Principles of Economics 3e

# Problems

28.

Last year, a small nation with abundant forests cut down $200 worth of trees. It then turned$100 worth of trees into $150 worth of lumber. It used$100 worth of that lumber to produce $250 worth of bookshelves. Assuming the country produces no other outputs, and there are no other inputs used in producing trees, lumber, and bookshelves, what is this nation's GDP? In other words, what is the value of the final goods the nation produced including trees, lumber and bookshelves? 29. The “prime” interest rate is the rate that banks charge their best customers. Based on the nominal interest rates and inflation rates in Table 19.10, in which of the years would it have been best to be a lender? Based on the nominal interest rates and inflation rates in Table 19.10, in which of the years given would it have been best to be a borrower? Year Prime Interest Rate Inflation Rate 1970 7.9% 5.7% 1974 10.8% 11.0% 1978 9.1% 7.6% 1981 18.9% 10.3% Table 19.10 30. A mortgage loan is a loan that a person makes to purchase a house. Table 19.11 provides a list of the mortgage interest rate for several different years and the rate of inflation for each of those years. In which years would it have been better to be a person borrowing money from a bank to buy a home? In which years would it have been better to be a bank lending money? Year Mortgage Interest Rate Inflation Rate 1984 12.4% 4.3% 1990 10% 5.4% 2001 7.0% 2.8% Table 19.11 31. Ethiopia has a GDP of$8 billion (measured in U.S. dollars) and a population of 55 million. Costa Rica has a GDP of $9 billion (measured in U.S. dollars) and a population of 4 million. Calculate the per capita GDP for each country and identify which one is higher. 32. In 1980, Denmark had a GDP of$70 billion (measured in U.S. dollars) and a population of 5.1 million. In 2000, Denmark had a GDP of \$160 billion (measured in U.S. dollars) and a population of 5.3 million. By what percentage did Denmark’s GDP per capita rise between 1980 and 2000?

33.

The Czech Republic has a GDP of 1,800 billion koruny. The exchange rate is 25 koruny/U.S. dollar. The Czech population is 20 million. What is the GDP per capita of the Czech Republic expressed in U.S. dollars?