Essay about Chapter 2

1254 Words Aug 27th, 2012 6 Pages
Chapter 2 Problems 1. Look at the newspapers for the past few days. What new economic statistics have been released? How do you interpret these statistics? Poverty levels in the US will continue to rise as long term unemployment numbers continue to increase. The societal problems that are associated with high unemployment will continue to increase.

2. A farmer grows a bushel of wheat and sells it to a miller for $1.00. The miller turns the wheat into flour and then sells the flour to a baker for $3.00. The baker uses the flour to make bread and sells the bread to an engineer for $6.00. The engineer eats the bread. What is the value added by each person? What is GDP?
Farmer’s VA = $1 Miller’s VA = $2 Baker’s VA = $3 GDP
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Government purchases 41.4 132.0 3,002.3 d. Net exports 329 27.5 -515.5 e. National defense purchases 12.0 132.0 817 State and local purchases 19.2 335.9 1,788.0 f. Imports 20.2 313.6 2,352.6
Do your see any ant stable relationships in the data? Do you see any trends? (Hint: A good place to look for data is the statistical appendices of the Economic report of the President, which is written each year by the Council of Economic Advisers. Alternatively, you can go to, which is the Web site of the Bureau of Economic Analysis. ) All trends are going up except exports which have decreased dramatically.

6. Consider an economy that produces and consumes bread and automobiles. In the following table are data for two different years. | Year 2000 | Year 2010 | Price of an automobile | $50,000 | $60,000 | Price of a loaf of bread | $10 | $20 | Number of automobiles produced | 100 cars | 120 cars | Number of loaves of bread produced | 500,000 loaves | 400,000 loaves |

a. Using the year 2000 as the base year, compute the

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