China was the largest economy for centuries because everyone had the same type of economy— subsistence—and so the country with the most people would be economically biggest. Then the Industrial Revolution sent the West on a more prosperous path. Now the world is returning to a common economy, this time technology- and information-based, so once again population triumphs. a. Why was China the world’s largest economy until 1890? b. Why did the United States surpass China in 1890 to become the world’s largest economy?
> Why are cheques and credit cards not money?
> What are the official measures of money? Are all the measures really money?
> What are the problems that arise when a commodity is used as money?
> What makes something money? What functions does money perform? Why do you think packs of chewing gum don’t serve as money?
> In the United Kingdom, the currency drain ratio is 38 percent of deposits and the reserve ratio is 2 percent of deposits. In Australia, the quantity of money is $150 billion, the currency drain ratio is 33 percent of deposits, and the reserve ratio is 8
> Financial innovation and the spread of U.S. currency throughout the world has broken down relationships between money, inflation, and output growth, making monetary gauges a less useful tool for policymakers, the U.S. Federal Reserve chairman, Ben Bernan
> Answer the following questions. a. What changes in the interest rate and the quantity of M2 occurred between 2007 and 2014? b. When the interest rate fell, why did the quantity of M2 demanded increase? c. How would you interpret the growth of M2 and the
> The table provides some data for the United States in the first decade following the Civil War. a. Calculate the value of X in 1869. b. Calculate the value of Z in 1879. c. Are the data consistent with the quantity theory of money? Explain your answer.
> Use the data in Problem 7 to work this problem. The interest rate is 4 percent a year. Suppose that real GDP decreases from $20 billion to $10 billion and the quantity of money remains unchanged. Do people buy bonds or sell bonds? Explain how the interes
> The figure shows an economy’s demand for money curve. If the central bank decreases the quantity of real money from $400 billion to $390 billion, explain how the price of a bond will change. 390 00 a10 420 Rad mony bio of 2007 doll
> What are the four main ways in which the CPI is an upward-biased measure of the price level?
> Explain the change in the nominal interest rate in the short run if: a. Real GDP increases. b. The Bank of Canada increases the quantity of money. c. The price level rises.
> Banks in New Transylvania have a desired reserve ratio of 10 percent of deposits and no excess reserves. The currency drain ratio is 50 percent of deposits. Now suppose that the central bank increases the monetary base by $1,200 billion. a. How much do t
> The U.S. Federal Reserve discussed “a new largescale asset purchase program” commonly called “QE3.” Some members said such a program could help the economy by lowering long-term interest rates and making financial conditions, more broadly, easier. They d
> Describe the Bank of Canada’s assets and liabilities. What is the monetary base and how does it relate to the Bank of Canada’s balance sheet?
> Set out the transactions that the Bank of Canada undertakes to increase the quantity of money.
> If the Bank of Canada makes an open market sale of $1 million of securities to a bank, what initial changes occur in the economy?
> How does financial regulation in Canada help minimize the cost of bank failure? Does it bring more stability to the banking system?
> The RBC says lines of credit for education are popular and the size of loans to students has been going up as tuition costs have increased. Compared to “good debt” like a mortgage, student loan rates are higher because the debt is riskier. Financial inst
> Starbucks customers can now pay for their coffee using their smartphone. Does this mean the move to electronic payments is finally coming? If people can use their smartphones to make payments, will currency disappear? How will the components of M1 change
> Rapid inflation in Brazil in the early 1990s caused the cruzeiro to lose its ability to function as money. Which of the following commodities would most likely have taken the place of the cruzeiro in the Brazilian economy? Explain why. a. Tractor parts b
> How does the natural unemployment rate change and what factors might make it change?
> Sara withdraws $1,000 from her savings account at the TD Bank, keeps $50 in cash, and deposits the balance in her chequable account at the TD Bank. What is the immediate change in M1 and M2?
