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answer the following questions. Please separate the questions below from the document I’ve attached.

1. Suppose you are given the following data for a small economy:

Number of unemployed workers: 1,000,000.

Labor force: 10,000,000.

Based on this data, answer the following:

What is the unemployment rate?

Can you determine whether the economy is operating at its full employment level?

Now suppose people who had been seeking jobs become discouraged, and give up their job searches. The labor force shrinks to 900,500 workers, and unemployment falls to 500,000 workers. What is the unemployment rate now? Has the economy improved??

2. Nominal GDP for an economy is $10 trillion. Real GDP is $9 trillion. What is the value of the implicit price deflator?

3. Suppose you compare your income this year and last year and find that your nominal income fell but your real income rose. How could this have happened?

4. Suppose that people expect inflation to equal 3 percent, but in fact prices rise by 5 percent. Indicate whether this unexpected higher rate of inflation would help or hurt each of the following groups.

a homeowner with a fixed-rate mortgage.

a union worker with a fixed labor contract

a company that has invested some of its endowment in government bond which pay fixed rate of return.

Assignment #1

Question 1-25%:

Explain three ways we can use microeconomics analysis.

Question 2- 25%

Table1.1 shows the maximum possible output combination of bikes and laptops using all resources and currently available technology for country Alfa.

Table 1.1:

Possible Output Combination Quantity of bikes Quantity of laptops

A 1700 0

B 600 2200

C 500 2400

D 400 2600

E 0 3400

a. Graph the country’s Production Possibility Frontier. Put bikes on the horizontal axis and laptops on the vertical axis.

b. Is combination D efficient or not? Explain your answer.

c. Add combination F ( 300, 1000) on your graph and determine if it isefficient or not? Explain your answer.

d. What is the opportunity cost of bikes when we move from B to C? Explain.

e. Suppose that the country invests in a new technology to produce laptops, show the possible change to the PPF.

Question 3- 25%

Amy and Diane must prepare a presentation for their economic class. As part of their presentation, they must do a series of calculations and prepare 50 PowerPoint slides. It would

take Amy 10 hours to do the required calculation and 10 hours to prepare the slides. It would

take Diane 12 hours to do the calculations and 20 hours to prepare the slides.

a. How much time would it take the two to complete the project if they divide the tasks equally?

b. How much time would it take the two to complete the project if Diana specializes in calculation and Amy specializes in preparing slides?

c. If Diane and Amy have the same opportunity cost of $5 per hour, is there a better solution than for each to specialize in calculating or preparing slides?

Question 4 – 25%

Suppose that you lend $1,000 to a friend who pays you back $1,100 the next year. Suppose that prices that year rose by 8% and the real rate of return in the stock market was 4%. Your friend says that he or she was being more than fair by giving you more than the rate of inflation as a return.

What do you think? Use the opportunity cost principle to answer this question.