Question: If tuition keeps increasing at the same
If tuition keeps increasing at the same rate as in 2010–2011 (see News, p. 134), how much will it cost to complete a degree at a private college in four years?
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IN THE NEWS Rise in College Costs Hits Public Schools Hardest While heading to a private college is still more expensive than going to a state school, tuition and fees are climbing at a faster pace at public schools than at their private brethren. For the school year 2010-2011, in-state tuition and fees at public four-year colleges and universities rose to $7,605, up 7.9 percent from a year ago, the College Board reported Thursday. At private four-year institutions, the average cost rose 4.5 percent to $27,293.... "Prices are continuing to rise more rapidly than the rate of inflation, particularly in the pub- lic sector," said Sandy Baum, independent policy analyst at the College Board. -Blake Ellis Source: CNNMoney.com, October 28, 2010. © 2010 Time Inc. Used under license. Analysis: Tuition increases reduce the real income of students. How much you suffer from inflation depends on what happens to the prices of the products you purchase.
> Assume that the product depicted below generates external costs in consumption of $4 per unit. (a) What is the market price (market value) of the product? (b) Draw the social demand curve. (c) What is the socially optimal output? (d) By how much doe
> According to the News on page 82, what percentage of income is spent on lottery tickets by (a) A poor family with income of $18,000 per year? (b) An affluent family with income of $40,000 per year? IN THE NE WS Perpetuating Poverty: Lotteries Prey o
> In Figure 4.2 (p. 73), by how much is the market (a) Overproducing private goods? (b) Underproducing public goods? B (Market mix) A (Optimal mix) W Production possibilities R S PUBLIC GOODS (units per time period) FIGURE 4.2 Underproduction of Public
> According to Figure 3.8, (a) How many organs are supplied at a zero price? (b) If the News on page 66 is correct, how many organs would be supplied at positive prices? Figure 3.8:
> According to Figure 3.8, (a) How many people die in the market-driven economy? (b) How many people die in the government-regulated economy? Figure 3.8:
> As a result of the BP oil spill (News, p. 58), which of the following changed in the shrimp market (answer yes or no): (a) Demand? (b) Quantity demanded? (c) Price? IN THE N EWS Seafood Prices Rise on BP Oil Spill Original supply WASHINGTON-Diners Sh
> Given the following data on gasoline supply and demand, (a) What is the equilibrium price? (b) How large a market shortage would exist if the government set a price ceiling of $2 per gallon? Price per gallon $5.00 $4.00 $3.00 $2.00 $1.00 Quantity dema
> The government now spends over $700 billion a year on Social Security benefits. Why don’t we leave it to individuals to save for their own retirement?
> According to the News on page 61 (a) What was the initial price of a Final Four ticket? (b) At that price was there (A) an equilibrium, (B) a shortage, or (C) a surplus? IN THE NEWS: Students Struggle to Find Final Four Tickets When midnight struck Su
> According to Figures 3.5 and 3.6, what would the new equilibrium price of tutoring services be if Ann decided to stop tutoring? Figures 3.5: Figure 3.6: (a) Ann's supply curve (b) Bob's supply curve (c) Cory's supply curve $50 45 40 35 30 25 20 15 10
> Use the following data to draw supply and demand curves on the accompanying graph. Price $8 7 6 5 4 3 2 1 Quantity demanded 2 3 4 5 6 7 8 9 Quantity supplied 10 9 8 7 6 5 4 3 (a) What is the equilibrium price? (b) If a minimum price (price floor)
> In Figure 3.8, when a price ceiling of zero is imposed on the organ market, by how much does (a) The quantity of organs demanded increase? (b) The demand increase? (c) The quantity of organs supplied decrease? (d) The supply decrease? Figure 3.8: Mar
> According to Figure 3.3, at what price would Tom buy 12 hours of web tutoring? (a) Without a lottery win. (b) With a lottery win. Figure 3.3: $50 Demand shifts when 45 tastes, income, other goods, or expectations change. 40 Shift in demand 35 D2: inc
> How much more output (income) per year will have to be produced in the world just to provide the 2.7 billion “severely” poor population with $1 more output per day?
> Using the data in Figure 2.3, (a) Compute the average income of U.S. households. (b) If all incomes were equalized by government taxes and transfer payments, how much would the average household in each income quintile gain (via transfers) or lose (via
> U.S. real gross domestic product increased from $10 trillion in 2000 to $15 trillion in 2010. During that same decade the share of manufactured goods (e.g., cars, appliances) fell from 16 percent to 12 percent. What was the dollar value of manufactured o
> According to Table 2.1 (p. 34), how fast does total output (GDP) have to grow in order to raise per capita GDP in (a) China? (b) Ethiopia? Table 2.1: Average Growth Rate (2000–2009) of GDP Populatlon Per Caplta GDP High-income countries United State
> (a) How much more output does the $15 trillion U.S. economy produce when GDP increases by 1.0 percent? (b) By how much does this increase the average (per capita) income if the population is 300 million?