> The table sets out the data for an economy when the government’s budget is balanced. Suppose that the quantity of loanable funds demanded increases by $1 trillion at each real interest rate and the quantity of loanable funds supplied i
> The table sets out the data for an economy when the government’s budget is balanced. If the government’s budget becomes a deficit of $1 trillion, what are the real interest rate and investment? Does crowding out occur
> The table sets out the data for an economy when the government’s budget is balanced. a. Calculate the equilibrium real interest rate, investment, and private saving. b. If planned saving increases by $0.5 billion at each real interest
> First Call, Inc., a smartphone company, plans to build an assembly plant that costs $10 million if the real interest rate is 6 percent a year or a larger plant that costs $12 million if the real interest rate is 5 percent a year or a smaller plant that c
> Treasury Yields Fall to Two-Week Low Treasury bond prices rose on Monday, pushing interest rates down. The interest rate on 10-year bonds fell 4 basis points to 1.65%. What is the relationship between the price of a Treasury bond and its interest rate? W
> Lori is a student who teaches golf on Saturdays. In a year, she earns $20,000 after paying her taxes. At the beginning of 2014, Lori owned $1,000 worth of books, DVDs, and golf clubs and she had $5,000 in a savings account at the bank. During 2014, the i
> What is the Ricardo-Barro effect and how does it modify the crowding-out effect?
> How do changes in the demand for and supply of loanable funds change the real interest rate and quantity of loanable funds?
> What determines the supply of loanable funds and what makes it change?
> Define frictional unemployment, structural unemployment, and cyclical unemployment. Give examples of each type of unemployment.
> How do households make saving decisions?
> What determines the demand for loanable funds and what makes it change?
> How do firms make investment decisions?
> Explain the connection between the price of a financial asset and its interest rate.
> Distinguish between physical capital and financial capital and give two examples of each.
> G20 Vows to Boost World GDP by $2 trillion The centrepiece of the 2014 G20 meeting is for all 20 countries to boost investment, create new jobs, and together boost world income by $2 trillion over 5 years. a. Explain the effect of an increase in planned
> Answer the following questions. a. Why does the news article say that bond prices and interest rates move in opposite directions? Is it correct? Explain. b. How does a government budget deficit influence the loanable funds market, and why does a decrease
> The table sets out the data for an economy when the government’s budget is balanced. a. Calculate the equilibrium real interest rate, investment, and private saving. b. If planned saving decreases by $1 billion at each real interest ra
> A judge in Lamar County, Texas, ruled that TransCanada has permission to build its Keystone XL pipeline from Cushing, Oklahoma, to Port Arthur, Texas. TransCanada has said it will start building as soon as possible. Show on a graph the effect of TransCan
> In 2012, the Lee family had disposable income of $80,000, wealth of $140,000, and an expected future income of $80,000 a year. At a real interest rate of 4 percent a year, the Lee family saves $15,000 a year; at a real interest rate of 6 percent a year,
> Why does unemployment arise and what makes some unemployment unavoidable?
> Draw a graph to illustrate how an increase in the supply of loanable funds and a decrease in the demand for loanable funds can lower the real interest rate and leave the equilibrium quantity of loanable funds unchanged.
> Draw a graph to illustrate the effect of an increase in the demand for loanable funds and an even larger increase in the supply of loanable funds on the real interest rate and the equilibrium quantity of loanable funds.
> Recent data indicate that Canadians are saving more. Statistics Canada reports that the Household Savings Rate is currently 5.4%, a 0.4% increase from the previous year. Likewise, a recent Bank of Montreal study found that 48% of Canadians are now invest
> Explain the processes that will bring the growth of real GDP per person to a stop according to the classical, neoclassical, and new growth theories.
> For three years, there was no technological change in Longland but capital per hour of labour increased from $10 to $20 to $30 and real GDP per hour of labour increased from $3.80 to $5.70 to $7.13. Then, in the fourth year, capital per hour of labour re
> The IMF projects that China’s real GDP per person will be 15,040 yuan in 2015 and 16,010 yuan in 2016 and that India’s real GDP per person will be 54,085 rupees in 2015 and 56,840 rupees in 2016. By maintaining their current growth rates, which country w
> Brazil’s real GDP was 1,180 trillion reais in 2013 and 1,202 trillion reais in 2014. Brazil’s population was 198 million in 2013 and 200 million in 2014. Calculate: a. The growth rate of real GDP. b. The growth rate of real GDP per person. c. The approxi
> What is the key proposition of new growth theory that makes economic growth persist?
