When Barack Obama was campaigning for president in 2008, he proposed more government spending paid for with higher taxes on “the rich.” What impact would those options have on macro equilibrium?
> Each of the following statements represents a decision made by the accountant of Growth Industries: a. A tornado destroyed $200,000 in uninsured inventory. This loss is included in the cost of goods sold. b. Land was purchased 10 years ago for $50,000.
> Uranium Mining Company, founded in 1982 to mine and market uranium, purchased a mine in 1983 for $900 million. It estimated that the uranium had a market value of $150 per ounce. By 2012, the market value had increased to $300 per ounce. Records for 2012
> The income statement of Jones Company for the year ended December 31, 2012, follows. Required a. Compute the net earnings remaining after removing nonrecurring items. b. Determine the earnings (loss) from the nonconsolidated subsidiary. c. Determine the
> The income statement of Tawls Company for the year ended December 31, 2012, shows the following: / Required a. Compute the net earnings remaining after removing nonrecurring items. b. Determine the earnings from the nonconsolidated subsidiary. c. For th
> List where each of the following items may appear. Choose from (A) income statement, (B) balance sheet, or (C) reconciliation of retained earnings. a. Dividends paid b. Notes payable c. Income from noncontrolling interest d. Accrued payrolls e. Loss
> List the statement on which each of the following items may appear. Choose from (A) income statement, (B) balance sheet, or (C) neither. a. Net income b. Cost of goods sold c. Gross profit d. Retained earnings e. Paid-in capital in excess of par f.
> You were recently hired as the assistant treasurer for Victor, Inc. Yesterday, the treasurer was injured in a bicycle accident and is now hospitalized, unconscious. Your boss, Mr. Fernandez, just informed you that the financial statements are due today.
> Best Buy Co., Inc.’s consolidated balance sheets from its 2011 annual report are presented in Exhibit 5-3. Required a. Using the balance sheets, prepare a vertical common-size analysis for 2011 and 2010. Use total assets as a base b. Us
> How might the inflationary flashpoint affect policy decisions? How would you represent the flashpoint on the Phillips curve?
> How would the volume and timing of capital investments be affected by (a) a permanent cut in the capital gains tax and (b) a temporary 10 percent tax credit?
> How does each of the following infrastructure items affect aggregate supply? (a) highways, (b) schools, (c) sewage systems, and (d) courts and prisons.
> What did Ms. Weir mean when she said the proposed toy regulation “goes too far” (News, p. 357)? How far is enough?
> OSHA predicted that its proposed ergonomics rules (text, p. 356) would have cut repetitive stress injuries by 50 percent. Was Congress correct in repealing those rules?
> How is the aggregate supply curve affected by (a) minimum wage laws and (b) Social Security payroll taxes and retirement benefits?
> Which of the following groups are likely to have the highest tax elasticity of labor supply: (a) college students, (b) single parents, (c) primary earners in two-parent families, and (d) secondary earners in two-parent families? Why are there diffe
> How did the 2011 tsunami affect Japan’s potential output ?
> Why might prices rise when aggregate demand increases? What factors might influence the extent of price inflation?
> If mortgage rates fell to 0 percent (“free money”), why might consumers still hesitate to borrow money to buy a home?
> How many people are employed by your local or state government? What do they produce? What is the opportunity cost of that output?
> Why did the stock market “surge” when the Fed announced it intended to buy $1.2 trillion of bonds ?
> Could long-term interest rates rise when short-term rates are falling? What would cause such a pattern?
> When prices started doubling (see News, p. 329), why didn’t the Continental Congress print even more money so Washington’s army could continue to buy supplies? What brings an end to such “inflation financing”?
> How might the existence of multiplier effects increase the risk of inflation when interest rates are cut?
> Can there be any inflation without an increase in the money supply? How?
> If the Federal Reserve banks mailed everyone a brand-new $100 bill, what would happen to prices, output, and income? Illustrate your answer by using the equation of exchange.
> Why do high interest rates so adversely affect the demand for housing and yet have so little influence on the demand for pizzas?
> What proportions of your money balance are held for transactions, precautionary, and speculative purposes? Can you think of any other purposes for holding money?
> If bondholders expect the Fed to raise interest rates, what action might they take? How would this affect the Fed’s goal?
> In 2008 the Fed reduced both the discount and federal fund rates dramatically. But bank loan volume didn’t increase. What considerations might have constrained the market’s response to Fed policy?
