All Related Questions of Macroeconomics

Q: Explain the difference between macroeconomics and microeconomics. How are these two

Explain the difference between macroeconomics and microeconomics. How are these two fields related?

Q: Write the quantity equation and explain it.

Write the quantity equation and explain it.

Q: If a small open economy cuts defense spending, what happens to

If a small open economy cuts defense spending, what happens to saving, investment, the trade balance, the interest rate, and the exchange rate?

Q: In this chapter we saw that the steady-state rate

In this chapter we saw that the steady-state rate of unemployment is U/L= s/(s + f ). Suppose that the unemployment rate does not begin at this level. Show that unemployment will evolve over time and...

Q: Give three explanations of why the real wage may remain above the

Give three explanations of why the real wage may remain above the level that equilibrates labor supply and labor demand.

Q: Consider an economy described by the production function: Y = F

Consider an economy described by the production function: Y = F(K, L) = K 0.4L0.6. a. What is the per-worker production function? b. Assuming no population growth or technological progress, find the s...

Q: Might a policymaker choose a steady state with more capital than in

Might a policymaker choose a steady state with more capital than in the Golden Rule steady state? With less capital than in the Golden Rule steady state? Explain your answers.

Q: Suppose an economy described by the Solow model is in a steady

Suppose an economy described by the Solow model is in a steady state with population growth n of 1.8 percent per year and technological progress g of 1.8 percent per year. Total output and total capit...

Q: In the United States, the capital share of GDP is about

In the United States, the capital share of GDP is about 30 percent, the average growth in output is about 3 percent per year, the depreciation rate is about 4 percent per year, and the capital–output...

Q: What data would you need to determine whether an economy has more

What data would you need to determine whether an economy has more or less capital than in the Golden Rule steady state?

Q: Let’s examine how the goals of the Fed influence its response to

Let’s examine how the goals of the Fed influence its response to shocks. Suppose that in scenario A the Fed cares only about keeping the price level stable and in scenario B the Fed cares only about k...

Q: Why does the aggregate demand curve sloped downward?

Why does the aggregate demand curve sloped downward?

Q: If a war broke out abroad, it would affect the U

If a war broke out abroad, it would affect the U.S. economy in many ways. Use the model of the large open economy to examine each of the following effects of such a war. What happens in the United Sta...

Q: Although our development of the Keynesian cross in this chapter assumes that

Although our development of the Keynesian cross in this chapter assumes that taxes are a fixed amount, most countries levy some taxes that rise automatically with national income. (Examples in the Uni...

Q: Why does the IS curve slope downward?

Why does the IS curve slope downward?

Q: Consider the economy of Hicksonia. a. The consumption function

Consider the economy of Hicksonia. a. The consumption function is given by C = 300 + 0.6(Y - T).The investment function is I = 700 - 80r. Government purchases and taxes are both 500. For this economy,...

Q: What is the impact of a decrease in the money supply on

What is the impact of a decrease in the money supply on the interest rate, income, consumption, and investment?

Q: Suppose that policymakers in a large open economy want to raise the

Suppose that policymakers in a large open economy want to raise the level of investment without changing aggregate income or the exchange rate. a. Is there any combination of domestic monetary and fis...

Q: A small open economy with a floating exchange rate is in recession

A small open economy with a floating exchange rate is in recession with balanced trade. If policymakers want to reach full employment while maintaining balanced trade, what combination of monetary and...

Q: In the Mundell–Fleming model with floating exchange rates, explain

In the Mundell–Fleming model with floating exchange rates, explain what happens to aggregate income, the exchange rate, and the trade balance when a quota on imported cars is removed. What would happe...

Q: An economy has the following equation for the Phillips curve:

An economy has the following equation for the Phillips curve: π = Eπ - .5(u - 6) People form expectations of inflation by taking a weighted average of the previous two years of inflation: Eπ= 0.7 π-1...

Q: Why might inflation be inertial?

Why might inflation be inertial?

Q: “If a central bank wants to achieve lower nominal interest rates

“If a central bank wants to achieve lower nominal interest rates, it has to raise the nominal interest rate.”

Q: Use the model of the small open economy to predict what would

Use the model of the small open economy to predict what would happen to the trade balance, the real exchange rate, and the nominal exchange rate in response to each of the following events. a. A fall...

Q: A central bank has a new head, who decides to raise

A central bank has a new head, who decides to raise the target inflation rate from 2 to 3 percent. Using a graph of the dynamic AD–AS model, show the effect of this change. What happens to the nominal...

Q: The chapter analyzes Fisher’s model for the case in which the consumer

The chapter analyzes Fisher’s model for the case in which the consumer can save or borrow at an interest rate of r and for the case in which the\ consumer can save at this rate but cannot borrow at al...

Q: How do the life-cycle and permanent-income hypotheses resolve

How do the life-cycle and permanent-income hypotheses resolve the seemingly contradictory pieces of evidence regarding consumption behavior?