> If smoking generates external costs, should smoking simply be outlawed? How about cars that pollute?
> Using data from the endpapers, illustrate on the graph below (a) The federal government’s share of the total output. (b) The state/local government’s share of total output. 15 14 13 12 11 10 4 2 1930 1940 1950 196
> Using data from Table 2.1 (p. 34), illustrate on the following graphs real GDP and population growth since 2000 (in the manner of Figure 2.1) for the nations indicated. Table 2.1: Figure 2.1:
> In 2010 the world’s total output (real GDP) was roughly $75 trillion. What percent of this total was produced? (a) By the three largest economies (World View, p. 31)? (b) By the three smallest economies in that World View? (c) How much larger is the U.S
> Suppose there’s a relationship of the following sort between study time and grades: / If you have only 20 hours per week to use for either study time or fun time, (a) Draw the (linear) production possibilities curve on the graph below that represents
> If a person literally had “nothing else to do,” (a) What would be the opportunity cost of doing these problems? (b) What is the likelihood of that?
> According to the World View on page 15, which nation has (a) The highest level of faith in the market system? (b) The lowest level of faith in the market system?
> Suppose either computers or televisions can be assembled with the following labor inputs: / (a) Draw the production possibilities curve for an economy with 54 units of labor. Label it P54. (b) What is the opportunity cost of the eighth computer? (c)
> According to Figure 1.4, (a) At which point(s) is this society producing some of each type of output but still producing inefficiently? (b) At which point(s) is this society producing the most output possible with the available resources and technology?
> What are the three core economic questions societies must answer?
> What is the opportunity cost (in civilian output) of a defense buildup that raises military spending from 4.3 to 4.7 percent of a $15 trillion economy?
> What is the specific market failure justification for government spending on (a) public universities, (b) health care, (c) trash pickup, (d) highways, (e) police, and (f) solar energy? Would a purely private economy produce any of these services?
> (a) What is the cost of the North Korean 2009 missile launch, according to South Korea ? (b) How many people could have been fed for an entire year at the World Bank standard of $2 per day with that money?
> According to Figure 1.2 (p. 9), what is the opportunity cost of North Korea moving from point P to point N (in terms of food output)? Reduced food output Military! buildup D B MILITARY OUTPUT (units per year) H FOOD OUTPUT (units per year) AG
> (a) Compute the opportunity cost in forgone tanks for each additional truck produced: (b) As truck output increases, are opportunity costs (A) increasing, (B) decreasing, or (C) remaining constant? Truck output Tank output 1 2 3 4 5 5 4.5 3.8 3.0
> According to Table 1.1 (or Figure 1.1), what is the opportunity cost of the fourth truck? Figure 1.1 Step 1: give up one truck. Producing more of one good implies producing less of another. B 4 Step 2: get two tanks. Step 3: give up another truck. St
> According to the World View on page 465, (a) How much money is spent annually to combat baldness? (b) How much medical care would that money buy for each child who dies from malaria each year?
> (a) Which low-income nation in Table 21.3 has a GDP growth rate closest to that of the United States? (b) How much faster is that nation’s population growth? (c) How much lower is its per capita GDP growth? Average Annual Growth
> According to Table 21.3, how many years will it take for per capita GDP to double in (a) China? (b) Madagascar? (c) Zimbabwe? Average Annual Growth Rate (2000–2009) of GDP Population Per Caplta GDP High-Income countries 2.1 1.5 Canada 1.0 1.1 F
> If the industrialized nations were to satisfy the UN’s Millennium Aid Goal, how much more foreign aid would they give annually?
> (a) How much foreign aid does the United States now provide? (b) How much more is required to satisfy the UN’s Millennium Aid Goal if U.S. GDP = $15 trillion? Total Aid Percentage of Donor Country (S billions) Total Income Austral
> In Namibia, (a) What percentage of total output is received by the richest 10 percent of households? (b) How much output did this share amount to in 2010, when Namibia’s GDP was $12 billion? (c) With a total population of 2 million, what was the impli
> Why might Fourth of July fireworks be considered a public good? Who should pay for them? What about airport security?
> Americans already enjoy living standards that far exceed world averages. Do we have enough? Should we even try to produce more?
