Question

Answer the next question(s) on the basis of the following information: Only three goods are produced in an economy in the following amounts: A = 10, B = 30, C = 5. The current year per unit prices of these three goods are A = $2, B = $3, and C = $1. (Advanced analysis) Refer to the above information. If the per-unit prices of the three goods each were $1 in a base year used to construct a GDP price index, then the GDP price index in the current year is:
A. 205.5.
B. 255.5.
C. 39.3.
D. 100.

If the U.S. unemployment rate is 9 percent, we can infer that:
A. the economy is in the expansion phase of the business cycle.
B. potential GDP is in excess of actual GDP.
C. actual GDP is in excess of potential GDP.
D. actual GDP is equal to potential GDP.

Which of the following types of unemployment is directly associated with insufficient overall demand for goods and services?
A. Search unemployment
B. Wait unemployment
C. Cyclical unemployment
D. Frictional unemployment

In the depth of the Great Depression, the unemployment rate in the United States was about:
A. 15 percent.
B. 33 percent.
C. 25 percent.
D. 40 percent.

Answer 1

Answer
255.5
GDP base year = 1x10+1x30+1x5=45
GDP current year = 2x10+3x30+1x5=115
GDP price index = (150/45) x 100 = 255.5

B. potential GDP is in excess of actual GDP.
There exists a unemployement rate. Thus the economy is operating below its potential GDP.

C. Cyclical unemployment
It is a situatin when the demand of the goods and services in the econmy cannot sustain the employment rate, this leads to an unemployment.

C. 25 percent.
It was about 25% according to many sources.

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