Q: The IS–LM model developed in Chapters 11 and 12 assumes

The IS–LM model developed in Chapters 11 and 12 assumes that investment depends only on the interest rate. Yet our theories of investment suggest that investment might also depend on national income:...

Q: Explain why an increase in the interest rate reduces the amount of

Explain why an increase in the interest rate reduces the amount of residential investment.

Q: A central bank has decided to adopt inflation targeting and is now

A central bank has decided to adopt inflation targeting and is now debating whether to target 5 percent inflation or zero inflation. The economy is described by the following Phillips curve: u =5 - 0....

Q: Describe the Lucas critique.

Describe the Lucas critique.

Q: The Social Security system levies a tax on workers and pays benefits

The Social Security system levies a tax on workers and pays benefits to the elderly. Suppose that Congress increases both the tax and the benefits. For simplicity, assume that Congress announces that...

Q: Describe four problems affecting measurement of the government budget deficit.

Describe four problems affecting measurement of the government budget deficit.

Q: Some commentators argue that when a financial firm is rescued by the

Some commentators argue that when a financial firm is rescued by the government in the midst of a financial crisis, the firm’s equity holders should be wiped out, but the firm’s creditors should be pr...

Q: What are the net capital outflow and the trade balance? Explain

What are the net capital outflow and the trade balance? Explain how they are related.

Q: What are adverse selection and moral hazard? How do banks mitigate

What are adverse selection and moral hazard? How do banks mitigate these problems?

Q: Use the model of supply and demand to explain how a fall

Use the model of supply and demand to explain how a fall in the price of frozen yogurt would affect the price of ice cream and the quantity of ice cream sold. In your explanation, identify the exogeno...

Q: Place each of the following transactions in one of the four components

Place each of the following transactions in one of the four components of expenditure: consumption, investment, government purchases, and net exports. a. Boeing sells an airplane to the U.S. Air Force...

Q: How are the CPI and the PCE deflator similar, and how

How are the CPI and the PCE deflator similar, and how are they different?

Q: Suppose that an economy’s production function is Cobb–Douglas with parameter

Suppose that an economy’s production function is Cobb–Douglas with parameter a = 0.3. a. What fractions of income do capital and labor receive? b. Suppose that immigration increases the labor force by...

Q: Write a Cobb–Douglas production function for which capital earns one

Write a Cobb–Douglas production function for which capital earns one-fourth of total income.

Q: In the nation of Wiknam, people hold $1,000

In the nation of Wiknam, people hold $1,000 of currency and $4,000 of demand deposits in the only bank, Wikbank. The reserve–deposit ratio is 0.25. a. What are the money supply, the monetary base, and...

Q: Explain how banks create money.

Explain how banks create money.

Q: Suppose that the money demand function takes the form (M/

Suppose that the money demand function takes the form (M/P)d 5 L(i, Y ) 5 Y/(5i) a. If output grows at rate g and the nominal interest rate is constant, at what rate will the demand for real balances...

Q: If inflation rises from 6 to 8 percent, what happens to

If inflation rises from 6 to 8 percent, what happens to real and nominal interest rates according to the Fisher effect?

Q: Answer the following questions about your own experience in the labor force

Answer the following questions about your own experience in the labor force. a. When you or one of your friends is looking for a part-time job, how many weeks does it typically take? After you find a...

Q: What will happen to the trade balance and the real exchange rate

What will happen to the trade balance and the real exchange rate of a small open economy when government purchases increase, such as during a war? Does your answer depend on whether this is a local wa...

Q: If a small open economy bans the import of Japanese video game

If a small open economy bans the import of Japanese video game systems, what happens to saving, investment, the trade balance, the interest rate, and the exchange rate?

Q: Suppose that Congress passes legislation making it more difficult for firms to

Suppose that Congress passes legislation making it more difficult for firms to fire workers. (An example is a law requiring severance pay for fired workers.) If this legislation reduces the rate of jo...

Q: Is most unemployment long-term or short term? Explain your

Is most unemployment long-term or short term? Explain your answer.

Q: “Devoting a larger share of national output to investment would help

“Devoting a larger share of national output to investment would help restore rapid productivity growth and rising living standards.” Do you agree with this claim? Explain, using the Solow model.

Q: In the Solow model, how does the rate of population growth

In the Solow model, how does the rate of population growth affect the steady-state level of income? How does it affect the steady-state rate of growth.

Q: Prove each of the following statements about the steady state of the

Prove each of the following statements about the steady state of the Solow model with population growth and technological progress. a. The capital–output ratio is constant. b. Capital and labor each e...

Q: How can policymakers influence a nation’s saving rate?

How can policymakers influence a nation’s saving rate?

Q: The official arbiter of when recessions begin and end is the National

The official arbiter of when recessions begin and end is the National Bureau of Economic Research, a nonprofit economics research group. Go to the NBER’s Web site (http://www.nber .org) and find the l...

Q: Explain the impact of an increase in the money supply in the

Explain the impact of an increase in the money supply in the short run and in the long run.

Q: What determines the natural rate of unemployment?

What determines the natural rate of unemployment?

