Problem Set 2
Macroeconomics I.
Profs. Luis Puch and Ricardo Pérez Valls
Bachellor in Economics.
Universidad Complutense de Madrid.
March 6, 2024
Part 1. Inflation
Problem 1. EUROSTAT prepares a press release each month summarizing the data obtained for the varia-
tion in the harmonised index of consumer prices (HICP) of the previous month. To obtain the last complete
available (March 2024):
1. Go to: https://ec.europa.eu/eurostat/web/hicp/publications
2. Look for the Euro Indicators and News Release
Next, regarding the last published month, answer the following questions:
1. What was the annual variation of the general HICP in February 2024 for the euro area? Did it (the
variation) increase or decrease compared to the previous month?
2. What was the annual variation of the general HICP in January 2024 for the European Union? Did it
increase or decrease compared to the previous month?
3. What is the (expected) monthly variation of the HICP in February 2024 for the euro area? Did it
increase or decrease compared to the previous month?
4. What was the inflation rate for olive oil in January 2024 in your home country? Was it higher or lower
than the EU average (50%).
Problem 2. The company you work at wants to make some inflation forecasts in order to plan production
ahead. You are requested to provide an estimate ”as much conservative as possible”. Which index would
you use, and why?
Problem 3. Most collective bargaining agreements establish that wages must increase in accordance with
CPI. In your opinion, should other price indices be considered? Why/Why not?
Problem 4. 1. Consider the following figure depicting GDP and CPI in the United States over the past
75 years.
1
Briefly reflect on the coherence of both series. When are they most correlated?
2. Discuss whether the following economic indicators are procyclical or countercyclical?
Are they leading or lagging the cycle?:
(a) Motorcycle sales
(b) Hotel reservations on the Spanish coast
(c) Suspensions of payments and bankruptcy declarations
(d) Affiliated with Social Security
(e) Collection of indirect taxes
(f) Public expenditure on unemployment benefit
(g) Companies that cease their activity
(h) Index of orders in the industry
(i) Public deficit
(j) Imports of automobiles
Problem 5. In some economy, two consumption goods X and Y, and an investment good Z, are produced.
Only information on goods X and Y is used to construct the basket needed to compute the CPI. According
to the following information:
2022 2023
PRICE QUANTITY PRICE QUANTITY
GOOD X 3 50 4 35
GOOD Y 6 65 8 40
GOOD Z 25 55 100 95
1. Compute GDP growth at current prices and at constant prices of both 2022 and 2023. What are the
two measures of real GDP that you have obtained? What is “real growth” instead?
2. Compute “real growth,” in the way discussed in class, and therefore real GDP in 2023. Then compute
the corresponding GDP Deflator and the inflation rate measured from the GDP Deflator.
3. Relate the measure of inflation obtained in Question 2 above with the measures of inflation implied by
your calculations in Question 1 above.
2
4. Compute the CPI each year and inflation measured from the CPI. Compute also the Consumption
Deflator and the corresponding inflation measure. Relate both measures with nominal and real growth
in consumption.
Part 2. National Accounts
Problem 6. The economy of a fictitious country provided the following figures in a year:
Production 1,500
Intermediate Consumption 600
Investment 350
Imports 100
Exports 150
1. Using the good and services account, calculate Final Consumption of this economy
(Recall: Resources= Uses)
2. If the gross capital formation was 400, what was the change in inventory? What does it mean that it
has a positive/negative sign?
Problem 7. Assuming taxes and transfers away, these were the macromagnitudes of the Spanish economy
in 2021 (source: INE, units: billion euros)
Final Consumption 937
Added Value of Services 814
Wages 585
Gross Production Surplus 496
Gross Capital Formation 252
Added Value of Industry 185
Net taxes on production and imports 126
Net taxes on products 115
Added Value of Construction 61
Added Value of Agriculture 32
Net Exports 18
1. Calculate GDP via the Supply, Income, and Demand approaches (Note: net taxes on products are
used for supply approach whereas net taxes on production are used for income approach)
2. For the last decade, Spain has incurred in trade surpluses (positive net exports), likewise China or
South Africa. Other countries such as the United States or the United Kingdom have consistently run
trade deficits. What has your country done? Briefly elaborate on these discrepancies.
