Student Information

Name: NGUYỄN THỊ THU PHƯƠNG Roll number: HS160810

Room No: BE218 Class: IB1704

FOR TEACHER ONLY

MARK MARKED BY Signature of Proctor

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ECO121_Test 01_Individual Assignment 01

1. Two goods are being produced: hot dogs and hamburgers.

Year Price of Quantity of Price of Quantity of

Hot Dogs Hot Dogs Hamburgers Hamburgers
2008 $1 100 $2 50
2009 $2 150 $3 100
2010 $3 200 $4 150

a. Explain how to calculate nominal GDP and real GDP

The production of goods and services valued at current prices.

The calculation of nominal GDP is:

 C – Private consumption
 I – Gross investment
 G – Government investment
 X – Exports
 M – Imports

The production of goods and services valued at constant prices.

 The calculation of real GDP is:

 GDPD – GDP Deflator

b. Calculate the nominal GDP and real GDP

If let’s assume that the base year is 2008.

Year
Nominal GDP ($ 1 × 100) + ($ 2 × 50) = $ 200.
2008
Real GDP ($ 1 × 100) + ($ 2 × 50) = $ 200.
Nominal GDP ($ 2 × 150) + ($ 3 × 100) = $ 600.
2009
Real GDP ($ 1 × 150) + ($ 2 × 100) = $ 350.
Nominal GDP ($ 3 × 200) + ($ 4 × 150) = $ 1.200.
2010
Real GDP ($ 1 x 200) + ($ 2 x 150) = $ 500

c. Calculate GDP deflators and inflation rates:

GDP deflators for 2008
($200 / $200) × 100 = 100.
GDP deflators for 2009 ($600 / $350) × 100 = 171.

GDP deflators for 2010 ($1200 / $500) × 100 = 240.

Inflation rates:
Inflation rates for 2008 compare to 2008
(($200 - $200) / $200) x 100 = 0%
Inflation rates for 2009 compare to 2008 (($600 - $350 ) / $350) × 100 = 71%.

Inflation rates for 2010 compare to 2008 (($1200 -$500) / $500) × 100 = 140%.

Inflation rates for 2010 compare to 2009 (($1200-$850) / $850) x 100 = 41%
2. Fill in the missing data then calculate the inflation rates

Year Real GDP (in Nominal GDP (in GDP deflator Inflation rate
year 2000 dollars) current dollars) (base year 2000)
1970 3000 1200 40 -60
1980 5000 3000 60 -40
1990 6000 6000 100 0
2000 6400 8000 125 25
2010 7500 15000 200 100
2020 10000 30000 300 200
2030 20000 50000 250 150
3. Can GDP measure well-being? Discuss following questions:
a) If GDP is a good measure of well-being, why is Switzerland’s GDP so much lower
than India’s GDP or China’s GDP?
- If we take GDP as a measure of happiness, there are still elements of Happiness
that GDP or money cannot buy. One thing that almost everyone knows is that
Switzerland is a livable country, the environment is clean and the crime rate is
very low, the people there are very peaceful and happy (According to the
newspapers interviewed people). people currently living in Switzerland). As for
China and India, there are still too many inadequacies and hidden corners. GDP
per capita of a country it only shows the good side, which it exists outside. The
difference in GDP between the rich and the poor in China and India is too large.
- So if you take the GDP of a country as a measure of happiness, there are still too
many human factors that GDP cannot cover.
b) What measures would be better to compare the well-being of different countries?
- Compare divorce rates.
- Compare the disparity of GDP per capita in the country.
- Compare environmental pollution index
c) How do you expect these direct measures to correlate with per capita GDP?
I would expect these direct measures to be closely related to GDP per capita

4. Create a student price index. The consumer price index includes the prices of hundreds
of goods purchased by consumers. It is possible to construct many other price indexes.
Your mission: Create a personalized student price index.