Q: Consider the impact of an increase in thriftiness in the Keynesian cross

Consider the impact of an increase in thriftiness in the Keynesian cross model. Suppose the consumption function is C = C + c(Y - T), where C is a parameter called autonomous consumption that repre...

Q: Why does the LM curve slope upward?

Why does the LM curve slope upward?

Q: An economy is initially described by the following equations: C

An economy is initially described by the following equations: C = 500 + 0.75(Y - T) I = 1,000 + 50r M/P =Y - 200r G = 1000 T = 1000 M = 6,000 P = 2 a. Derive and graph the IS curve and the LM curve. C...

Q: Describe the possible effects of falling prices on equilibrium income.

Describe the possible effects of falling prices on equilibrium income.

Q: This appendix considers the case of a large open economy with a

This appendix considers the case of a large open economy with a floating exchange rate. Now suppose instead that a large open economy has a fixed exchange rate. That is, the central bank announces a t...

Q: The Mundell–Fleming model takes the world interest rate r*

The Mundell–Fleming model takes the world interest rate r* as an exogenous variable. Let’s consider what happens when this variable changes. a. What might cause the world interest rate to rise? (Hint:...

Q: What are the advantages of floating exchange rates and fixed exchange rates

What are the advantages of floating exchange rates and fixed exchange rates?

Q: According to the rational-expectations approach, if everyone believes that

According to the rational-expectations approach, if everyone believes that policymakers are committed to reducing inflation, the cost of reducing inflation—the sacrifice ratio—will be lower than if th...

Q: Explain the differences between demand-pull inflation and cost-push

Explain the differences between demand-pull inflation and cost-push inflation.

Q: The sacrifice ratio is the accumulated loss in output that results when

The sacrifice ratio is the accumulated loss in output that results when the central bank lowers its target for inflation by 1 percentage point. For the parameters used in the text simulation (see the...

Q: Country A and country B both have the production function Y

Country A and country B both have the production function Y = F(K, L) = K1/3L2/3. a. Does this production function have constant returns to scale? Explain. b. What is the per-worker production functio...

Q: A central bank has a new head, who decides to increase

A central bank has a new head, who decides to increase the response of interest rates to inflation. How does this change in policy alter the response of the economy to a supply shock? Give both a grap...

Q: Explain whether borrowing constraints increase or decrease the potency of fiscal policy

Explain whether borrowing constraints increase or decrease the potency of fiscal policy to influence aggregate demand in each of the following cases. a. A temporary tax cut b. An announced future tax...

Q: Use Fisher’s model of consumption to analyze an increase in second-

Use Fisher’s model of consumption to analyze an increase in second-period income. Compare the case in which the consumer faces a binding borrowing constraint and the case in which he does not.

Q: When the stock market crashes, what influence does it have on

When the stock market crashes, what influence does it have on investment, consumption, and aggregate demand? Why? How

Q: List four reasons firms might hold inventories.

List four reasons firms might hold inventories.

Q: After every policy meeting, the Federal Reserve issues a statement (

After every policy meeting, the Federal Reserve issues a statement (sometimes called the press release), which you can find on the Fed’s Web site (http://www.federalreserve.gov/monetarypolicy/ fomccal...

Q: How does a person’s interpretation of macroeconomic history affect his view of

How does a person’s interpretation of macroeconomic history affect his view of macroeconomic policy?

Q: Some economists have proposed the rule that the cyclically adjusted budget always

Some economists have proposed the rule that the cyclically adjusted budget always be balanced. Compare this proposal to a strict balanced-budget rule. Which is preferable? What problems do you see wit...

Q: According to the traditional view of government debt, how does a

According to the traditional view of government debt, how does a debt-financed tax cut affect public saving, private saving, and national saving?

Q: In recent years, as described in this chapter, both the

In recent years, as described in this chapter, both the United States and Greece have experienced increases in government debt and a significant economic downturn. In what ways were the two situations...

Q: In the Solow model, how does the saving rate affect the

In the Solow model, how does the saving rate affect the steady-state level of income? How does it affect the steady-state rate of growth?

Q: How does the leverage ratio influence a financial institution’s stability in response

How does the leverage ratio influence a financial institution’s stability in response to bad economic news?

Q: How often does the price you pay for a haircut change?

How often does the price you pay for a haircut change? What does your answer imply about the usefulness of market-clearing models for analyzing the market for haircuts?

Q: List the three categories used by the Bureau of Labor Statistics to

List the three categories used by the Bureau of Labor Statistics to classify everyone in the economy. How does the BLS compute the unemployment rate?

Q: Figure 3-5 shows that in U.S. data

Figure 3-5 shows that in U.S. data, labor’s share of total income is approximately a constant over time. Table 3-1 shows that the trend in the real wage closely tracks the trend in labor productivity....

Q: What determines consumption and investment?

What determines consumption and investment?

Q: In the economy of Panicia, the monetary base is $1

In the economy of Panicia, the monetary base is $1,000. People hold a third of their money in the form of currency (and thus two-thirds as bank deposits). Banks hold a third of their deposits in reser...

