Economic Conditions at the Cycle Bottom Employment rebounded by 0.1 percent in August 2008, its first gain in four months. All of the increase was in full-time jobs. The unemployment rate in August 2008 was unchanged at 6.1 percent. Compare the unemployment rate in August 2008 to the estimated natural unemployment rate. What does this imply about the relationship between real GDP and potential GDP at this time?
> Does the quantity theory correctly predict the effects of money growth on inflation?
> What is the equation of exchange?
> How is the velocity of circulation calculated?
> What is the quantity theory of money?
> How is money market equilibrium determined in the short run?
> Amazon.com agreed to pay its workers $20 an hour in 1999 and $22 an hour in 2001. The price level for these years was 166 in 1999 and 180 in 2001. Calculate the real wage rate in each year. Did these workers really get a pay raise between 1999 and 2001?
> A bank manager tells you that she doesn’t create money. She just lends the money that people deposit. Explain why she’s wrong.
> What limits the quantity of money that the banking system can create?
> What are the Bank of Canada’s two main policy tools?
> What is the monetary base and how does it relate to the Bank of Canada’s balance sheet?
> What are the functions of depository institutions?
> What are depository institutions?
> What are the main components of money in Canada today?
> Explain the distinction between a central bank and a chartered bank.
> 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
> 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 and the Ricardo-Barro effect occurs, what are the real interest rate and
> A typical family on Sandy Island consumes only juice and cloth. Last year, which was the base year, the family spent $40 on juice and $25 on cloth. In the base year, juice was $4 a bottle and cloth was $5 a length. This year, juice is $4 a bottle and clo
> 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
> Michael is an Internet service provider. On December 31, 2014, he bought an existing business with servers and a building worth $400,000. During 2015, his business grew and he bought new servers for $500,000. The market value of some of his older servers
> 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
> Michael is an Internet service provider. On December 31, 2014, he bought an existing business with servers and a building worth $400,000. During 2015, his business grew and he bought new servers for $500,000. The market value of some of his older servers
> What is the crowding-out effect and how does it work?
> How does a government budget surplus or deficit influence the loanable funds market?
> Why is the real interest rate the opportunity cost of loanable funds?
> What is the loanable funds market?
> What are the three main types of markets for financial capital?
> What is the distinction between gross investment and net investment?
> Oregon’s 5.6 percent unemployment rate is close to the national average of 5.5 percent. A few years ago, Oregon had one of the highest unemployment rates in the nation. To avoid rising unemployment, Oregon Governor Kulongoski’s plan is to provide public
> The deficit in the first 10 months of the year from April 2013 to January 2014 totalled $10.54 billion, down from $13.87 billion in the same period a year earlier. a. Explain the effect of the decrease in the budget deficit on the loanable funds market.
> At the start of 2008, India had an annual growth of 9 percent, huge consumer demand, and increasing investment. But by July 2008, India had large government deficits and rising interest rates. Economic growth is expected to fall to 7 percent by the end o
> At the start of 2008, India had an annual growth of 9 percent, huge consumer demand, and increasing investment. But by July 2008, India had large government deficits and rising interest rates. Economic growth is expected to fall to 7 percent by the end o
> 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,
> Karrie is a golf pro, and after she paid taxes, her income from golf and interest from financial assets was $1,500,000 in 2013. At the beginning of 2013, she owned $900,000 worth of financial assets. At the end of 2013, Karrie’s financial assets were wor
> Annie runs a fitness centre. On December 31, 2014, she bought an existing business with exercise equipment and a building worth $300,000. During 2015, business improved and she bought some new equipment for $50,000. At the end of 2015, her equipment and
> An economy’s capital stock was $46.3 billion at the end of 2010, $46.6 billion at the end of 2011, and $47.0 billion at the end of 2012. Depreciation in 2011 was $2.4 billion, and gross investment during 2012 was $2.8 billion (all in 2007 dollars). Calcu
> An economy’s capital stock was $46.3 billion at the end of 2010, $46.6 billion at the end of 2011, and $47.0 billion at the end of 2012. Depreciation in 2011 was $2.4 billion, and gross investment during 2012 was $2.8 billion (all in 2007 dollars). Calcu
> On January 1, 2014, Terry’s Towing Service owned 4 tow trucks valued at $300,000. During 2014, Terry’s bought 2 new trucks for a total of $180,000. At the end of 2014, the market value of all of the firm’s trucks was $400,000. What was Terry’s gross inve
> The tables describe an economy’s labour market and its production function in 2014. In 2015, the population increases and labour hours supplied increase by 10 at each real wage rate. Does the standard of living in this economy increase
> CNN reported that for the first six months of 2008, the U.S. economy lost 438,000 jobs. The job losses in June were concentrated in manufacturing and construction, two sectors that have been badly battered in the recession. a. Based on the report, what m
> The tables describe an economy’s labour market and its production function in 2014. In 2015, the population increases and labour hours supplied increase by 10 at each real wage rate. What are the equilibrium real wage rate, labour prod
> The tables describe an economy’s labour market and its production function in 2014. What are the equilibrium real wage rate, the quantity of labour employed in 2014, labour productivity, and potential GDP in 2014? Real wage rat dln
> The Asian Development Bank reported that Myanmar’s GDP growth accelerated to 7.5% in 2013 from 7.3% in 2012. Growth was supported by rising investment, improved business confidence, commodity exports, and buoyant tourism. Is this expansion more likely to
> What, according to neoclassical growth theory, is the fundamental cause of economic growth?