> Is the relative decline in U.S. farming and manufacturing (Figure 2.2) a good thing or a bad thing? 100 Services 80 60 80% 40 Agriculture Manufacturing mining, and construction 20 19% 1% 1800 1840 1880 1920 1960 2000 PERCENTAGE OF EMPLOYMENT
> In early 2009, short-term bond yields in the United States fell to less than 0.5 percent. Yet relatively few people moved their assets out of bonds into banks. How might this failure of open market operations be explained?
> Why did bond prices decline at the February 2009 auction?
> Why do people hold bonds rather than larger savings account or checking account balances? Under what circumstances might they change their portfolios, moving their funds out of bonds and into bank accounts?
> Why do banks want to maintain as little excess reserves as possible? Under what circumstances might banks want to hold excess reserves?
> How does federal deposit insurance encourage greater risk taking by banks? Could the banking system function without government deposit insurance? How?
> If people never withdrew cash from banks, how much money could the banking system potentially create? Could this really happen? What might limit deposit creation in this case?
> Does the fact that your bank keeps only a fraction of your account balance in reserve make you uncomfortable? Why don’t people rush to the bank and retrieve their money? What would happen if they did?
> What percentage of your monthly bills do you pay with (a) cash, (b) check, (c) credit card, and (d) automatic transfers? How do you pay off the credit card balance? How does your use of cash compare with the composition of the money supply (Figure
> How are an economy’s production possibilities affected when workers are paid in goods rather than in cash?
> Why are checking account balances, but not credit cards, regarded as “money”?
> The U.S. farm population has shrunk by over 25 million people since 1900. Where did all the people go? Why did they move?
> Which of the following options do you favor for resolving future Social Security deficits? What are the advantages and disadvantages of each option? (a) cutting Social Security benefits, (b) raising payroll taxes, (c) cutting non–Social Security prog
> How long would it take to pay off the national debt? How would the economy be affected?
> A constitutional amendment has been proposed that would require Congress to balance the budget each year. Is it possible to balance the budget every year? Is it desirable?
> If deficit spending "crowds out" some private investment, could future generations be worse off? If external financing eliminates crowding out, are future generations thereby protected?
> What is considered "too much" debt or "too large" a deficit? Are you able to provide any guidelines for deficit or debt ceilings?
> In what ways do future generations benefit from this generation’s deficit spending? Cite three examples.
> Who paid for the Revolutionary War? Did the deficit financing initiated by the Continental Congress pass the cost of the war on to future generations?
> What were the differences in size, content, and expected impact between the U.S. and Chinese 2009 stimulus packages?
> Why do critics charge that fiscal policy has a “big-government bias”?
> Can we continue to produce more output every year? Is there a limit?
> How quickly should Congress act to remedy an AD excess or AD shortfall? What are the risks of quick fiscal policy responses?
> Will consumers always spend the same percentage of any tax cut? Why might they spend more or less than usual?
> What happens to aggregate demand when transfer payments and the taxes to pay them both rise by the same amount?
> How did consumers spend their 2008 tax cut? Does it matter what they spend it on? Explain.
> How can you tell if the economy is in equilibrium? How could you estimate the GDP gap?
> Why might “belt-tightening” by consumers in a recession be unwelcome?
> What forces might turn an economic bust into an economic boom? What forces might put an end to the boom?
> How can equilibrium output exceed full-employment output?
> When unwanted inventories pile up in retail stores, how is production affected? What are the steps in this process?
> How might a “perfect” macro equilibrium (Figure 9.10a) be affected by (a) a stock market crash, (b) rising home prices, (c) a recession in Canada, and (d) a spike in oil prices? z/
> Why is per capita GDP so much higher in the United States than in Mexico?
> How do households dissave? Where do they get the money to finance their extra consumption? Can everyone dissave at the same time?
> Did President Obama make the right policy decisions? How could you be sure?
> How would a sudden jump in U.S. prices affect (a) imports from Mexico, (b) exports to Mexico, and (c) U.S. aggregate demand?
> What might have caused real GDP to decline so dramatically in (a) 1929 and (b) 1946 (see Figure 8.3)? What caused output to increase again in each case? 20 20 World War II Great 15 15 Depression Long-term average growth (3%) Korean War 10 10 Vietna
> What exactly did Say mean when he said that “supply creates its own demand”?
> If equilibrium is compatible with both buyers’ and sellers’ intentions, how can it be undesirable?
