Exercise 1: Chapter 15 Question 14
The national income can be defined as the sum of all the output of the economy nationwide, where the gross national product (GDP) measures the value of that economy. Though not all economy inputs are considered in the GDP measurement, and then arises the question of the uncertainty or shortcomings of the national income account. I remember when I first came in the United States my householder does not have laundry machines; the household wash their clothes themselves so I do, we cannot afford a Laundromat for every dirty cloth. I understand now such input does not affect the GDP, our action is simply ignores by the nation because there is no payment burden by the state tax. Still our household complained about the water bill in the house, consequently we pay tax anyway.
Similarly some activities such as drug trade and babysitting are not considered in calculating the national income. Recalling the household above, the householder’s wife babysits children that their parents bring into the house and pay her directly. I heard that the lady was trying to get a babysitting license, which means she was operating and the nation does not know. Other non-marketed activities such as services from person to person and prostitution do not include in the GDP. I think some activities out of our standard of living that the nation does not rely on, their use might encounter some inaccuracies and defect the national income account. We will not accurately measure black market activities and inflation which is always adjusted for some reasons. Also the GDP does not take welfare into account.
The GDP is considered to be the market value of all final goods and services produced in the economy during a period of one year, plus income earned locally by the foreigners minus income earned abroad by the nationals, then the GDP shows another limitation of the national income account; some of the activities to external parties to the production or consumption are simply dismissed.
Exercise 2: Chapter 16 Question 5
Frictional unemployment is the time period between jobs when a worker is searching for a better job in comparing his or her previous job to another suitable job. It is the economy stage in which short-term unemployed and employers search respectively the best job and the most skilled employees. The frictional unemployment include the labor force who for some reasons such as searching a better job, moving to another location or they just lost their job therefore look for another job. This does not affect negatively the economy, indeed it is a sign of well-being or healthy economy, due to the fast-growing economy with a mobile and adaptable labor force that have choices.
Frictional unemployment is important because it benefits both workers and employers by giving them time to look for their best fit. Everybody wants to make more money, live in a better house, or drive a better car. Frictional unemployed are allowed while voluntary leaving their job to look for better position in short time period between jobs. They are given time to report to their new employers. This stage of the economy benefits also employers who search for time to implement their production through the interview and hiring of the skilled employees. If frictional unemployment did not exist in our economy, its inertia would lead economists to create one, for an economy without this type of unemployment is unimaginable; means people are not looking for implementation, innovation and achievement and firms will just stagnate in downturn. As stated the presence of this type of unemployment is just possible in a fast-growing economy which is a sign of a healthy economy. "It is a sign of efficiency in an economy when workers try to increase their income by leaving one job for another" (Boyes, 2005, p.169).
Thus frictional unemployment is inevitable and natural for any economy as people change jobs and businesses open and close.

Exercise 3: Chapter 26 Question 8
An exchange rate is the rate at which one currency can be exchanged for another. In other words, it is a price of one country’s currency to get another country’s currency. When it comes to the point when the flexible exchange rate or floating exchange rate suffers of disorder you can guess the importance of the intervention of the authority to restore the order. There is why the fixed exchange rate is created.
Under the floating rate, markets determine the exchange rate. It might be an excess in demand for the existing currency, then its price will appreciate and become more expensive for the foreign currency buyer reducing the demand. With an expansionary fiscal policy and rates vary, there will be a rise in interest rates and as incomes increase, the demand for money also arises (Stone, 2011 p. 683). On the other hand, the supply of this currency might be an excess then it will depreciate. The rate is lower encouraging investors and consumers to want more foreign currency; it causes the exchange rate to depreciate. These two instances affect the price for export and import and inflation might arise worsening the currency volatility already in the market. Nobody cares; it is a free market. Supply and demand determine the value of the currency.
Differently the government deserts the right to fixe or pegs the rate. Under a fixed exchange rate government determines the exchange rate, but economic policies maintain the rates (Stone, 2011 p.682).That means the government or its central bank precisely determines the exchange rate and makes its own economic policies to control or maintain as the official exchange rate. The fixed exchange rate arose because the government needed to be involved in order to maintain certain equilibrium in the market where it is a potential buyer and seller. What is surprising is that we still have speculation with the fixed exchange rate.
References
Boyes, W. & Michael M. (2005) Economics. (6th edition) Houghton Mifflin http://www.econport.org/content/handbook/NatIncAccount/Limitations.html Stone, Gerald W. (2011). Core Economics. New York: Worth Publishers.
http://economics.about.com/cs/money/l/aa022703a.htm