Question

Year	Good	Price	Quantity
2014	Ice cream cones	$2.50	1,000
	Hot dogs	$1.25	500
	Surfboards	$100.00	10
2015	Ice cream cones	$3.50	800
	Hot dogs	$2.25	400
	Surfboards	$100.00	14

4. a. Calculate nominal GDP for 2014 and 2015.

b. Calculate the percentage change in GDP from 2014 to 2015, first using 2014 prices and then using 2015 prices.

c. Calculate the percentage change in real GDP from 2014 to 2015, using your answers from part (b).

d. What is the GDP deflator for 2015 if it equals 1.0 in 2014?

5 Given the information in the following table for three consecutive years in the U.S. economy, calculate the missing data.

Year	Nominal GDP (in billions of U.S. dollars)	Real GDP (in billions of 2005 dollars)	GDP Deflator (2005=100)	Inflation (percent change in GDP deflator)	Real GDP per Capita (in 2005 dollars)	Population (in millions)
2005	12,623		100.0	3.3		297.4
2006		12,959		3.2		300.3
2007			106.2		45,542	303.3

6. Look at two scenarios, details of which are provided below, for monthly inventories and sales for a company producing cereal. In both scenarios, the company’s sales are the same.

Scenario A
Month	Start-of-the-Month Inventory Stock	Production	Sales	Inventory Investment
Jan.	50	50	45
Feb.		50	55
Mar.		50	80
Apr.		50	50
May		50	40

Scenario B
Month	Start-of-the-Month Inventory Stock	Production	Sales	Inventory Investment
Jan.	50	45	45
Feb.		55	55
Mar.		80	80
Apr.		50	50
May		40	40

a.Calculate the inventory investment during each month and the resulting stock of inventory at the beginning of the following month for both scenarios.

b.Does maintaining constant production lead to greater or lesser fluctuations in the stock of inventory? Explain.

Answer 1