MACHO UNIT 2 FREE RESPONSE QUESTION : GDP 20 pts TOTAL EAGLETON KNIGHTLAND YEAR Nominal GDP Population YEAR Nomial Population GDP Deflator GO Deflator $1000 100 20 $2000 100 25 $2400 120 25 $3000 150 25 Use the data above for two tiny nations a. Calculate the following for YEAR 2. (Show your work) i. Real GDP for Eagleton (1 pt) it. Real GDP for Knightland (1 pt) b. Calculate the following (show your work) Inflation in Eagleton between year 1 and year 2. (1 pt) ii. Inflation in Knightland between year 1 and year 2. (1 pt) C. Given your answer to part b, if the nominal interest rate is the same for both nations in year 2, which nation has a higher real interest rate? Explain (2 pts) d. Based on the data, which country has experienced an economic expansion between year 1 and year 2? Explain how you found your answer. (2 pts) e. Based on the data, is the real GDP per capita in Knightland greater than, less than or equal to the real GDP per capita in Eagleton in year 2? Explain. (2 pts) f. If Knightland is below potential GDP in year 2, how would the unemployment rate of Knightland compare to the natural rate of unemployment? Explain. (2 pts) g. For each of the following, INDICATE whether each transaction would be INCLUDED or NOT INCLUDED in the YEAR 2 GDP of Knightland. EXPLAIN your answer. i. Purchase of shares of stock of a company fully owned by citizens of Knightland. (2 pts) ii. Payment for the construction of bridge by the government of Knightland. (2 pts) ili, An increase the inventory of computer chips produced by a company in Knightland. (2 pts) iv. A car produced in Eagleton by a company owned by citizens of Knightland. (2 pts)