# Issues in Macroeconomics:Problems, Exercises, Essay Questions

### EXERCISES AND PROBLEMS

1) Calculate your personal rate of inflation for the year. Consider the bundle of goods you buy each week. Determine their base-period quantities (this week last year, for example), their current prices, and their prices last year. Then use the formula on page 000.

2) Examine your clothing, school equipment, and so forth and make an estimate of how much of it has been imported. Why would this most likely be an underestimate? [Hint: think of raw materials.]

3) What would happen to the official unemployment rate if the Bureau of Labor Statistics treat homemaking as employment? [Hint: What would happen to the labor force? What would happen to the number of unemployed? Then use the formula for the unemployment rate as given in the technical workshop on p000.]

4) In 1970 total production in the U.S. was \$1 trillion dollars (in current prices). In 1979 it was \$1.5 trillion (in current prices; so the comparison does not take account of inflation). What was the total growth rate during these years? What was the annual growth rate?

[Hint: See appendix for the calculation of growth percentages.]

5) In 1970 the Consumer Price Index was 116. In 1979 it was 217. What was the average annual inflation rate over those years?

### Essay and discussion questions

6) In what specific ways do the six macroeconomic problems affect your personal life? For example: "It's very difficult to get summer employment this year because the country is in a recession."

7) Economists describe "Inflation and unemployment as "twin evils." What is evil about them? In what respect do the comments of Paul and Rodney on p. 000 contradict the description?

8) Maria is particularly concerned about the problem unemployment. What might some of her reasons be?

9) A friend remarks: "Did you see that gas prices went up by 10 cents a gallon last week? This inflation is killing me." How would an economist reply? [Hint: First straighten your friend out on his use of the term "inflation." Then correct his understanding of the consequences of inflation.]

11) Discuss the economics in the passage quoted from Grapes of Wrath. What is Steinbeck's explanation for the low wages for farm work?