> What is the key idea of classical growth theory that leads to the dismal outcome?
> Why is the unemployment rate never zero, even at full employment?
> Explain the influences on the pace of labour productivity growth.
> What determines the demand for labour, the supply of labour, and labour market equilibrium?
> Compare the growth rates in Hong Kong, Korea, Singapore, Taiwan, China, and Canada. In terms of real GDP per person, how far is China behind these others?
> Describe the gaps between real GDP per person in Canada and in other countries. For which countries is the gap narrowing? For which is it widening? For which is it the same?
> What has been the average growth rate of Canadian real GDP per person over the past 86 years? In which periods was growth most rapid and in which periods was it slowest?
> Use the Rule of 70 to calculate the growth rate that leads to a doubling of real GDP per person in 20 years.
> What is the relationship between the growth rate of real GDP and the growth rate of real GDP per person?
> China grows at around 9 percent a year, but its one-child policy will start to reduce the size of China’s working-age population within the next 10 years. India, by contrast, will have an increasing working-age population for another generation at least.
> Answer the following questions. a. How do South Africa and Botswana compare on economic growth rates? b. For South Africa to grow faster, how would the percentage of GDP invested in new capital need to change? c. If South Africa is able to achieve a grow
> We are at a tipping point where technology— from software to hardware and everything in between—is weaving its way into all that we do and is about to touch every industry. Every day, we are reminded how quickly things are changing, from connected cars,
> Describe the alternative measures of unemployment.
> Is faster economic growth always a good thing? Argue the case for faster growth and the case for slower growth. Then reach a conclusion on whether growth should be increased or slowed.
> Just six months ago, India was looking good. Annual growth was 9%, consumer demand was huge, and foreign investment was growing. But now most economic forecasts expect growth to slow to 7%—a big drop for a country that needs to accelerate growth. India n
> The first table describes an economy’s labour market in 2014 and the second table describes its production function in 2014. Suppose that labour productivity increases in 2014. What effect does the increased labour productivity have on
> While gross domestic product growth is picking up a bit in emerging market economies, it is picking up even more in the advanced economies. Real GDP in the emerging market economies is forecasted to grow at 5.4% in 2015 up from 4.9% in 2012. In the advan
> South Africa’s real GDP was 1,900 billion rand in 2011 and 1,970 billion rand in 2012. South Africa’s population was 50.5 million in 2011 and 51.0 million in 2012. Calculate: a. The growth rate of real GDP. b. The growth rate of real GDP per person. c. T
> Mexico’s real GDP was 13,405 trillion pesos in 2013 and 13,805 trillion pesos in 2014. Mexico’s population was 118.4 million in 2013 and 119.5 million in 2014. Calculate: a. The growth rate of real GDP. b. The growth rate of real GDP per person. c. The a
> In 2014, China’s real GDP is growing at 7 percent a year and its population is growing at 0.5 percent a year. If these growth rates continue, in what year will China’s real GDP per person be twice what it is in 2014?
> An economy has a fixed price level, no imports, and no income taxes. MPC is 0.80, and real GDP is $150 billion. Businesses increase investment by $5 billion. Calculate the multiplier and the change in real GDP.
> Explain how an increase in business investment at a constant price level changes equilibrium expenditure.
> Suppose that the economy is at full employment, the price level is 100, and the multiplier is 2. Investment increases by $100 billion. Are the values of the multipliers in the short run and the long run larger or smaller than 2?
> Suppose that the economy is at full employment, the price level is 100, and the multiplier is 2. Investment increases by $100 billion. In the short run, does the price level remain at 100? Explain why or why not.
