1. The following data describe France's economy in 2008.
Consumption 234 billion euros
Government expenditure 93 billion euros
Investment 88 billion euros
Exports 128 billion euros
Net Exports -11 billion euros
a. Calculate France's GDP in 2008.
b. What was the (nominal) value of total production equal to in 2008?
c. France's imports in 2007 was 120 billion euros. Did France's imports increase or
decrease in 2008?
2. In the economy of Sunland, the commercial banks have deposits of $600 billion. Their reserves are $60 billion. All reserves are in deposits with the Central Bank and the commercial banks hold no excess reserves.
a. What is the economy's monetary base?
b. What is the quantity of money in the economy?
c. Calculate the money multiplier.
d. How much money will the banking system generate from the deposits?
3. Econaville is a country in which the quantity theory of money operates. The country has a constant population, capital stock, and technology so real GDP does not change. In 2014, real GDP was $500 million, the price level was 15 and the velocity of circulation of money was
10. In 2015, the quantity of money increased by 20 percent.
a. What was the quantity of money in 2014?
b. What was the velocity of circulation in 2015?
c. What was the price level in 2015?
1. [15 marks]The basket of goods contains 8 pounds of rice and 2 pounds of chicken
Year Price of rice (per lb) Price of Chicken (per lb)
2005 $1.50 $3.50
2006 $2.00 $3.00
2007 $2.10 $4.00
a. Calculate the cost of the basket of goods.
b. Calculate the CPI for each year using 2006 as the base year.
c. Calculate the inflation rate for each year using 2006 as the base year.