a. Choose five (or more) different products. Be specific e.g., gasoline, toothbrush,
coffee, etc.
- I choose; Gasoline, food, coffee, entertainment, housing
b. Pick a quantity for each product. This will be your market basket. — e.g., 15 liters
gasoline, 1 toothbrush, 30 cups of coffee, etc.
- Gasoline 8 liters , 26 food , 8 cups of coffee , 2 entertainment , 1 house
c. Find the actual price for each product.
- Gasoline 8 liters. 30 VND/1 liter = 8 . 30 = 240 VND/ 1 month
- Food 26/ month . 1 day = 50VND => 26 . 50 = 1300 VND/ month
- Coffee 8 cups . 1 cups = 35VND = > 8 .35 = 280 VND / 1 month
- Entertainment 2 times . 1 time = 100 => 2 . 100 = 200 VND / 1 month
- Home 1 /month = 1000 VND
d. Calculate the “basket” - total cost of buying these products.
- Total basket = 3.020 VND
e. You expect inflation for student’s expenses to be 10% next year. How much will
your basket cost?
- If inflation increases to 10%
- Total = 3020+( 3020.10% ) = 3322 VND
f. What are the reasons that inflation calculated by using CPI often overstates the
actual inflation? Give an example for each reason based on your basket of
expenses above.
5. Thanh is a worker in a manufacturing firm. He complains that his living expenses are
increasing too fast: from 20,000VND to 25,000VND a meal, his rent increases from 2
million VND to 2.5 million VND. His boss agrees to raise his salary from 6 million to
6.5 million.
Calculate the inflation rate based on the increase in Thanh’s meal, rent, and salary.
Comment if Thanh’s salary raise can compensate for inflation.
The inflation rate:
Inflation
Meal ((25.000 VND -20.000 VND ) / 20.000) x 100 = 25
Rent ((2.5 milion VND – 2milion VND)/2 milionVND) x 100 = 25
Salary ((6.5 milion VND – 6 milion VND)/6 milion VND) x 100 = 25

The inflation rate of food and rent is equal to Thanh's salary. But Mr. Thanh has to pay
for the total of 2 inflation rates that his meals and rent. Therefore, Thanh's salary increase
only offsets half of the inflation. Wage increases do not compensate for inflation.
6. Suppose the National Congress passes a law requiring employers to provide employees
some benefit (such as healthcare) that raises the cost of an employee by $4 per hour
a. What effect does this law have on the demand for labor?
- When the price of labor, that is, wages of the employers increases, the demand
curve will shift to the left, and the price will be adjusted
- The demand labor demand decreased D1 => D2
- The wage rate will decline by less than $4
- Wage rate decreases; P1 => P2
- Decrease in the number of employees H1 => H2
b. If employees place a value on this benefit exactly equal to its cost, what effect
does this law have on the supply of labor?
- When the employees place the value of benefit exactly equal to the cost of $4,
The supply curve will shift to the right P2 =>P3
c. Now suppose that workers do not value the new law at all. How does this affect
the labor market?
- When the workers do not value the change, the supply curve will not shift.
- So, the wage rate will decrease by $4, and the quantity of the labor will also
decline
- P2 => P3
- P3 = P1 -$4
- Employers will be worse off because now they will have to pay increased total
wages as well as the provided benefits
7. What is the opportunity cost of investing in capital? What is the opportunity cost of
investing in human capital? Do you think a country can overinvest in capital? Explain.
- The opportunity cost of investing in capital is the loss of consumption that results from
redirecting resources toward investment.
- The opportunity cost of investing in human capital is also the loss of consumption that
is needed to provide the resources for investment.
- Over-investment in capital is possible because of diminishing marginal returns. A
country can "over-invest" in capital if people would prefer to have higher consumption
spending and less future growth.
8. Bonus: What is the best technological knowledge (best understanding of our time) of
slowing down population growth in a humane, ethical, and legal way?
- Technology 4.0 is rapidly evolving, and population increase is frequent in many
nations; several countries have also implemented population control measures. For
example, in Vietnam, using the internet as a propaganda tool about the world's
population growth and taking many measures to prevent population growth, network
operators are also trying to block websites. black, this is also a way to reduce
population growth in the teenage years.