> In an economy, autonomous consumption expenditure is $50 billion, investment is $200 billion, and government expenditure is $250 billion. The marginal propensity to consume is 0.7 and net taxes are $250 billion. Exports are $500 billion and imports are $
> In an economy, autonomous consumption expenditure is $50 billion, investment is $200 billion, and government expenditure is $250 billion. The marginal propensity to consume is 0.7 and net taxes are $250 billion. Exports are $500 billion and imports are $
> In an economy, autonomous consumption expenditure is $50 billion, investment is $200 billion, and government expenditure is $250 billion. The marginal propensity to consume is 0.7 and net taxes are $250 billion. Exports are $500 billion and imports are $
> In an economy, autonomous consumption expenditure is $50 billion, investment is $200 billion, and government expenditure is $250 billion. The marginal propensity to consume is 0.7 and net taxes are $250 billion. Exports are $500 billion and imports are $
> How does an increase in autonomous expenditure change real GDP in the short run? Does real GDP change by the same amount as the change in aggregate demand? Explain why or why not.
> Statistics Canada reported the following CPI data: June 2008……... 217.3 June 2009……… 214.6 June 2010………. 216.9 Why might these CPI numbers be biased? How can alternative price indexes avoid this bias?
> How does a change in the price level influence the AE curve and the AD curve?
> How do the marginal propensity to consume, the marginal propensity to import, and the income tax rate influence the multiplier?
> If real GDP and aggregate expenditure are greater than equilibrium expenditure, what happens to firms’ inventories? How do firms change their production? And what happens to real GDP?
> If real GDP and aggregate expenditure are less than equilibrium expenditure, what happens to firms’ inventories? How do firms change their production? And what happens to real GDP?
> What is the relationship between aggregate planned expenditure and real GDP at equilibrium expenditure?
> Which components of aggregate expenditure are influenced by real GDP?
> Statistics Canada reported that in the second quarter of 2014 Canadian exports increased by $24 billion. Explain and draw a graph to illustrate the effect of an increase in exports on equilibrium real GDP in the short run.
> Statistics Canada reported that in the second quarter of 2014 Canadian exports increased by $24 billion. Explain and draw a graph to illustrate the effect of an increase in exports on equilibrium expenditure in the short run.
> The U.S. Commerce Department reported that wholesale inventories fell 1.3 percent in August for a record 12th consecutive month, evidence that companies are trimming orders to factories, which helped depress economic output during the recession. Economis
> Gains in stock markets and increased house prices boosted Canadians’ wealth in the first quarter of 2014. On a per capita basis, household wealth rose to $222,600. Statistics Canada also reported that consumption expenditure increased by $4 billion in th
> Statistics Canada reported the following CPI data: June 2008……... 217.3 June 2009……… 214.6 June 2010………. 216.9 Calculate the inflation rates for the years ended June 2009 and June 2010. How did the inflation rate change in 2010?
> Gains in stock markets and increased house prices boosted Canadians’ wealth in the first quarter of 2014. On a per capita basis, household wealth rose to $222,600. Statistics Canada also reported that consumption expenditure increased by $4 billion in th
> Initially, the short-run aggregate supply curve is SAS0 and the aggregate demand curve is AD0. Some events change aggregate demand from AD0 to AD1 and aggregate supply from SAS0 to SAS1. What is the new macroeconomic equilibrium? LAS SA 115- SAS a 1
> The increase in real GDP in the second quarter primarily reflected increases in personal consumption expenditure (0.9%), exports (4.2%), and investment (0.8%)—the largest quarterly gain since 2011, mainly due to the increase in consumption expenditure. E
> The Bank of Canada cuts the quantity of money and all other things remain the same. Explain the effect of the cut in the quantity of money on aggregate demand in the short run.
> What are the defining features of classical macroeconomics and what policies do classical macroeconomists recommend?
> Does inflation result from increases in aggregate demand, short-run aggregate supply, or long run aggregate supply?
> Does economic growth result from increases in aggregate demand, short-run aggregate supply, or long-run aggregate supply?
