Page 195 - Krugmans Economics for AP Text Book_Neat

Section 3 Summary

9. Each month the Bureau of Labor Statistics releases the Con-
sumer Price Index Summary for the previous month. Go 2002 2003 2004 2005 2006
to www.bls.gov and find the latest report. (On the Bureau Real GDP
of Labor Statistics home page, click on “News Release” (billions of
under “Latest Numbers—Consumer Price Index” and then 2000 dollars) $10,048.8 10,301.0 10,675.8 11,003.4 11,319.4
choose “Consumer Price Index Summary.”) What was the
Nominal GDP
CPI for the previous month? How did it change from the
(billions of
month before? How did it change over the last year?
dollars) $10,469.6 10,960.8 11,685.9 12,433.9 13,194.7
10. The accompanying table provides the annual real GDP (in bil-
lions of 2000 dollars) and nominal GDP (in billions of dollars)
for the United States. a. Calculate the GDP deflator for each year.
b.Use the GDP deflator to calculate the inflation rate for all
years except 2002.
11. The cost of a college education in the United States is rising at
a rate faster than inflation. The table below shows the average
cost of a college education in the United States in 2006 and
2007 for public and private colleges. Assume the costs listed in
the table are the only costs experienced by the various college
students in a single year.
a. Calculate the cost of living for an average college student in
each category for 2006 and 2007.
b.Assume the quantity of goods purchased in each category,
that is, the market basket, is identical for 2006 and 2007.
Calculate an inflation rate for each type of college student
between 2006 and 2007.

Cost of college education (averages in 2006 dollars)
Tuition and fees Books and supplies Room and board Transportation Other expenses
Two-year public college: commuter $2,272 $850 $6,299 $1,197 $1,676
Four-year public college: resident 5,836 942 6,690 880 1,739
Four-year public college: commuter 5,836 942 6,917 1,224 2,048
Four-year public college: out-of-state 15,783 942 6,960 880 1,739
Four-year private college: resident 22,218 935 8,149 722 1,277
Four-year private college: commuter 22,218 935 7,211 1,091 1,630
Cost of college education (averages in 2007 dollars)
Tuition and fees Books and supplies Room and board Transportation Other expenses
Two-year public college: commuter $2,361 $921 $6,875 $1,270 $1,699
Four-year public college: resident 6,185 988 7,404 911 1,848
Four-year public college: commuter 6,185 988 7,419 1,284 2,138
Four-year public college: out-of-state 16,640 988 7,404 911 1,848
Four-year private college: resident 23,712 988 8,595 768 1,311
Four-year private college: commuter 23,712 988 7,499 1,138 1,664

12. Each month, usually on the first Friday of the month, the Bu- 13. In general, how do changes in the unemployment rate vary
reau of Labor Statistics releases the Employment Situation with changes in real GDP? After several quarters of a severe
Summary for the previous month. Go to www.bls.gov and find recession, explain why we might observe a decrease in the of-
the latest report. (On the Bureau of Labor Statistics home ficial unemployment rate. Could we see an increase in the of-
page, on the left side of the page, find “Unemployment” and ficial unemployment rate after several quarters of a strong
select “National Unemployment Rate. ” You will find the Em- expansion?
ployment Situation Summary under “News Releases.”) How 14. There is only one labor market in Profunctia. All workers have
does the unemployment rate compare to the rate one month the same skills, and all firms hire workers with these skills.
earlier? How does the unemployment rate compare to the rate Use the accompanying diagram, which shows the supply of
one year earlier?

Summary 153