Q: What are the various ways in which the Federal Reserve can influence

What are the various ways in which the Federal Reserve can influence the money supply?

Q: A newspaper article once reported that the U.S. economy

A newspaper article once reported that the U.S. economy was experiencing a low rate of inflation. It said that “low inflation has a downside: 45 million recipients of Social Security and other benefit...

Q: List all the costs of inflation you can think of, and

List all the costs of inflation you can think of, and rank them according to how important you think they are.

Q: A Case Study in this chapter concludes that if poor nations offered

A Case Study in this chapter concludes that if poor nations offered better production efficiency and legal protections, the trade balance in rich nations such as the United States would move toward su...

Q: In the economy of Solovia, the owners of capital get two

In the economy of Solovia, the owners of capital get two-thirds of national income, and the workers receive one-third. a. The men of Solovia stay at home performing household chores, while the women w...

Q: According to the theory of purchasing-power parity, if Japan

According to the theory of purchasing-power parity, if Japan has low inflation and Mexico has high inflation, what will happen to the exchange rate between the Japanese yen and the Mexican peso?

Q: Consider an economy with the following Cobb–Douglas production function:

Consider an economy with the following Cobb–Douglas production function: Y = 5K 1/3L 2/3. a. Derive the equation describing labor demand in this economy as a function of the real wage and the capital...

Q: Do Europeans work more or fewer hours than Americans? List three

Do Europeans work more or fewer hours than Americans? List three hypotheses that have been suggested to explain the difference.

Q: Draw a well-labeled graph that illustrates the steady state of

Draw a well-labeled graph that illustrates the steady state of the Solow model with population growth. Use the graph to find what happens to steady-state capital per worker and income per worker in re...

Q: Two countries, Richland and Poorland, are described by the Solow

Two countries, Richland and Poorland, are described by the Solow growth model. They have the same Cobb–Douglas production function, F(K, L)= A K aL1-a, but with different quantities of capital and lab...

Q: Give an example of an institutional difference between countries that might explain

Give an example of an institutional difference between countries that might explain the differences in income per person.

Q: Why is it easier for the Fed to deal with demand shocks

Why is it easier for the Fed to deal with demand shocks than with supply shocks?

Q: Suppose that the money demand function is (M/P

Suppose that the money demand function is (M/P)d = 800 - 50r, where r is the interest rate in percent. The money supply M is 2,000 and the price level P is fixed at 5. a. Graph the supply and demand f...

Q: Determine whether each of the following statements is true or false,

Determine whether each of the following statements is true or false, and explain why. For each true statement, discuss whether there is anything unusual about the impact of monetary and fiscal policy...

Q: Business executives and policymakers are often concerned about the competitiveness of American

Business executives and policymakers are often concerned about the competitiveness of American industry (the ability of U.S. industries to sell their goods profitably in world markets). a. How would...

Q: Suppose an economy described by the Solow model has the following production

Suppose an economy described by the Solow model has the following production function: Y= K1/2(LE)1/2. a. For this economy, what is f(k)? b. Use your answer to part (a) to solve for the steady-state v...

Q: Describe the impossible trinity.

Describe the impossible trinity.

Q: Suppose that the economy is initially at a longrun equilibrium. Then

Suppose that the economy is initially at a longrun equilibrium. Then the Fed increases the money supply. a. Assuming any resulting inflation to be unexpected, describe any changes in GDP, unemployment...

Q: Under what circumstances might it be possible to reduce inflation without causing

Under what circumstances might it be possible to reduce inflation without causing a recession?

Q: The text analyzes the case of a temporary shock to the demand

The text analyzes the case of a temporary shock to the demand for goods and services. Suppose, however, that et were to increase permanently. What would happen to the economy over time? In particular,...

Q: Albert and Franco both follow the life-cycle hypothesis: they

Albert and Franco both follow the life-cycle hypothesis: they smooth consumption as much as possible. They each live for five periods, the last two of which are retirement. Here are their incomes earn...

Q: Explain why changes in consumption are unpredictable if consumers obey the permanent

Explain why changes in consumption are unpredictable if consumers obey the permanent-income hypothesis and have rational expectations.

Q: It is an election year, and the economy is in a

It is an election year, and the economy is in a recession. The opposition candidate campaigns on a platform of passing an investment tax credit, which would be effective next year after she takes offi...

Q: What is meant by the “time inconsistency” of economic policy

What is meant by the “time inconsistency” of economic policy? Why might policymakers be tempted to renege on an announcement they made earlier? In this situation, what is the advantage of a policy rul...

Q: Find some recent projections for the future path of the U.

Find some recent projections for the future path of the U.S. government debt as a percentage of GDP. What assumptions are made about government spending, taxes, and economic growth? Do you think these...

Q: According to the Ricardian view of government debt, how does a

According to the Ricardian view of government debt, how does a debt-financed tax cut affect public saving, private saving, and national saving?

Q: Go to the website of the Bureau of Economic Analysis and find

Go to the website of the Bureau of Economic Analysis and find the growth rate of real GDP for the most recent quarter. Go to the website of the Bureau of Labor Statistics and find the inflation rate o...