> In 2010, how many of the 800,000 black teenagers who participated in the labor market (a) Were unemployed? (b) Were employed? (c) Would have been employed if they had the same unemployment rate as white teenagers? 40 36 32 Teenagers 43.0 28 24 20 Ad
> Why might more reliance on markets rather than government be desirable? When and how might it be undesirable?
> The World View on page 63 explains why gasoline prices rose in 2011. What will bring prices down?
> The goal of the price cut described in the News on page 51 was to (select one– enter letter) (A) Increase supply. (B) Increase quantity supplied. (C) Increase demand. (D) Increase quantity demanded. |N THE NEWS AT&T Cuts Price on IP
> On the accompanying graph, illustrate (A) nominal per capita GDP and (B) real per capita GDP for each year. (The necessary data appear on the endpapers of this book.) (a) By what percentage did nominal per capita GDP increase in the 1990s? (b) By what pe
> What is the connection between North Korea’s missile program and its hunger problem?
> How many resources should we allocate to space exploration? How will we make this decision?
> What events might prompt consumers to demand fewer goods at current prices?
> Use the GDP deflator data on the inside cover of this book to compute real GDP in 2000 at 2010 prices.
> Should the government try to equalize incomes more by raising taxes on the rich and giving more money to the poor? How might such redistribution affect total output and growth?
> Why do people around the world have so much faith in free markets?
> Illustrate what’s happening to oil prices in the World View on page 63. (a) Which direction did the demand curve shift (left or right)? (b) Which direction did the supply curve shift (left or right)? (c) Did price (A) increase or (B) decrease?
> Who would go to college in a completely private (market) college system? How does government intervention change this FOR WHOM outcome?
> How does the slope of the AS curve affect the size of the AD shortfall? If the AS curve were horizontal, how large would the AD shortfall be in Figure 11.3?
> (a) If Haiti’s per capita GDP of roughly $1,150 were to DOUBLE every decade (an annual growth rate of 7.2 percent), what would Haiti’s per capita GDP be in 50 years? (b) What is U.S. per capita GDP in 2010 (World View
> What are the opportunity costs of developing wind farms to generate “clean” electricity? Should we make the investment?
> If the labor force of 150 million people is growing by 1.5 percent per year, how many new jobs have to be created each month to keep unemployment from increasing? Web query: By how much did U.S. employment actually increase last month ( www.bls.gov )?
> In the previous problem’s market equilibrium, what is (a) The market value of the good? (b) The social value of the good?
> What was the “soaring” inflation rate in the United Kingdom in early 2011 (World View, p. 148)? Why was it such a concern? WORLD VIE W U.K. Inflation Soars U.K. consumer price inflation accelerated sharply in Decem
> How might a nation’s production possibilities be affected by the following? a. A decrease in income taxes. b. An increase in immigration. c. An increase in military spending. d. An increase in college tuition.
> What would have happened to shrimp prices and consumption if the government had prohibited price increases after the BP oil spill (see News, p. 58)?
> Between 2000 and 2010, by how much did (a) The labor force increase? (b) Total employment increase? (c) Total unemployment increase? (d) Total output (real GDP) increase?
> What was real per capita GDP in 1933 measured in 2008 prices? (Use the data in Table 5.4 to compute your answer.)
> Should the firefighters have saved the house in the News on page 73? What was the justification for their belated intervention? I N T H E N E W S Firefighters Watch as Home Burns to the Ground OBION COUNTY, Tenn.—Imagine your home catches fire but th
> What’s the real cost of the food in the “free lunch” cartoon on page 6?
> According to the World View on page 32, what percentage of America’s GDP per capita is available to the average citizen of (a) Mexico? (b) China? (c) Haiti? 47,020 GDP per Capita (2010) 37,380 34,790 34,440 29,010 24,020 19,190 15
> Use Figure 4.3 (p. 75) to illustrate on the accompanying production possibilities curve the optimal mix of output (X). M CIGARETTES (packs per year) CTHER GOO DS (units per year) FIGURE 4.3 Externalities Market supply The market responds to consumer
> How much time could you spend on homework in a day? How much do you spend? How do you decide?
> What opportunity costs did you incur in reading this chapter? If you read another chapter today, would your opportunity costs (per chapter) increase? Explain.
> Could demand-pull inflation occur before an economy was producing at capacity? How?
> Why is the failure of a major bank so frightening?
> By how much did defense spending increase in 1940 to 1944? (See the front endpapers of this book.) What was crowded out?
