2600 = 126.92

Inflation between the two years :

= {( GDP deflator of 2018 - GDP deflator of 2017) / GDP deflator of 2017 } *100

= (126.92 – 100) / 100 * 100

= 26.92%

Option B] 26.92% is correct option

Question 2]

Quantity Produced	Price	Value
Wheat	50 million	$2/bushel	$100 million
Television	1 million	$500/television	$500 million

Assuming these are the only two goods produced in the economy, what is the value of the GDP?

The Value of GDP will be $100 million + $500 million = 600 million

Correct option: E] $600 million

Question 3]

unemployment rate = unemployment / [employed + unemployment] * 100

= 15 / [141+15] * 100

= 9.4%

Correct option: 9.4%

Question 4]

labor force participation rate = labor force / working age population = 159 / 247 * 100

= 64.37%