> What are the preconditions for labour productivity growth?
> What are the effects of an increase in labour productivity on potential GDP, the quantity of labour, the real wage rate, and potential GDP per hour of labour?
> According to former Federal Reserve chairman Alan Greenspan, IT investments in the 1990s boosted productivity, which boosted corporate profits, which led to more IT investments, and so on, leading to a nirvana of high growth. Which of the growth theories
> The first table describes an economy’s labour market in 2014 and the second table describes its production function in 2014. What are labour productivity and potential GDP in 2014? Red wage rate Labour haurn Idlan par hour Labour h
> The first table describes an economy’s labour market in 2014 and the second table describes its production function in 2014. What are the equilibrium real wage rate and the quantity of labour employed in 2014? Red wage rate Labour
> If a large increase in investment increases labour productivity, explain what happens to: a. Potential GDP. b. Employment. c. The real wage rate.
> Economic Conditions at the Cycle Bottom Employment rebounded by 0.1 percent in August 2008, its first gain in four months. All of the increase was in full-time jobs. The unemployment rate in August 2008 was unchanged at 6.1 percent. How did the unemploym
> The IMF World Economic Outlook reports the following unemployment rates: Do these numbers tell us anything about the relative size of their labour force participation rates and employment-to-population ratios? Ragion Linited States 2010 2011 9.6 9.0
> The IMF World Economic Outlook reports the following unemployment rates: What do these numbers tell us about the relative size of their natural unemployment rates? Ragion Linited States 2010 2011 9.6 9.0 Euro area 10.1 10.9 Japan 5.1 4.5
> The IMF World Economic Outlook reports the following unemployment rates: What do these numbers tell us about the phase of the business cycle in the three regions in 2011? Ragion Linited States 2010 2011 9.6 9.0 Euro area 10.1 10.9 Japan 5.1 4.5
> With about 1.3 million Canadians looking for work, some employers are swamped with job applicants, but many employers can’t hire enough workers. The job market has changed. During the recession, millions of middle-skill, middlewage jobs disappeared. Now
> A high unemployment rate tells us that a large percentage of the labour force is unemployed but not why the unemployment rate is high. What unemployment measure tells us if (i) people are searching longer than usual to find a job, (ii) more people are
> If a severe drought decreases labour productivity, explain what happens to: a. Potential GDP. b. Employment. c. The real wage rate.
> Jobs Report: Hiring Up, Unemployment Down The Labor Department reported that hiring accelerated in November, and the unemployment rate fell to 8.6 percent from 9 percent in October. Two reasons for the fall are that more Americans got jobs, but even more
> What are the effects of an increase in the population on potential GDP, the quantity of labour, the real wage rate, and potential GDP per hour of labour?
> What are the two broad sources of potential GDP growth?
> Economic Conditions at the Cycle Bottom Employment rebounded by 0.1 percent in August 2008, its first gain in four months. All of the increase was in full-time jobs. The unemployment rate in August 2008 was unchanged at 6.1 percent. How can the unemploym
> What determines potential GDP?
> What is the aggregate production function?
> What is economic growth and how do we calculate its rate?
> In July 2011, the Canadian unemployment rate was 7.2 percent. In January 2012, the unemployment rate was 7.6 percent. Predict what happened to: The labour force between July 2011 and January 2012, if unemployment was constant.
> How does the unemployment rate fluctuate over the business cycle?
> What is the output gap? How does it change when the economy goes into recession?
> In July 2011, the Canadian unemployment rate was 7.2 percent. In January 2012, the unemployment rate was 7.6 percent. Predict what happened to: Unemployment between July 2011 and January 2012 if the labour force was constant.
