Student Information

Name: ĐỖ THỊ THÚY NGA Roll number:

Room No: Class: MKT1909

FOR TEACHER ONLY

MARK MARKED BY Signature of Proctor
(NAME AND SIGNATURE)

ECO121_Test 01_Individual Assignment 01

Question1. (3 points)

Fill in blanks in table below;

Year 1 (2000) Year 2 (2003) Year 3 (2006)
Market Basket Items # of Units $ per unit Total Cost $ per unit Total Cost $ per unit Total Cost
Cheese 2 lbs $1.75 $3.50 $1.50 …..$ $1.50 ……..$
Blue Jeans 2 pairs $12.00 $....... $15.50…..$ $20.00 …….$
Gasoline 10 gallons $1.25 $....... $1.60 …...$ $2.70 ……...$
Total Cost of Basket --------- ------ $ ------ $ ------ $

Using year 1 as our base year, using the formula above to calculate the index and

compare the CPI inflation rate over those years

Year 1 Index = (base year)? CPI inflation rate = ?

Year 2 index =? CPI inflation rate = ?

Year 3 Index = ?
Question 2 (3 points):
a. Suppose there is an economy that produces only two goods: tequila and peyote. In 2008, the
economy produced 100 litres of tequila and 200 peyote plants. The unit prices (per litre or per plant)
in 2008 were $100 and $500. 1000 people were employed in the tequila sector, and the peyote
sector employed 500. In 2009, the weather was particular sunny and hot, which is good for tequila
production but bad for the cultivation of peyote. As a result, the economy produced 120 litres of
tequila but only 191 peyote plants in 2009. The tequila and peyote sold for $90 per litre and $550
per plant that year. 1100 people were employed in the tequila sector, while only 450 people worked
in the peyote sector.

Answer the following questions:

a. How much is Nominal GDP in 2008 and 2009? What is the percentage change?
b. How much is Real GDP in 2008 and 2009, by considering 2008 as the base year? What is
the percentage change?
c. How much is the GDP deflator in the two years? By what percentage does the price level
change from the base year to 2009?
d. What was the growth rate of average labor productivity for the whole economy between
2008 and 2009?

b. In the country of UAS, people produce canoes, fish for salmon, and grow corn. In a year they
produced 5000 canoes using labor and natural materials only, but sold only 4000, as the economy
entered a recession. The cost of producing each canoe was $1000, but the ones that sold were priced
at $1250. They fished $30 million worth of salmon. They used $3 million of the salmon as fertilizer
for corn. They grew and ate $55 million of corn. What was USA’s GDP for the year?

Question 3 (4 points)
a. What is defined as absolute advantage?
b. What is defined as comparative advantage?
c. Case 1: Output approach
Two commodities and two countries
Given the resources, Singapore and Malaysia can produce the following products –
television sets and cars (see Table 01)
Countries TV sets Cars (units)
Singapore 100 50
Malaysia 60 40
Table 01
+ Which country has the absolute advantage in the production of both TV sets and Cars over
the other?
+ Which country has the comparative advantage either in the production of TV sets or in the
production of Cars over the other? Draw your PPF to illustrate
d. Case 2: Input approach
Two commodities and two countries
Give the resources, America and England can produce one unit for both Steel and Coal in
terms of number of working hours shown as follows:
Countries One unit of Steel One unit of Coal
required required
America 80 man-hours 90 man-hours
England 120 man-hours 100 man-hours
Table 02
+ Which country should specialize in the production of Steel? Draw your PPF to illustrate
+ Which country should specialize in the production of Coal? Draw your PPF to illustrate
e. Case 3: Input approach
Two countries but multiple commodities
The following Table 03 shows the numbers of man – days taken to produce an equivalent
amount of six commodities in each of the two countries – Switzerland and Sweden.
Countries Coal Cotton Wool Iron Wheat Maize
Switzerland 120 60 70 100 140 80
Sweden 100 25 35 90 90 20
Table 03
+ Assuming that there are no other costs of production. Which two commodities is Sweden
most likely to import from Switzerland?