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Schulich School of Business Mokhles Hossain

York university Winter 2018

INTL 1210
Macroeconomics for managers
Assignment 1
Value: 110 points

Due: Tuesday, February 06, 2018

• Late Assignments will not be accepted
• Show all your work (calculations, graphs) to get full
• Assignment must be typed (except for the diagrams)
Question 1 (12 points)

Explain which of the following goods and services are included and which are not included in
Canada's GDP:

a. Jacinda buys termite spray at her local Home Depot.

b. Jacinda uses the termite spray she purchased at her local Home Depot to treat her house
for termites.
c. Arturo hires a pest control company to treat his house for termites.
d. Jeannine sells her 1969 Pontiac GTO to a local car museum.
e. Simon purchases a new John Deere tractor to use on his farm.
f. Ravi purchases two round-trip airline tickets between Toronto and Montreal.

Question 2 (10 points)

Table 2.5
2012 2013
Quantity Price Quantity Price
Pineapples 20 $0.50 25 $0.55
Milkshakes 70 1.50 90 1.75
Lipstick 20 2.00 30 2.25
Bookmarks 35 0.75 35 1.00

Table 2.5 gives quantities and prices for each good produced in a simple economy in 2012 and

Refer to Table 2.5. Calculate nominal and real GDP for 2012 and 2013. Assume 2012 is the base
year. What is the value of the GDP deflator for 2012 and for 2013?

Question 3 (18 points)

Consider an economy which consists of two firms, A and B, and consumers. Firm A is a wheat
producer. Firm B is a beer factory. In 2004, Firm A produces wheat worth $5000, out of which
$3000 it sells directly to consumers, $1500 it sells to the beer factory and $500 it keeps in storage
for next year. Firm A pays workers $3000. Firm B produces beer worth $4500, out of which it
sells $4000 to consumers and keeps $500 in storage for next year. Firm B pays workers $2800.
Calculate GDP using

(a) The output approach, (b) the expenditure approach, (c) the income approach. (15)

Question 4 (20 points)
(graph required)

Participation of women in the Canadian labour force has been risen dramatically since 1970.

How do you think this rise affected Potential GDP? Productivity? Use appropriate diagram to

Question 5 (20 points)

(graph required)

Consider an economy with two labour markets, neither of which is unionized. Now suppose a
union is established in one market.

a. Show the effect of the union on the market in which it is formed.

b. Show the effect of the union on the nonunionized market.

Question 6 (20 points)

(graph required)

Use appropriate models to explain how Government deficit affects the real wages.

Question 7 (10 points)

The average wage in manufacturing was $3.01 per hour in 1970 and $21.9 in 2018.

a. Compute the growth rate of manufacturing wage over this period.

b. Suppose, the growth rate remains unchanged. How many years will it take for wage to
double? triple?