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Diagnosis: Monetary

Okay economic doctors, now that youre finished inthe classroom, it is time to start your residency, andapply your knowledge to some real world situations.

Below you will find the economic information from theimaginary country of Pseudopolis. Your job will be asfollows.

1. Using the data provided, graph the economic

information in the space provided (label youraxes!)

2. Answer the questions underneath each graphand predict the health of the patient.

UnemploymentUnem-

ploymentRate

3.5 3.2 2.5 2 4.0 4.6 5.9 6.2 6.4 7.0 7.2

Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

1. How would you describe the general trend of unemployment from 1999 to

2009?

2. In which of the following years do you think GDP is/will be at its lowest:

2001, 2005, 2008? Explain your reasoning.

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Inflation and Deflation

PriceLevel

100 101 120 150 145 130 122 100 85 60 57

Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Note: Think of price level as the average price of all goods and services in aneconomy that you would buy on a regular basis.

3. What years experienced the most rapid period ofinflation? What years

experienced the most rapid period ofdeflation? How do you know?

4. Which of the following years is more likely to have had a low GDP: 2007or 2002? Explain your reasoning.

5. Look at the wide swing of prices throughout the years. Imagine that youare a business owner trying to buy supplies for your factory/business.Why would these price swings be bad for your business?

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Gross Domestic Product

GDP 10 12 15 17 18 17.5 16 13 11 8 ?

Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Note: GDP is in billions of dollars.

6. In what year/years was the economy at its healthiest? Least healthy?How do you know?

7. Look back at your answer to number 2. Were you correct in yourprediction? If so, what evidence gave it away and what helped youinterpret it accurately? If not, what was the source of your error?

8. Using the data from above (prices and unemployment), predict where

GDP might be in the 2009. Explain your reasoning.

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You Make the Diagnosis

Medical records of an economy indicate that priceshave fallen slightly, unemployment is falling, and GDPhas increased by 3% in the past four months (thats

the highest gain ever). Overall, is this patient:

Healthy Sick Explain your diagnosis: ________________________

_________________________________________________________________________________________________________________________________.

You Make the Diagnosis

Medical records of an economy indicate that priceshave fallen slightly, unemployment is falling, and GDPhas increased by 3% in the past four months (thats

the highest gain ever). Overall, is this patient:

Healthy Sick Explain your diagnosis: ________________________

_________________________________________________________________

________________________________________________________________.

You Make the Diagnosis

Medical records of an economy indicate that priceshave fallen slightly, unemployment is falling, and GDPhas increased by 3% in the past four months (thats

the highest gain ever). Overall, is this patient:

Healthy Sick Explain your diagnosis: ________________________

_________________________________________________________________________________________________________________________________.