Problem 1: (30 points)
a) The following table represents information about the average nominal wages and CPI in this country for several years. Use the information in the following table to determine who had the highest salary when they were employed. (show your calculations)
| Year they were first employed | CPI | Nominal Salary (in KD) | |
| Ahmed | 1990 | 83 |
7200 |
| May | 2005 | 103 | 12600 |
| Abdullah | 2020 | 135 | 16800 |
Problem 2: (30 points)
Use the below graph and questions to write up an essay.
1. Explain changes in the business cycle. (label the graph)
2. Discuss Macroeconomic indicators during the expansion and recession phases.
3. How indicators change when the period of expansion ends?
4. Discuss the inflation rate
Problem 3: (20 points)
Kuwait’s working age population is 1478000, out of those 1263000 is in the labor force, from which 1157000 is employed.
1. Find the unemployment rate 2. How many people are not in the labor force 3. Calculate employment population ratio 4. What is the labor force participation rate
Problem 4: (20 points)
Use below questions to fill in the white cells in the table. Numbers are in billions.
| Real GDP (Y) | Disposable Income (DI) | Consumption (C) | Saving (S) | Marginal Propensity to Consume (MPC) | Marginal Propensity to Save (MPS) | ||||||||
| $10,500 | $8,500 | ||||||||||||
| 11,500 | 9,350 | ||||||||||||
| 12,500 | 10,200 | ||||||||||||
| 13,500 | 11,050 | ||||||||||||
| 14,500 | 11,900 |
1) Calculate disposable income, consumption, saving, MPC and MPS if taxes in this economy are $500. Show one example of calculation for each column.
2) Calculate the multiplier for this economy. Interpret what multiplier means for the economy.