> Two and a half billion people are in “severe” poverty with less than $2 of income per day. (a) What is the maximum combined income of this “severely” poor population? (b) What percentage of the world’s total income (roughly $72 trillion) does this rep
> Adjusted for inflation, the World Bank’s threshold for “extreme” poverty is $1.25 per person per day. (a) How much annual income does this imply for a family of four? (b) What portion of the official U.S. poverty threshold (roughly $22,000 for a famil
> The following schedules summarize the supply and demand for trifflings, the national currency of Tricoli: Use these schedules for the following: (a) Graph the supply and demand curves on the next page. (b) Determine the equilibrium exchange rate.
> For each of the following possible events, indicate whether the global value of the U.S. dollar will A: rise or B: fall. (a) American cars become suddenly more popular abroad. (b) Inflation in the United States accelerates. (c) The United States fa
> If a new home can be constructed for $175,000, what is the opportunity cost of federal defense spending, measured in terms of private housing? (Assume a defense budget of $700 billion.)
> Between 1980 and 2010, by how much did the labor force participation rate (Figure 6.2) of (a) Men fall? (b) Women rise?
> What share of U.S. total income in 2010 consisted of (a) Wages and salaries? (b) Corporate profits? ( Note: See Table 5.5 for data.) Expenditure Income C: Consumer goods and Wages and salaries Corporate profits Proprietors' income $ 7,985 1,625 1,055
> According to the World View on page 138, how many Zimbabwean dollars could you buy with one U.S. dollar in January 2009? WORLD VIE W Zimbabwe to Introduce $100 Trillion Banknote Zimbabwe's central bank will introduce a $100 trillion banknote, worth a
> If the unemployment rate in 2010 had not risen since 2008, how many more workers would have been employed in 2010? (Use Figure 6.1 and this book’s endpapers). Figure 6.1: Total population (310 million) Out of the labor force (155 mi
> If everyone seeks a free ride, what mix of output will be produced in Figure 4.2? Why would anyone voluntarily contribute to the purchase of public goods like flood control or snow removal? B (Market mix) A (Optimal mix) W Production possibilities R
> According to Figure 6.1 (p. 114), (a) What percentage of the civilian labor force was employed? (b) What percentage of the civilian labor force was unemployed? (c) What percentage of the population was employed in civilian jobs? Total population (310
> According to the World View on page 442, what was the peso price of a euro in May 2011?
> If a euro is worth $1.40, what is the euro price of a dollar?
> Which countries are the two largest export markets for the United States? (See Table 19.3.) (1) __________ (2) __________ Exports to (S billions) Imports from (S billions) Trade Balance Country (S billions) Top Deficit Countries China $113 $376 -
> According to the News on page 401, what is the implied value of the multiplier for (a) Increased unemployment benefits? (b) Infrastructure spending?
> What MPC for tax cuts is assumed in the News on page 401?
> If the Congressional Budget Office makes its average error this year, by how much will it underestimate next year’s budget deficit?
> If the labor force increases by 1.1 percent each year and productivity increases by 3.4 percent, how fast will output grow?
> Which AS curve (a, b, or c) in Figure 16.1 causes the least unemployment when fiscal or monetary restraint is pursued? Figure 16.1 (a) The Keyneslan view Aggregate supply AD AD AD, OUTPUT (roal GDP por pariod) (b) The monetarist vlew Aggregate supply
> If the tax elasticity of supply is 0.16, by how much do tax rates have to be reduced to increase the labor supply by 2 percent?
> Why should taxpayers subsidize public colleges and universities? What external benefits are generated by higher education?
> According to Bernanke’s rule of thumb (p. 320), how much fiscal stimulus would be equivalent to a 2-point reduction in long-term interest rates?
> If the nominal rate of interest is 5 percent and the real rate of interest is 3 percent, what rate of inflation is anticipated?
> In Table 15.1, what is the implied price of holding money in a checking account rather than in Treasury bonds? Option Interest Rate Cash 0.00% Checking accounts 0.17 6-month CD 0.37 10-year Treasury bond Corporate bond 3.41 5.13 Source: Federal Reser
> What was the Fed’s target for the fed funds rate in December 2008?
> If the GM bond described on pages 303–304 was resold for $1,500, what would its yield be?
> How large is the difference between the interest rates on six-month and five-year jumbo CDs?
> In Table 13.2, how much unused lending capacity does Eternal Savings have at step 4? Step 1: You deposit cash at Unversity Bank. The deposit creates $100 of reserves, $20 of which are designated as required reserves. This leaves $80 of excess reserve
> What is the value of the money multiplier when the required reserve ratio is (a) 12.5 percent? (b) 10 percent?
> Suppose a bank’s balance sheet looks like this: (a) What is the required reserve ratio? (b) How much money can this bank still lend? Assets Llabilities Reserves Deposits $600 Excess $ 70 Required Loans 30 500 Total $600 Total $600
> Between 2000 and 2010, in how many years was fiscal restraint initiated?
> Is there a shortage of on-campus parking at your school? How might the shortage be resolved?
