General Business

Spring 2002

Answers to Homework #2

1. a. Pe = $1000 per month; Qe = 50,000 units

b. No effect on this market: e.g., the market will continue to charge the equilibrium rent of $1000 per month while providing 50,000 units

c. This is a price ceiling which will result in excess demand. At a rent of $500 per month, 55,000 units will be demanded while 25,000 units will be supplied. Thus, there will be excess demand of 30,000 rental units at a price of $500 per month.

d. (c) is an example of an effective price ceiling.

2. a. (a) = .50

b. 4000 units

c. Real GDP is the same for both years

d. net exports= exports – imports

imports = $1000

e. C + I + G + (X – M) = GDP

I = $7000

f. wages + rent + interest + profits = Gross National Income = GDP

profits = $7,500

g. 40 people

3. a. False

b. False

c. False

d. True

e. False

4. a. 264,997,000

b. $5,152 Billion

c. $19,441

d. $4221

e. 19%

f. –1%

5. a. 134,808,000

b. 66.92%

c. 5.36%

6. a. Seasonal

b. Cyclical

c. Structural

d. Frictional

e. Structural

f. Structural