Question 1

Consider the following information on GDP and CPI for an economy over the last 3 years.Calculate nominal GDP growth for 2012.

Accepted Answer

Nominal GDP growth for 2012 = (136.8 / 132.4) - 1 = 3.32%

Question 2

You invest $50,000 in Germany when the exchange rate is $1.35/€.Your investment gains 13%,and you subsequently exchange the euros back into dollars at a rate of $1.40/€.What is your total percentage return on this investment?

Accepted Answer

$50,000 / $1.35 / € = 37,037.04€
37,037.04€ × 1.13 = 41,851.85€
41,851.85€ × $1.40 / € = $58,592.59
($58,592.59 - 50,000) / 50,000 = 17.19%

Question 3

The CPI for this year was reported as 164.9,If inflation was 1.25 percent,what must the CPI have been last year?

Accepted Answer

Last year's CPI = 164.90 / (1.0125) = 162.86

Question 4

If the nominal GDP was reported at $122.3 billion and real GDP was reported at $120.1 billion,what was the inflation rate for the period?

Accepted Answer

Inflation rate = (122.3 - 120.1) / 120.1 = 1.83%

Question 5

If the nominal GDP was reported at $1,305.80 billion and inflation was 2.5%,what is the level of real GDP for the period?

Accepted Answer

Real GDP = 1305.80 / (1.025) = $1,273.95

Question 6

Assume the inflation rate in 2016 is 1.3 percent.If the nominal GDP grew 3.5 percent and nominal wages grew 2.6 percent,what are the approximate real growth rates of GDP and wages?

Accepted Answer

Real GDP growth = 3.5% - 1.3% = 2.2%
Real wages growth = 2.6% - 1.3% = 1.3%

Question 7

An analyst gathered the following year-end price level data for an economy.What is the economy's annual inflation rate for 2013?

Accepted Answer

Annual inflation rate = (168.0 - 163.0) / 163.0 = 3.07%

Question 8

Consider the following information on GDP and CPI for an economy over the last 3 years.Calculate nominal GDP growth for 2011.

Accepted Answer

Nominal GDP growth for 2011 = (132.4 / 128.6) - 1 = 2.95%

Question 9

Suppose you are a U.S.investor who is planning to invest $200,000 in China.Your Chinese investment gains 7.5 percent.If the exchange rate moves from 5.10 Yuan per dollar to 5.20 per dollar over the period,what is your total return on this investment?

Accepted Answer

$200,000 × 5.10 Yuan = 1,020,000 Yuan
1,020,000 Yuan × 1.075 = 1,096,500 Yuan
1,096,500 / 5.20 = $210,865.38
($210,865.38 - 200,000) / 200,000 = 5.43%

Question 10

Assume there are 475 million people in the United States,175 million of which make up the labor force.If 16 million are unemployed,what is the unemployment rate?

Accepted Answer

The unemployment rate = 16 / 175 = 9.14%

Question 11

An analyst gathered the following year-end price level data for an economy.What is the economy's annual compounded inflation rate for 2007-2012?

Accepted Answer

Compound annual inflation rate = (196.8/174)^1/5 = 2.49%

Question 12

You invest $250,000 in Japan at a starting exchange rate of 101.50×/$.Your Japanese investment gains 5.6 percent,and the ending exchange rate is 102.40×/$.What is your total return on this investment?

Accepted Answer

$250,000 × 101.50Y = 25,375,000Y
25,375,000 Y × 1.06 = 29,796,000 Y
29,796,000/102.4 × = $261,679.69
($261,679.69 - 250,000) / 250,000 = 4.67%

Question 13

You invest $150,000 in Germany when the exchange rate is $1.25/€.Your investment gains 10%,and you subsequently exchange the euros back into dollars at a rate of $1.20/€.What is your total percentage return on this investment?

Accepted Answer

$150,000 / $1.25 / € = 120,000€
120,000€ × 1.10 = 132,000€
132,000€ × $1.20 / € = $158,400
($158,400 - 150,000) / 150,000 = 5.60%

Question 14

Your $785,000 investment in Mexico gained 6 percent.If the exchange rate moves from 13.4 pesos per dollar to 12.5 per dollar over the period,what is your total return on this investment?

Accepted Answer

$785,000 × 13.40 pesos = 10,519,000 pesos
10,519,000 Pesos × 1.06 = 11,150,140 pesos
11,150,140 / 12.50 pesos / USD = $892,011.20
($892,011.20 - 785,000) / 785,000 = 13.63%

Question 15

Assume the inflation rate in 2016 is 1.2 percent.If the nominal GDP grew 3.3 percent and nominal wages grew 2.1 percent,what are the approximate real growth rates of GDP and wages?

Accepted Answer

Real GDP growth = 3.3% - 1.2% = 2.1%
Real wages growth = 2.1% - 1.2% = 0.9%

Question 16

You are planning to invest $150,000 in Hong Kong.If your Hong Kong investment gains 7.5 percent while the exchange rate moves from 7.75 Hong Kong dollars (HK$)per U.S.dollar to 7.70 per dollar over the period,what is your total return on this investment?

Accepted Answer

$150,000 × 7.75 HK$ = 1,162,500 HK$
1,162,500 HK$ × 1.075 = 1,249,687.50 HK$
1,249,687.50 HK$ / 7.70 = $162,297.08
($162,297.08 - 150,000) / 150,000 = 8.20%

Question 17

An analyst gathered the following year-end price level data for an economy.What is the economy's annual inflation rate for 2016?

Accepted Answer

Annual inflation rate = (207.1 - 201.2) / 201.2 = 2.93%

Question 18

Suppose you want to convert U.S.dollars to Indian rupees.If you have $120,000 and the exchange rate is $0.0159 per rupee,how many rupees (in millions)will you receive in the conversion?

Accepted Answer

Rupees received = $120,000 / 0.01594 = 7,526,342.20 rupees = 7.53 million rupees

Question 19

Assume the CPI increases from 125.9 to 126.4 over the period.What is the inflation rate implied by this CPI change?

Accepted Answer

Inflation rate = (126.4 - 125.9) / 125.9 = 0.40%

Question 20

As a U.S.investor,you decide to invest $110,000 in Switzerland.You do so at a starting exchange rate of 1.093 SwFr/$.Your Swiss investment gains 7 percent,and the ending exchange rate is 1.091SwFr/$.What is your total return on this investment?

Accepted Answer

$100,000 × 1.093Swfr = 120,230 SwFr
120,230 SwFr × 1.07 = 128,646.10
128,646.10 SwFr / 1.091 = $117,915.77
($117,915.77 − 110,000) / 110,000 = 7.20%

Quiz 19: Global Economic Activity and Industry Analysis