Chapter 1

  1. Assuming it takes four hours of painting time to

paint a room and two hours to sand a floor. If all 24
hours were spent painting,
 A) How many rooms can be painted by one worker?

 B) If a decision were made to sand two floors, how many
painted rooms would have to be given up?
Since it takes 2 hours to sand a flour, then 4 hours would be
used to sand 2 floors which which means 1 room must be
given up
 C) Illustrate with a Production Possibilities Curve
Chapter 2
 2. Suppose the following data describe output in
two different years
Item Year 1 Year 2
Apples 20,000 at $0.25 each 30,000 at $0.30 each
Bicycles 700 at $800 each 650 at $900 each
Movie Rentals 10,000 at $1 each 12,000 at $1.50 each

 A) Compute nominal GDP in each year

 B) By what percentage did nominal GDP increase

between Year 1 and Year 2?
C) Now compute real GDP in Year 2 by using the prices on Year 1.

Real GDP is equal to the sum of the base year price * current year
quantity of all the goods.

D) By what percentage did real GDP increase between Year 1 and Year
2?