> What country had the largest budget deficit (as a percentage of GDP) in 2011?
> Since 1980, in how many years has the federal budget had a surplus? $300 200 Budget surpluses 100 -100 -200 -300 -400 Budget deficits -500 -600 -700 -800 -900 -1000 -1100 -1200 -1300 -1400 -1500 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
> If the AD excess is $300 billion and the MPC is 0.8, (a) How much fiscal restraint is desired? (b) By how much do income taxes have to be increased to get that restraint?
> Suppose the government decides to increase taxes by $20 billion to increase Social Security benefits by the same amount. How will this combined tax transfer policy effect aggregate demand at current prices?
> Suppose that an increase in income transfers rather than government spending was the preferred policy for stimulating the economy depicted in Figure 11.4. By how much would transfers have to increase to attain the desired shift of AD? Fiscal policy h
> In the tax cut example on pages 236–37, (a) By how much does consumer saving increase initially? (b) How large is the initial spending injection?
> How large is the inflationary GDP gap in Figure 10.9? AS AC = $300 billion Al = $100 billion New spending causes sequential AD shifts and inflationary pressure. Pe Po ADS AD5 Inflationary KGDP ADo gap i QF (= $3,000) REAL OUTPUT (in billions of dolla
> According to World Bank estimates, by how much did consumer spending decline as a result of the 40-point drop in the index of consumer confidence between 2007 and 2009?
> If Korean exports to the United States decline by $15 billion (World View, p. 217) by how much will cumulative Korean spending drop if their MPC is 0.75?
> By how much did annualized consumption decline in November 2008 when GDP was $14 trillion?
> What would happen in the apple market if the government set a minimum price of $5.00 per apple? What might motivate such a policy?
> If the marginal propensity to consume is 0.8, (a) What is the value of the multiplier? (b) What is the marginal propensity to save?
> If the consumption function is C = $300 billion + 0.9Y, (a) How much do consumers spend with incomes of $4 trillion? (b) How much do they save?
> What was the range, in absolute percentage points, of the variation in quarterly growth rates between 2005 and 2008 of (a) Consumer spending? (b) Investment spending? ( See Figure 9.8 for data given below +16 +12 +8 Consumption +4 Investment is more
> If every $1,000 increase in the real price of homes adds 6 cents to annual consumer spending (the “wealth effect”), by how much did consumption decline when home prices fell by $2 trillion in 2006–2008?
> (a) What is the implied MPC in the News on page 186? (b) What is the implied APC? IN THE NE WS News Release: Personal Income and Outlays Personal Income and Outlays: May 2011 Personal income increased $36 billion, or 0.27 percent, and disposable pers
> Suppose you have $7,000 in savings when the price level index is at 100. (a) If inflation pushes the price level up by 10 percent, what will be the real value of your savings? (b) What is the real value of your savings if the price level declines by 10 p
> In Figure 8.8, what price level will induce people to buy all the output produced at full employment? Aggregate supply PE P* Aggregate demand Equilibrium output Full-employment output QE QF REAL OUTPUT (quantity per year) PRICE LE VEL (average price)
> According to Table 7.3 (p. 137), what happened during the period shown to the (a) Nominal price of gold? (b) Real price of gold? Table 7.3:
> If a basic input like oil goes up in price by 20 percent and accounts for 3 percent of total costs in the economy, how much cost-push inflation results?
> For each situation described here determine the type of unemployment: (a) Steelworkers losing their jobs due to decreased demand for steel. (b) A college graduate waiting to accept a job that allows her to utilize her level of education. (c) The Great Re
> The shortage in the organ market (Figure 3.8) requires a nonmarket rationing scheme. Who should get the available (qa) organs? Is this fairer than the market-driven distribution? Figure 3.8
> Using the information on page 141 and Table 7.5, by what percentage did the price level increase (a) Between 1982–1984 and 2010? (b) Between 2000 and 2010? Year CPI Year CPI Year CPI Year CPI 1800 17.0 1915 10.1 1950 24.1 1982–1984
> According to the News on page 126, in October 2009 (a) How many people were in the labor force? (b) How many people were employed? IN THE NEWS Unemployment Rate Hits 10.2 Percent, a 26-Year High In another sign that workers are being left out of the
> Suppose all the dollar values in Problem 4 were in 2000 dollars. Use the Consumer Price Index shown on the end cover of this book to convert Problem 4’s GDP to 2010 dollars. What is the value of that GDP in 2010 dollars? (You’ll be converting the figures
> If 150 million workers produced America’s GDP in 2010 (World View, p. 31), how much output did the average worker produce? 14.6 2010 Gross Domestic Product (GDP) (in trillions of U.S. dollars) 10.1 4.4 3.1 2.7 2.3 1.6 1.4 0.63 0.01