Q: In the Solow model, what determines the steady state rate of

In the Solow model, what determines the steady state rate of growth of income per worker?

Q: Explain how a financial crisis reduces the aggregate demand for goods and

Explain how a financial crisis reduces the aggregate demand for goods and services.

Q: Find data on GDP and its components, and compute the percentage

Find data on GDP and its components, and compute the percentage of GDP for the following components for 1950, 1980, and the most recent year available. a. Personal consumption expenditures b. Gross pr...

Q: Describe the two ways the BLS measures total employment.

Describe the two ways the BLS measures total employment.

Q: According to the neoclassical theory of distribution, a worker’s real wage

According to the neoclassical theory of distribution, a worker’s real wage reflects her productivity. Let’s use this insight to examine the incomes of two groups of workers: farmers and barbers. Let W...

Q: Explain the difference between government purchases and transfer payments. Give two

Explain the difference between government purchases and transfer payments. Give two examples of each

Q: As a Case Study in the chapter discusses, the money supply

As a Case Study in the chapter discusses, the money supply fell from 1929 to 1933 because both the currency–deposit ratio and the reserve–deposit ratio increased. Use the model of the money supply and...

Q: Why might a banking crisis lead to a fall in the money

Why might a banking crisis lead to a fall in the money supply?

Q: During World War II, both Germany and England had plans for

During World War II, both Germany and England had plans for a paper weapon: they each printed the other’s currency, with the intention of dropping large quantities by airplane. Why might this have bee...

Q: Explain the roles of monetary and fiscal policy in causing and ending

Explain the roles of monetary and fiscal policy in causing and ending hyperinflations.

Q: The president is considering placing a tariff on the import of Japanese

The president is considering placing a tariff on the import of Japanese luxury cars. Using the model presented in this chapter, discuss the economics and politics of such a policy. In particular, how...

Q: An economy begins in long-run equilibrium, and then a

An economy begins in long-run equilibrium, and then a change in government regulations allows banks to start paying interest on checking accounts. Recall that the money stock is the sum of currency an...

Q: Suppose that a country experiences a reduction in productivity—that is

Suppose that a country experiences a reduction in productivity—that is, an adverse shock to the production function. a. What happens to the labor demand curve? b. How would this change in productivity...

Q: Many demographers predict that the United States will have zero population growth

Many demographers predict that the United States will have zero population growth in the coming decades, in contrast to the historical average population growth of about 1 percent per year. Use the So...

Q: The amount of education the typical person receives varies substantially among countries

The amount of education the typical person receives varies substantially among countries. Suppose you were to compare a country with a highly educated labor force and a country with a less educated la...

Q: How does endogenous growth theory explain persistent growth without the assumption of

How does endogenous growth theory explain persistent growth without the assumption of exogenous technological progress? How does this differ from the Solow model?

Q: The following equations describe an economy. Y + C +

The following equations describe an economy. Y + C + I + G. C = 50 + 0.75 (Y - T ). I = 150 - 10 r. (M/P)d = Y + 50r. G = 250. T = 200. M = 3,000. P = 4 a. Identify each of the variables and briefly e...

Q: Monetary policy and fiscal policy often change at the same time.

Monetary policy and fiscal policy often change at the same time. a. Suppose that the government wants to raise investment but keep output constant. In the IS–LM model, what mix of monetary and fiscal...

Q: Suppose that higher income implies higher imports and thus lower net exports

Suppose that higher income implies higher imports and thus lower net exports. That is, the net-exports function is NX = NX(e, Y ). Examine the effects in a small open economy of a fiscal expansion on...

Q: Assume that people have rational expectations and that the economy is described

Assume that people have rational expectations and that the economy is described by the sticky price model. Explain why each of the following propositions is true. a. Only unanticipated changes in the...

Q: Explain two ways in which a recession might raise the natural rate

Explain two ways in which a recession might raise the natural rate of unemployment.

Q: Suppose a central bank does not satisfy the Taylor principle; in

Suppose a central bank does not satisfy the Taylor principle; in particular, assume that up is slightly less than zero, so the nominal interest rate rises less than one-for-one with inflation. Use a g...

Q: When real GDP declines during a recession, what typically happens to

When real GDP declines during a recession, what typically happens to consumption, investment, and the unemployment rate?

Q: Demographers predict that the fraction of the population that is elderly

Demographers predict that the fraction of the population that is elderly will increase over the next 20 years. What does the life-cycle model predict for the influence of this demographic change on th...

Q: Give an example in which someone might exhibit time-inconsistent preferences

Give an example in which someone might exhibit time-inconsistent preferences.

Q: The United States experienced a large increase in the number of births

The United States experienced a large increase in the number of births in the 1950s. People in this baby-boom generation reached adulthood and started forming their own households in the 1970s. a. Use...

Q: List three policy rules that the Fed might follow. Which of

List three policy rules that the Fed might follow. Which of these would you advocate? Why?

