The magazine Women of China reported that the percentage of income spent on consumer goods by urban Chinese women increased from 26 percent in 2007 to 63 percent in 2009. China’s National Bureau of Statistics reported that in the first six months of 2010, consumption expenditure in rural China grew by 16 percent and in urban China by 19 percent, but GDP grew by 11 percent. A private forecaster expects consumption expenditure to increase from 36 percent of GDP in 2010 to 42 percent in 2020. Explain the effect of a rise in consumption expenditure on real GDP and the price level in the short run.
> 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
> 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
> Compare the multiplier in the short run and the long run and explain why they are not identical.
> 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 long run.
> President Obama’s proposal to jolt a listless economic recovery with $180 billion worth of tax breaks and transportation projects left economists largely unimpressed Tuesday. If taxes fall by $90 billion and the spending on transport projects increases b
> 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
> On January 27, 2009, the government announced a stimulus package, which included $12 billion earmarked for infrastructure—the construction of roads, bridges, public transit, broadband Internet access, schools, and social housing in every region of the co
> The spreadsheet lists real GDP ( Y ) and the components of aggregate planned expenditure in billions of dollars. a. What is aggregate planned expenditure when real GDP is $200 billion? b. If real GDP is $200 billion, explain the process that moves the ec
> The spreadsheet lists real GDP ( Y ) and the components of aggregate planned expenditure in billions of dollars. Calculate autonomous expenditure. Calculate the marginal propensity to consume. E M 2 A 100 110 50 60 60 15 3 200 170 50 60 60 30 300 230
> 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
> You are given the following information about the economy of Australia: Disposable income………………………………….. Saving (billions of dollars per year) 0………………………………………………………………………….. 0 100……………………………………………………………………… 25 200……………………………………………………………………… 50 300………………
> You are given the following information about the economy of Australia: Disposable income………………………………….. Saving (billions of dollars per year) 0………………………………………………………………………….. 0 100……………………………………………………………………… 25 200……………………………………………………………………… 50 300………………
> Describe the policy change that a classical macroeconomist, a Keynesian, and a monetarist would recommend for Canadian policymakers to adopt in response to each of the following events: a. Growth in the world economy slows. b. The world price of oil rise
> Initially, the short-run aggregate supply curve is SAS0 and the aggregate demand curve is AD0. Some events change aggregate supply from SAS0 to SAS1 . Describe two events that could have created this change in aggregate supply. What is the equilibrium a
> 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. Describe two events that could have created this change in aggregate demand. What is the equilibrium afte
> Canada trades with the United States. Explain the effect of each of the following events on Canada’s aggregate demand. ■ The government of Canada cuts income taxes. ■ The United States experiences strong economic growth. ■ Canada sets new environmental s
> An exodus of discouraged searchers from the job market kept the unemployment rate from climbing above 10 percent. Had the labour force not decreased by 661,000, the unemployment rate would have been 10.4 percent. The number of discouraged searchers rose
> Labour productivity is rising at a rapid rate in China and wages are rising at a similar rate. Explain how a rise in labour productivity and wages in China will influence the quantity of real GDP supplied and aggregate supply in China.
> Explain the influence of each of the following events on the quantity of real GDP supplied and aggregate supply in India and use a graph to illustrate. ■ Canadian firms move their call handling, IT, and data functions to India. ■ Fuel prices rise. ■ Walm
> What are the defining features of monetarist macroeconomics and what policies do monetarist macroeconomists recommend?
> What are the defining features of Keynesian macroeconomics and what policies do Keynesian macroeconomists recommend?
> How do fluctuations in aggregate demand and short-run aggregate supply bring fluctuations in real GDP around potential GDP?
> Describe three types of short-run macroeconomic equilibrium.
> How do changes in expectations, fiscal policy and monetary policy, and the world economy change aggregate demand and the aggregate demand curve?
> Why does the aggregate demand curve slope downward?
> What does the aggregate demand curve show? What factors change and what factors remain the same when there is a movement along the aggregate demand curve?
> A decade ago, Brazil had rapid growth but now its economy is experiencing a slowdown with investment falling and inventories increasing. Potential GDP growth rate has slowed. Business and consumer confidence has fallen. a. Explain the effect of a decreas
> In July 2014, in the economy of Sandy Island, 10,000 people were employed, 1,000 were unemployed, and 5,000 were not in the labour force. During August 2014, 80 people lost their jobs and didn’t look for new ones, 20 people quit their jobs and retired, 1
> Answer the following questions. a. What are the main features of the Canadian economy in the second quarter of 2014? b. Did Canada have a recessionary gap or an inflationary gap in 2014? How do you know? c. Use the AS - AD model to show the changes in ag
> Cut Taxes and Boost Spending? Raise Taxes and Cut Spending? Cut Taxes and Cut Spending? This headline expresses three views about what to do to get an economy growing more rapidly and contribute to closing the recessionary gap. Economists from which macr
> Greg Mankiw wrote in 2007 on the eve of the global financial crisis, “Congress made its most important contribution to taming the business cycle back in 1913, when it created the Federal Reserve System. Today, the Fed remains the first line of defence ag
> Explain why changes in consumer spending and business investment play a large role in the business cycle.
