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c. Mr. Zhang buys 1000 shares of Bank of China stock at 3.65RMB per share, paying
his domestic stockbroker a 0.30% commission.
Answer
The commission of 0.30%*1000*3.65=10.95 RMB, is the value is of the stock
broking services, and enters into GDP as consumption. The rest of the transaction
involves buying and selling of a financial asset, which is not included in GDP.
Q2. Imagine that an economy, Antoinette, that produces only two goods: cakes and wine.
The following figures describes the economy of Antoinette in 1790 and 1791:
1
EC 1301 Principles of Economics Sem 1 AY 2017/18 – LY Mun
Answer:
1790 (Base year) 1791
Number of cakes produced 20000 25000
Bottles of wine produced 15000 20000
Price of each cake in $ $2 $3
Price of each bottle of wine in $ $5 $6
Population 100 150
a. Nominal GDP in $ =20000*2+15000*5 =25000*3+20000*6
115000 195000
b. Real GDP in 1790 $ 115000 =25000*2+20000*5
150000
c. Percentage change in nominal GDP =(195000-115000)/115000*100
69.6
d. Percentage change in real GDP =(150000-115000)/115000*100
30.4
e. Real GDP per capita =115000/100 =150000/150
1150 1000
f. Percentage change in real GDP per capita =(1000-1150)/1150*100
-13.0
Q3. Explains what happens to the unemployment rate (U3) and the employment-population
ratio in each of the following scenarios.
b. After an unsuccessful search, some of the laid-off workers became discouraged and quit
looking for a job. How will the unemployment rate and EPR change relative to your
answer in part a?
Answer: Unemployment rate will fall from part (a) and EPR will remain the same as
part (a)
c. Numerous students graduate from college but cannot find work.
Answer: Unemployment rate will rise and EPR will remain unchanged.