Economics Tasks

Problem 1

Whereas Gross Domestic Product (GDP) measures the total market value of goods and services produced in a country, the Gross National Product (GNP) is a measure adjusted to reflect the value of goods and services earned by the residents of a nation (Mankiv, 2012, p.30). This means that the income earned by a U.S national from a rental property located in France is added as part of the U.S GNP.Similarly, the rental income earned by a French resident with respect to a property located in the U.S is excluded when computing the GNP for the U.S.

Problem 2

The structural form of unemployment is one among the many types of unemployment. It arises from the failure of wages to adjust to equilibrium clearing levels. Wage rigidity forces employers to ration employment by employing less people than they would otherwise employ if wages were easily adjusting to reflect the movement of market forces. It is deemed the worst form of unemployment given the possibility of wage rigidity to persist, thereby, making unemployment to continue.

On its part, frictional unemployment is a natural form of unemployment in that some workers will always be leaving their jobs to search for better jobs while others simply move from one employer to the other. This form of unemployment occurs during this period of employment search.

Seasonal unemployment on the other hand stems from the fact that some labor requirements in some industries tends to be seasonal. This means that workers are likely to remain unemployed when the industry is out of season and to be employed when the season begins.

Lastly, cyclical unemployment occurs because of the ups and downs of the business cycle. For instance, unemployment would occur when the economy is in a recession and disappear with the end of the recession.

Problem 3

Unexpected inflation has a redistributive effect in that it can transfer wealth from one group to the other (Mankiv, 2012). A typical example is the redistribution between borrowers and lenders. Unexpected inflation allows borrowers to pay back money whose real value is less than what they borrowed. It is not true that the Fed overemphasizes inflation as price stability is just one of the twin goals of the Fed.

Problem 4

Problem 5

The problem relates to the choice of the base year. This is evident from the two different values. The first value is found by using a simple interest formula while the second value is obtained by a compound interest approach.


Question 1


The information in the link shows that the economy was expanding from March 1991 reaching a peak in 2001 whereupon a recession begun but which ended in November of 2001 with another expansion lasting till December 2007 and a subsequent recession that lasted till September of 2009.


Compared to the previous cycles, one can draw the conclusion that the cycle that begun in March 1991 to March 2001 lasted relatively longer as a business cycle. This was a period of 10 good years. The immediate prior business cycles beginning in March 1980 lasted only for one year from one phase to the other.

Question 2

Evident from the household incomes is that all the categories of households identified in the Income and Earnings Summary Measures by Selected Characteristics 2014 and 2015 observed positive percentage changes with the exception of households residing outside metropolitan statistical areas.

A look at the same table also reveals that households whose members are black have the lowest median income followed by Hispanics with Asians having the highest median income. The lesson from this is that race may determine household income.

Question 3

  2001 2014 Change Percentage Change
GDP 10,621.8 17,393.1 6,771.3 63.75%
Personal Consumption Expenditures 7,103.1 11,863.4 4,760.3 67.01%
Gross private domestic investment 1,928.6 2,886.5 957.9 49.67%
Net Exports of Goods and Services -368.7 -508.8 140.1 38.00%
Government Consumption Expenditures

And Gross Investment

1,958.8 3,152.1 1,193.3 60.92%

It is evident from above that all the indicators had registered some percentage increases over the period although each indicator had a somewhat different extent of increase.



Mankiv, N.G.(2012).Macroeconomics.8th edn.New York: Worth Publishers.


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