Q: Do you find the traditional or the Ricardian view of government debt

Do you find the traditional or the Ricardian view of government debt more credible? Why?

Q: What does it mean for a central bank to act as lender

What does it mean for a central bank to act as lender of last resort?

Q: Tina is the sole owner of Tina’s Lawn Mowing, Incorporated (

Tina is the sole owner of Tina’s Lawn Mowing, Incorporated (TLM). In one year, TLM collects $1,000,000 from customers to mow their lawns. TLM’s equipment depreciates in value by $125,000. TLM pays $60...

Q: (This problem requires the use of calculus.) Consider a Cobb

(This problem requires the use of calculus.) Consider a Cobb–Douglas production function with three inputs. K is capital (the number of machines), L is labor (the number of workers), and H is human ca...

Q: What makes the demand for the economy’s output of goods and services

What makes the demand for the economy’s output of goods and services equal the supply?

Q: To increase tax revenue, the U.S. government in

To increase tax revenue, the U.S. government in 1932 imposed a 2-cent tax on checks written on bank account deposits. (In today’s dollars, this tax would amount to about 34 cents per check.) a. How do...

Q: Use the Keynesian cross model to predict the impact on equilibrium GDP

Use the Keynesian cross model to predict the impact on equilibrium GDP of the following. In each case, state the direction of the change and give a formula for the size of the impact. a. An increase i...

Q: In each of the following scenarios, explain and categorize the cost

In each of the following scenarios, explain and categorize the cost of inflation. a. Because inflation has risen, the J. Crew clothing company decides to issue a new catalog monthly rather than quarte...

Q: Define the terms real variable and nominal variable, and give an

Define the terms real variable and nominal variable, and give an example of each.

Q: Here is a table similar to Table 6-2 (but

Here is a table similar to Table 6-2 (but in alphabetical order) for the currencies of four imaginary nations. Use the theory of purchasing-power parity to fill in the blanks with a number or â&...

Q: Consider an economy with two sectors: manufacturing and services. Demand

Consider an economy with two sectors: manufacturing and services. Demand for labor in manufacturing and services are described by these equations: Lm = 200 -6W m Ls = 100 - 4Ws where L is labor (in n...

Q: In the Solow model, population growth leads to steady-state

In the Solow model, population growth leads to steady-state growth in total output, but not in output per worker. Do you think this would still be true if the production function exhibited increasing...

Q: This question asks you to analyze in more detail the two-

This question asks you to analyze in more detail the two-sector endogenous growth model presented in the text. a. Rewrite the production function for manufactured goods in terms of output per effectiv...

Q: Use the IS–LM diagram to describe both the short-

Use the IS–LM diagram to describe both the short-run effects and the long-run effects of the following changes on national income, the interest rate, the price level, consumption, investment, and real...

Q: Suppose that money demand depends on disposable income, so that the

Suppose that money demand depends on disposable income, so that the equation for the money market becomes M/P = L(r, Y - T ). Analyze the short-run impact of a tax cut in a small open economy on the e...

Q: Suppose that an economy has the Phillips curve π = π

Suppose that an economy has the Phillips curve π = π-1 - 0.5(u - un) and that the natural rate of unemployment is given by an average of the past two years’ unemployment: un = 0.5(u-1 + u-2). a. Why...

Q: The text assumes that the natural rate of interest r is a

The text assumes that the natural rate of interest r is a constant parameter. Suppose instead that it varies over time, so now it has to be written as rt. a. How would this change affect the equation...

Q: Use the Keynesian cross to explain why fiscal policy has a multiplied

Use the Keynesian cross to explain why fiscal policy has a multiplied effect on national income.

Q: A Case Study in the chapter indicates that the elderly do not

A Case Study in the chapter indicates that the elderly do not dissave as much as the life-cycle model predicts. a. Describe the two possible explanations for this phenomenon. b. One study found that t...

Q: U.S. tax laws encourage investment in housing (such

U.S. tax laws encourage investment in housing (such as through the deductibility of mortgage interest for purposes of computing taxable income) and discourage investment in business capital (such as t...

Q: Give three reasons that a budget deficit might be a good policy

Give three reasons that a budget deficit might be a good policy choice.

Q: What are the pros and cons of using public funds to prop

What are the pros and cons of using public funds to prop up a financial system in crisis?

Q: Consider an economy that produces and consumes hot dogs and hamburgers.

Consider an economy that produces and consumes hot dogs and hamburgers. In the following table are data for two different years. a. Using 2010 as the base year, compute the following statistics for ea...

Q: The government raises taxes by $100 billion. If the marginal

The government raises taxes by $100 billion. If the marginal propensity to consume is 0.6, what happens to the following? Do they rise or fall? By what amounts? a. Public saving b. Private saving c. N...

Q: Explain what happens to consumption, investment, and the interest rate

Explain what happens to consumption, investment, and the interest rate when the government increases taxes.

Q: Give an example of a bank balance sheet with a leverage ratio

Give an example of a bank balance sheet with a leverage ratio of 20. If the value of the bank’s assets rises by 2 percent, what happens to the value of the owners’ equity in this bank? How large a dec...

