Posted: June 15th, 2022

ECO – What would be the expected relationship between GDP, inflation rate

1. What would be the expected relationship between GDP, inflation rate, and unemployment rate? What happens when one goes up, to the other two?

2. The number of people employed in a city were 128,000. The adult population was 201, 000 and the labor force participation rate was 67%. Based on the figures listed above, what is (1) the unemployment rate, (2)labor force participation rate, (3) number of adults in the “not in L.F.” category and (4) how is the economy doing, compared to what? show your work here.

3. What are the problems with inflation itself? Be Specific. Is the real inflation that consumers have in their real-life really less than or greater than the government’s recorded inflation rate? What does this mean about the real GDP growth rate for the economy based on the real-life inflation rate, if the nominal GDP growth rate stays the same?

4. Coffee prices in 1960 were .40 cents and are $1.65 in 2009. Income in 1960 was $10,000 and are $40,000 in 2009. Does this mean that society is worse off or better off in 2009 than in 1960? Under what conditions are consumers better off? Besides the change in the price, why would society be better off in 2000 than in 1960? show your work.

5. What do the problems with the measurement of the Gross Domestic Product (GDP), Consumer Price Index (CPI) and unemployment rate statistics mean about the actual state of the economy as compared to what the statistics indicate. Is the country really doing better than or worse than what the indicators say? How can you tell?

6. The price of a first class stamp is .42 cents in 2009. The price of the same first class stamp in 1975 was .13 cents. The price index in 1975 was 75 and price index in 2009 will be 218. After adjusting for inflation, how much more expensive is the stamp in 2009 than the stamp in 1975? Have stamp prices kept pace with the inflation rate from 1975 to 2009? show your work.

7. What are the problems with unemployment and what are the problems with the way that the government measures unemployment? In real life, is the unemployment rate lower than or higher than government’s rate?

8. Gas prices are high at $3.30 in the Year of 2008, compared the prices in 1979 of gas prices for $1.00. Are Nominal prices or the Real Prices higher today, then in the past? How do you know? show your work. Use the CPI in 1979 of 85 and in 2008 of 218.

9. True or False and why? The unemployment rate for all people is about the same as the national average. There is not real difference in the unemployment rates.

10. True or False and why? When inflation is rising, then there is a decrease in the purchasing power for the consumer and the rate of the inflation is the same for all products that a consumer may buy. 

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