> The magazine Women of China reported that the percentage of income spent on consumer goods by urban Chinese women increased from 26 percent in 2007 to 63 percent in 2009. China’s National Bureau of Statistics reported that in the first six months of 2010
> The following events have occurred at times in the history of Canada: ■ The world economy goes into an expansion. ■ Canadian businesses expect future profits to rise. ■ The government increases its expenditure on goods and services in a time of increased
> Real exports of goods and services increased 4.2 percent in the second quarter, after falling 0.2 percent in the first quarter. Real imports of goods and services increased 2.7 percent, after falling 1.4 percent in the first quarter. Explain how the chan
> Explain for each event whether it changes the quantity of real GDP demanded or aggregate demand in Canada. ■ Canada’s exports to the European Union boom. ■ Canadian firms build new pipelines across the nation. ■ Foreign exchange dealers expect the Canadi
> Explain for each event whether it changes the quantity of real GDP supplied, short-run aggregate supply, long-run aggregate supply, or a combination of them. ■ Automotive firms in Canada switch to a new technology that raises productivity. ■ Toyota and H
> In Canada between June and July in 2014, the number of full-time jobs fell by 59,700 while part-time jobs increased by 60,000. The unemployment rate fell 0.1 percent to 7 percent as some workers left the job market. The participation rate fell to 65.9 pe
> The table gives some information about Canada’s international transactions in 2010. Item……………………………………………………. Billions ofdollars Imports of goods and services……………….………….…….…… 508 Net foreign investment in Canada………….………….……..……. 54 Exports of goods and
> With the strengthening of the yen against other currencies in 2012, Japan’s central bank did not take any action. A Japanese politician called on the central bank to take actions to weaken the yen, saying it will help exporters in the short run and have
> The Canadian price level is 106.3, the Japanese price level is 95.4, and the real exchange rate is 103.6 Japanese real GDP per unit of Canadian real GDP. What is the nominal exchange rate?
> The U.K. pound is trading at 1.54 Canadian dollars per U.K. pound and purchasing power parity holds. The Canadian interest rate is 2 percent a year and the U.K. interest rate is 4 percent a year. a. Calculate the Canadian interest rate differential. b. W
> Colombia is the world’s biggest producer of roses. The global demand for roses increases and at the same time Colombia’s central bank increases the interest rate. In the foreign exchange market for Colombian pesos, what happens to: a. The demand for peso
> On March 30, 2012, the U.S. dollar was trading at 82 yen per U.S. dollar on the foreign exchange market. On August 30, 2012, the U.S. dollar was trading at 79 yen per U.S. dollar. a. What events in the foreign exchange market could have brought this fall
> How are net exports and the government sector balance linked?
> What are the transactions that the balance of payments accounts record?
> How has China operated in the foreign exchange market, why, and with what effect?
> What is a crawling peg and how does it work?
> Statistics Canada reported the following data for 2013: Labour force:………………………… 19.4 million Employment:………………………… 18.0 million Working-age population:……….. 26.7 million Calculate the: a. Unemployment rate. b. Labour force participation rate. c. Employme
> What is a fixed exchange rate and how is its value fixed?
> What determines the real exchange rate and the nominal exchange rate in the long run?
> What determines the real exchange rate and the nominal exchange rate in the short run?
> What is purchasing power parity and what happens when this condition doesn’t hold?
> What is interest rate parity and what happens when this condition doesn’t hold?
> What is arbitrage and what are its effects in the foreign exchange market?
> What makes the supply of Canadian dollars change?
> What makes the demand for Canadian dollars change?
> What happens if there is a shortage or a surplus of Canadian dollars in the foreign exchange market?
> Answer the following questions. a. What happened to the foreign exchange value of the U.S. dollar in July and August 2014? b. What could the Bank of Canada have done to stop the fall in the Canadian dollar? c. What could the European Central Bank have do
> Labour force participation rate: 67.4 percent Working-age population: 29.0 million Employment-to-population ratio: 62.5 Calculate the: a. Labour force. b. Employment. c. Unemployment rate.
