GDP nominal rate growth (quarterly)

Paper instructions:

I). Please report the most recent estimates of the following:

• GDP nominal rate growth (quarterly)

• Rate of inflation,

• Rate of unemployment

• Prime nominal interest rate (please provide definition)

• Discount nominal interest rate (please provide definition)

• Federal funds nominal interest rate (please provide definition)

Please list the sources of your information.

II). Please solve the following two problems:

Problem 1:

When the price of gasoline increased from 3 to 4 dollars per gallon, the demand for gasoline decreased from 100,000 gallons to 90,000 daily. Also, the demand for a $50,000 SUV dropped from 3000 to 2500 cars per month. Based on the above please answer the following questions:

1) Estimate the price elasticity of demand for gasoline.

2) Estimate the price elasticity of demand for SUVs.

3) How would you term this demand for gasoline, price elastic, price inelastic, otherwise? Please explain.

4) Estimate the change in the total revenues of gasoline.

5) Estimate the cross elasticity of demand for gasoline and SUVs.

6) Based on the above cross elasticity estimates, please explain whether gasoline and SUVs are complementary, substitute, or not related products.

Problem 2:

A married couple spent $8000 for travel in 2007 when their combined income was $100,000. In 2008, when the husband lost his job due to the recession, the combined income dropped to $65,000 and the couple spent only $4000 for travel. Please estimate the couple’s income elasticity. Would you term this elasticity as elastic or inelastic?

The husband is now back to work the couple estimates their income to be $130,000 in 2010. Please estimate the couple’s travel budget for 2010 based on your income elasticity findings above.

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