Q: Some economic historians have noted that during the period of the gold

Some economic historians have noted that during the period of the gold standard, gold discoveries were most likely to occur after a long deflation. (The discoveries of 1896 are an example.) Why might...

Q: Suppose China exports TVs and uses the yuan as its currency,

Suppose China exports TVs and uses the yuan as its currency, whereas Russia exports vodka and uses the ruble. China has a stable money supply and slow, steady technological progress in TV production,...

Q: According to the IS–LM model, what happens in the

According to the IS–LM model, what happens in the short run to the interest rate, income, consumption, and investment under the following circumstances? Be sure your answer includes an appropriate gra...

Q: When workers’ wages rise, their decision about how much time to

When workers’ wages rise, their decision about how much time to spend working is affected in two conflicting ways—as you may have learned in courses in microeconomics. The income effect is the impulse...

Q: Consider how unemployment would affect the Solow growth model. Suppose that

Consider how unemployment would affect the Solow growth model. Suppose that output is produced according to the production function Y= K a[(1 - u)L]1-a, where K is capital, L is the labor force, and u...

Q: Choose two countries that interest you—one rich and one poor

Choose two countries that interest you—one rich and one poor. What is the income per person in each country? Find some data on country characteristics that might help explain the difference in income:...

Q: The Fed is considering two alternative monetary policies: • holding

The Fed is considering two alternative monetary policies: • holding the money supply constant and letting the interest rate adjust, or • adjusting the money supply to hold the interest rate constant....

Q: Suppose that the price level relevant for money demand includes the price

Suppose that the price level relevant for money demand includes the price of imported goods and that the price of imported goods depends on the exchange rate. That is, the money market is described by...

Q: Some economists believe that taxes have an important effect on the labor

Some economists believe that taxes have an important effect on the labor supply. They argue that higher taxes cause people to want to work less and that lower taxes cause them to want to work more. Co...

Q: Suppose that people’s expectations of inflation are subject to random shocks.

Suppose that people’s expectations of inflation are subject to random shocks. That is, instead of being merely adaptive, expected inflation in period t, as seen in period t - 1, is Et-1πt =π t-1 + nt...

Q: Consider two savings accounts that pay the same interest rate. One

Consider two savings accounts that pay the same interest rate. One account lets you take your money out on demand. The second requires that you give 30-day advance notification before withdrawals. a....

Q: Why might the level of government debt affect the government’s incentives regarding

Why might the level of government debt affect the government’s incentives regarding money creation?

Q: Abby consumes only apples. In year 1, red apples cost

Abby consumes only apples. In year 1, red apples cost $1 each, green apples cost $2 each, and Abby buys 10 red apples. In year 2, red apples cost $2, green apples cost $1, and Abby buys 10 green apple...

Q: Explain why the aggregate demand curve slopes downward.

Explain why the aggregate demand curve slopes downward.

Q: Suppose that an increase in consumer confidence raises consumers’ expectations about their

Suppose that an increase in consumer confidence raises consumers’ expectations about their future income and thus increases the amount they want to consume today. This might be interpreted as an upwar...

Q: Jimmy Paul Miller starts his own bank, called JPM. As

Jimmy Paul Miller starts his own bank, called JPM. As owner, Jimmy puts in $2,000 of his own money. JPM then borrows $4,000 in a long-term loan from Jimmy’s uncle, accepts $14,000 in demand deposits f...

Q: Oceania is a small open economy. Suppose that a large

Oceania is a small open economy. Suppose that a large number of foreign countries begin to subsidize investment by instituting an investment tax credit (while adjusting other taxes to hold their tax...

Q: In any city at any time, some of the stock of

In any city at any time, some of the stock of usable office space is vacant. This vacant office space is unemployed capital. How would you explain this phenomenon? In particular, which approach to exp...

Q: Suppose that the demand for real money balances depends on disposable income

Suppose that the demand for real money balances depends on disposable income. That is, the money demand function is M/P = L(r, Y - T ). Using the IS–LM model, discuss whether this change in the money...

Q: Use the Mundell–Fleming model to answer the following questions about

Use the Mundell–Fleming model to answer the following questions about the state of California (a small open economy). a. What kind of exchange-rate system does California have with its major trading p...

Q: Go to the Web site of the Bureau of Labor Statistics

Go to the Web site of the Bureau of Labor Statistics (http://www.bls.gov). For each of the past five years, find the inflation rate as measured by the consumer price index for\all items (sometimes cal...

Q: Use the dynamic AD–AS model to solve for inflation as

Use the dynamic AD–AS model to solve for inflation as a function of only lagged inflation and supply and demand shocks. (Assume target inflation is constant.) a. According to the equation you have der...

Q: This problem uses calculus to compare two scenarios of consumer optimization.

This problem uses calculus to compare two scenarios of consumer optimization. a. Nina has the following utility function: U = ln(C1) + ln(C2) - ln(C3) She starts with wealth of $120,000, earns no ad...