> How do we calculate the inflation rate and what is its relationship with the CPI?
> What is the natural unemployment rate?
> What is the CPI and how is it calculated?
> The people on Coral Island buy only juice and cloth. The CPI basket contains the quantities bought in 2013. The average household spent $60 on juice and $30 on cloth in 2013 when juice was $2 a bottle and cloth was $5 a metre. In 2014, juice is $4 a bott
> What is the price level?
> Use the data in the Worked Problem on p. 673 . Calculate the change in equilibrium expenditure when investment decreases by $50 billion. Worked Problem on p. 673: You are given the following data about an economy that has a fixed price level, no imports
> Suppose that the economy is at full employment, the price level is 100, and the multiplier is 2. Investment increases by $100 billion. a. Compare the change in real GDP in the long run with the increase in investment. b. Explain how the price level chang
> Suppose that the economy is at full employment, the price level is 100, and the multiplier is 2. Investment increases by $100 billion. a. What is the immediate change in the quantity of real GDP demanded? b. In the short run, does real GDP increase by mo
> Suppose that the economy is at full employment, the price level is 100, and the multiplier is 2. Investment increases by $100 billion. What is the change in equilibrium expenditure if the price level remains at 100?
> Explain the link between equilibrium expenditure and the quantity of real GDP demanded.
> An economy has a fixed price level, no imports, and no income taxes. An increase in autonomous expenditure of $200 billion increases equilibrium expenditure by $800 billion. Calculate the multiplier and explain what happens to the multiplier if an income
> 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 new real GDP and explain why real GDP increases by more than $5 billion.
> Explain why induced consumption expenditure differs from autonomous consumption expenditure. Why isn’t all consumption expenditure induced expenditure?
> The figure illustrates the components of aggregate planned expenditure on Turtle Island. Turtle Island has no imports or exports, no incomes taxes, and the price level is fixed. a. What is aggregate planned expenditure when real GDP is $6 billion? b. If
> The people on Coral Island buy only juice and cloth. The CPI basket contains the quantities bought in 2013. The average household spent $60 on juice and $30 on cloth in 2013 when juice was $2 a bottle and cloth was $5 a metre. In 2014, juice is $4 a bott
> Describe the trends and fluctuations in the Canadian unemployment rate since 1960.
> The figure illustrates the components of aggregate planned expenditure on Turtle Island. Turtle Island has no imports or exports, no incomes taxes, and the price level is fixed. Calculate autonomous expenditure and the marginal propensity to consume.
> In an economy, when income increases from $400 billion to $500 billion, consumption expenditure increases from $420 billion to $500 billion. Calculate the marginal propensity to consume, the change in saving, and the marginal propensity to save.
> 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 real GDP change in the long run when autonomous expenditure increases? Does real GDP change by the same amount as the change in aggregate demand? Why or why not?
> If autonomous expenditure increases with no change in the price level, what happens to the AE curve and the AD curve? Which curve shifts by an amount that is determined by the multiplier and why?
> How do fluctuations in autonomous expenditure influence real GDP?
> What is the multiplier? What does it determine? Why does it matter?
> How does equilibrium expenditure come about? What adjusts to achieve equilibrium?
> How do we calculate the effects of real GDP on consumption expenditure and imports by using the marginal propensity to consume and the marginal propensity to import?
> Matching people with available jobs is always difficult after a recession as the economy remakes itself. But labour market data suggest the disconnect is particularly acute this time. Since the recovery began, the number of job openings has risen twice a
> Define and explain how we calculate the marginal propensity to consume and the marginal propensity to save.
> In an economy with a fixed price level, autonomous spending is $20 billion and the slope of the AE curve is 0.6. a. What is the equation of the AE curve? b. Calculate equilibrium expenditure. c. Calculate the multiplier. d. Calculate the shift of the agg
> Answer the following questions. a. If the second quarter 2014 change in inventories was a planned change, what role did it play in shifting the AE curve and changing equilibrium expenditure? Use a two-part figure as shown below to answer this question.
> In Japan, consumer prices slid at a faster pace in July and industrial production unexpectedly slumped. Contrast what the news clip says is happening in Japan with what is happening in Canada in Problem 30 and provide a graphical analysis of the differen
> Consumer sentiment was up in August, helped by merchant discounts, especially from auto dealerships who received incentives from automakers Honda, General Motors, and Toyota to lower prices. But consumers are worried about the future. They are worried ab
> Consumer sentiment was up in August, helped by merchant discounts, especially from auto dealerships who received incentives from automakers Honda, General Motors, and Toyota to lower prices. But consumers are worried about the future. They are worried ab
