Transcript Session 12

Welcome to
PMBA0608:
Economics/Statistics
Foundation
Fall 2006
Session12: November 29
Southern Campus
19:30-21:00
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Discuss Assignment 6:
# 1, Page 526 of Econ.
a. A family buys a new refrigerator durable
consumption added to C
b. Aunt Jane buys a new house fixed
investment (If )  added to I
c. Selling car from inventory has two effects
1. negative change in inventories = negative
inventory investment (Ii) subtracted from I
2. Added to C or I or X or G
 1 and 2 Cancel each other
 Net effect zero. Is that ok ?
 Note the value of car was accounted for
when it was added to inventories
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# 1, Page 526 of Econ.
d. You buy Pizza  none durable consumption
added to C
e. California repaves highway government
purchases added to G
f. Your parents buying French wine has two
effects
1. Addition to C
2. Addition to Imports M goes up  net exports go
down
 1 and 2 Cancel each other.
 Is that ok?
g. Honda expands its factory in Ohio  If 
added to I
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#4, Page 526 of Econ.
Part (a)
Σ Pi, 05 Qi, 05= $200
NGDP2006= Σ Pi, 06 Qi, 06= $400
NGDP2007= Σ Pi, 07 Qi, 07= $800
NGDP2005=
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#4, Page 526 of Econ.
Part (a)
Σ Pi, 05 Qi, 05 =$200
RGDP2006= Σ Pi, 05 Qi, 06 =$400
RGDP2007= Σ Pi, 05 Qi, 07 =$400
RGDP2005=
5
#4, Page 526 of Econ.
Part (a)
GDP deflator05 = (NGDP05/ RGDP05) X
100= (200/200) X 100 = 100
GDP deflator06 = (NGDP06/ RGDP06) X
100= (400/400) X 100 = 100
GDP deflator07 = (NGDP07/ RGDP07) X
100= (800/400) X 100 = 200
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#4, Page 526 of Econ.
Part (b)
Note:
Percentage change =
[(This year’s figure – last year’s figure)/last year’s figure] *100
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#4, Page 526 of Econ.
Year
%Δ NGDP
%Δ RGDP
2005 --
--
%Δ GDP
deflator
--
2006 [(400-200)/200]*
100= 100
100
0
2007 100
0
100
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#4, Page 526 of Econ.
 When prices don’t change (2006),
RGDP goes up by as much as NGDP
does
 When prices go up as much as NGDP
does (2007) , RGDP does not change
 Part (c)
 Economic well being is more closely
associated with RGDP than NGDP
 In 2007, economic well being did not rise
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#5, Page 526 of Econ.
Year
NGDP
GDP D
(base
year =
1996)
%ΔNGDP %ΔGDPD RGDP=
%ΔRGDP
(NGDP/G
DPD)*100
1999 9269
113
---
---
8203
---
2000 9873
118
6%
4%
8367
2%
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#5, Page 526 of Econ.
f. NGDP grew more than RGDP because
prices went up.
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Note
 What increases RGDP?
 Increase in Q
 %ΔRGDP = %ΔQ
 What increases NGDP?
 Increase in P and increase in Q
 %ΔNGDP = %ΔQ + %ΔP
 Or
 %ΔNGDP = %ΔRGDP + %ΔP
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#10, Page 527 of Econ.
 Relatively speaking, India probably
has more household production than
USA. So the gap between the true
per capita RGDPs (the one that
includes household production) of US
and India may not be as high as
indicated in this table
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To prepare yourself for Exam 2
1. Study Chapters 5, 6 and 23 of your Econ book and
answer the end of the chapter questions.
2. Study Section 3.4 though Section 4.2 of your Stat
book (pages 102-143) and answer the end of the
section questions.
 The formulas will not be given to you
 The binomial table will be given to you
3. Review your notes and the Power Point Slides
covering Sections 7 through 12.
4. Review Assignments 3 though 6.
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Exam 2 consists of





Econ multiple choice questions
Econ problems
Econ essays
Stat short problems/questions
Stat longer (more involved) problems
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Let’s do some sample Stat
questions




a)
b)
Question 3.21, Page 111 of Stat
P (U) = P (use internet)=0.4
P (NU) = P (not use internet) =0.36
P (DN) = P (don’t know)=.24
P(U) = 0.4
Let’s modify it to: What is the lowest
probability that only …
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Let’s do a picture for part b
You are selecting two individuals
P (U) = 0.4
P(U)= 0.4
P (NU) = 0.36
P (DN) = 0.24
P (NU) = 0.36
P (U) = 0.4
P (NU) = 0.36
P (DN) = 0.24
P (DN) = 0.24
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Part (b)
 There are two ways to select one person
who uses internet and one that doesn't
1. What is the probability of the first person
using the internet and the second person
not using internet?
 O.4 X 0.36 = 0.144
2. What is the probability of the first person
not using the internet and the first person
does?
 0.36 X 0.4 = 0.144
 The lowest probability that only one will
use internet = 0.144+0.144=0.288
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3.23, page 111 of stat
 Two devices to activate the sprinkler
 The sprinkler will be activated by
device A or device B or both
 Reliability of A is 0.91
 Reliability of B is 0.95
 P (sprinkler being activated)=?
 P (sprinkler being activated)= P (A or
B or both work)
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Note: You don’t want to double count
the case that both devices will work
P (AUB) = union = Probability of A or B or
both
P (AUB) = P (A) + P (B) – P (AB)
P (AUB) = 0.91 + 0.95 – (0.91 X 0.95) =
0.9955
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Let’s do 3.35, Page 123
 61% like term limit
 We select three individuals
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Part a
 What is P( none likes term limit)?
 0.39 X 0.39 X 0.39 =0.0593
 What is P (one likes term limit)?
 (0.39 X 0.39 X 0.61) + (0.39 X 0.61 X 0.39) +
(0.61 X 0.39 X 0.39) =0.2783
 What is P (two likes term limit)?
 (0.39 X 0.61 X 0.61) + (0.61 X 0.39 X 0.61) +
(0.61 X 0.61 X 0.39) = 0.4354
 What is P (all like term limit)?
 0.61 X 0.61 X 0.61 = 0.2270
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Note: Sum of probabilities = 1,
why?
x
0
P(x)
P (x)
0.0593
0.5
1
2
0.2783
0.4
0.3
0.4354
0.2
0.1
0
3
1
2
3
x
0.2270
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Part c
 P (x≥ 2) = P (2) + P (3)= 0.4354
+0.2270= 0.6624
 Part d
 E(x) = μ = Σx * P (x)
 E(x) = 0.2783 + (2 * 0.4354) + (3 * 0.2270)=
1.83
 Variance
 σ2= Σ (x – μ)2 P (x)
 σ2= (– 1.83)2 * 0.0593 +(1- 1.83)2 * 0.2783 +
(2- 1.83)2 * 0.4354 + (3- 1.83)2 * 0.2270 =
0.714
 Standard deviation = square root of variance=
0.845
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As you review for exam
 Send me your problems/questions
 See you Saturday at 9:00 a.m.
 Good Luck
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