> The Australian dollar fell against the U.S. dollar to its lowest value in the past two weeks. The CPI inflation rate was reported to be generally as expected but not high enough to justify previous expectations for an aggressive interest rate rise by Aus
> In 2007, the U.S. trade deficit with China hit $256.3 billion, the largest deficit ever recorded with a single country. Chinese currency, the yuan, has risen in value by 18.4 percent against the U.S. dollar since the Chinese government loosened its curre
> In 2007, the U.S. trade deficit with China hit $256.3 billion, the largest deficit ever recorded with a single country. Chinese currency, the yuan, has risen in value by 18.4 percent against the U.S. dollar since the Chinese government loosened its curre
> In 2007, the U.S. trade deficit with China hit $256.3 billion, the largest deficit ever recorded with a single country. Chinese currency, the yuan, has risen in value by 18.4 percent against the U.S. dollar since the Chinese government loosened its curre
> The Economist magazine uses the price of a Big Mac to determine whether a currency is undervalued or overvalued. In July 2012, the price of a Big Mac was $4.33 in New York, 15.65 yuan in Beijing, and 6.50 Swiss francs in Geneva. The exchange rates were 6
> The Brazilian real has appreciated 33 percent against the U.S. dollar and has pushed up the price of a Big Mac in Sao Paulo to $4.60, higher than the New York price of $3.99. Despite Brazil’s interest rate being at 8.75 percent a year compared to the U.S
> The Brazilian real has appreciated 33 percent against the U.S. dollar and has pushed up the price of a Big Mac in Sao Paulo to $4.60, higher than the New York price of $3.99. Despite Brazil’s interest rate being at 8.75 percent a year compared to the U.S
> Indian Entrepreneur Seeks Opportunities Rahul Reddy, an Indian real estate entrepreneur, believes that “The United States is good for speculative higher-risk investments.” He profited from earlier investment in Australia, and a strong Australian dollar p
> Indian Entrepreneur Seeks Opportunities Rahul Reddy, an Indian real estate entrepreneur, believes that “The United States is good for speculative higher-risk investments.” He profited from earlier investment in Australia, and a strong Australian dollar p
> Canada produces natural resources (coal, natural gas, and others), the demand for which has increased rapidly as China and other emerging economies expand. a. Explain how growth in the demand for Canada’s natural resources would affect the demand for Can
> What is the unemployment rate supposed to measure and why is it an imperfect measure?
> In 2011, the exchange rate changed from 94 yen per U.S. dollar in January to 84 yen per U.S. dollar in June, and back to 94 yen per dollar in December. What information would you need to determine the factors that caused these changes in the exchange rat
> Yesterday, the current exchange rate was $1.05 Canadian per U.S. dollar and traders expected the exchange rate to remain unchanged for the next month. Today, with new information, traders now expect the exchange rate next month to fall to $1 Canadian per
> Today’s exchange rate between the yuan and the U.S. dollar is 6.40 yuan per dollar, and the central bank of China is buying U.S. dollars in the foreign exchange market. If the central bank of China did not purchase U.S. dollars would there be excess dema
> In Problem 5, the banks have no excess reserves. Suppose that the central bank in Nocoin increases bank reserves by $0.5 billion. a. Explain what happens to the quantity of money and why the change in the quantity of money is not equal to the change in t
> In year 1, the economy is at full employment and real GDP is $400 million, the GDP deflator is 200 (the price level is 2), and the velocity of circulation is 20. In year 2, the quantity of money increases by 20 percent. If the quantity theory of money ho
> The spreadsheet provides data about the demand for money in Minland. Columns A and B show the demand for money schedule when real GDP ( Y 0 ) is $10 billion, and Columns A and C show the demand for money schedule when real GDP ( Y 1 ) is $20 billion. The
> In the economy of Nocoin, bank deposits are $300 billion, bank reserves are $15 billion of which two-thirds are deposits with the central bank. Households and firms hold $30 billion in bank notes. There are no coins. Calculate: a. The monetary base and q
> The Bank of Canada sells $20 million of securities to the Bank of Nova Scotia. Enter the transactions that take place to show the changes in the following balance sheets: Bank of Canada Aasta mlona LUabilmen (mlona Bank of Nova Scatta Assets Labilti
> Europe’s Banks Must Be Forced to Recapitalize E.U. banks must hold more capital. Where private funding is not forthcoming, recapitalization must be imposed by E.U. governments. What is the “capital” referred to in the news clip? How might the requirement
> In July 2011, currency held by individuals and businesses was $57 billion; chequable deposits owned by individuals were $211 billion and owned by businesses were $277 billion; nonchequable personal deposits were $163 billion; non-chequable business depos
> What are the alternative measures of the price level and how do they address the problem of bias in the CPI?
> How does a change in the supply of money change the interest rate in the long run?
> How does a change in the supply of money change the interest rate in the short run?