Q: An economy has 100 people divided among the following groups: 25

An economy has 100 people divided among the following groups: 25 have full-time jobs, 20 have one part-time job, 5 have two part-time jobs, 10 would like to work and are looking for jobs, 10 would lik...

Q: Imagine that you run the central bank in a large open economy

Imagine that you run the central bank in a large open economy with a floating exchange rate. Your goal is to stabilize income, and you adjust the money supply accordingly. Under your policy, what happ...

Q: Consider an economy described as follows: Y= C

Consider an economy described as follows: Y= C + I+ G. Y = 8,000. G = 2,500. T = 2,000. C = 1000 + 2/3(Y-T ). I = 1,200 - 100r. a. In this economy, compute private saving, public saving, and national...

Q: “Traveling in Mexico is much cheaper now than it was ten

“Traveling in Mexico is much cheaper now than it was ten years ago,” says a friend. “Ten years ago, a dollar bought 10 pesos; this year, a dollar...

Q: This problem asks you to analyze the IS–LM model algebraically

This problem asks you to analyze the IS–LM model algebraically. Suppose consumption is a linear function of disposable income: C(Y - T ) = a + b(Y - T ), where a> 0 and 0 < b < 1. The parameter b is t...

Q: In a speech that Senator Robert Kennedy gave when he was running

In a speech that Senator Robert Kennedy gave when he was running for president in 1968, he said the following about GDP: [It] does not allow for the health of our children, the quality of their educa...

Q: Suppose that the government increases taxes and government purchases by equal amounts

Suppose that the government increases taxes and government purchases by equal amounts. What happens to the interest rate and investment in response to this balanced-budget change? Explain how your ans...

Q: You read on a financial Web site that the nominal interest rate

You read on a financial Web site that the nominal interest rate is 12 percent per year in Canada and 8 percent per year in the United States. Suppose that international capital flows equalize the real...

Q: Consider whether each of the following events is likely to increase or

Consider whether each of the following events is likely to increase or decrease real GDP. In each case, do you think the well-being of the average person in society most likely changes in the same dir...

Q: When the government subsidizes investment, such as with an investment tax

When the government subsidizes investment, such as with an investment tax credit, the subsidy often applies to only some types of investment. This question asks you to consider the effect of such a ch...

Q: Suppose that consumption depends on the interest rate. How, if

Suppose that consumption depends on the interest rate. How, if at all, does this alter the conclusions reached in the chapter about the impact of an increase in government purchases on investment, con...

Q: : Macroeconomic data do not show a strong correlation between investment and

Macroeconomic data do not show a strong correlation between investment and interest rates. Let’s examine why this might be so. Use our model in which the interest rate adjusts to equilibrate the supp...

Q: Use the Mundell–Fleming model to predict what would happen to

Use the Mundell–Fleming model to predict what would happen to aggregate income, the exchange rate, and the trade balance under both floating and fixed exchange rates in response to each of the followi...

Q: In the Mundell–Fleming model with floating exchange rates, explain

In the Mundell–Fleming model with floating exchange rates, explain what happens to aggregate income, the exchange rate, and the trade balance when taxes are raised. What would happen if exchange rates...

Q: List the two things that GDP measures. How can GDP measure

List the two things that GDP measures. How can GDP measure two things at once?

Q: Let’s consider some more special cases of the mother of all models

Let’s consider some more special cases of the mother of all models. Starting with this comprehensive model, what extra assumptions would you need to yield each of the following specialized models? a....

Q: In the sticky-price model, describe the aggregate supply curve

In the sticky-price model, describe the aggregate supply curve in the following special cases. How do these cases compare to the short-run aggregate supply curve we discussed in Chapter 10? a. All fir...

Q: Explain the two theories of aggregate supply. On what market imperfection

Explain the two theories of aggregate supply. On what market imperfection does each theory rely? What do the theories have in common?

Q: Derive the long-run equilibrium for the dynamic AD–AS

Derive the long-run equilibrium for the dynamic AD–AS model. Assume there are no shocks to demand or supply (Ɛt = yt = 0) and inflation has stabilized (πt = &I...

Q: On a carefully labeled graph, draw the dynamic aggregate supply curve

On a carefully labeled graph, draw the dynamic aggregate supply curve. Explain why it has the slope it has.

Q: The chapter uses the Fisher model to discuss a change in the

The chapter uses the Fisher model to discuss a change in the interest rate for a consumer who saves some of his first-period income. Suppose, instead, that the consumer is a borrower. How does that al...

Q: What were Keynes’s three conjectures about the consumption function?

What were Keynes’s three conjectures about the consumption function?

Q: Use the neoclassical model of investment to explain the impact of each

Use the neoclassical model of investment to explain the impact of each of the following on the rental price of capital, the cost of capital, and investment. a. Anti-inflationary monetary policy raises...

Q: In the neoclassical model of business fixed investment, under what conditions

In the neoclassical model of business fixed investment, under what conditions will firms find it profitable to add to their capital stock?

Q: In the 1970s in the United States, the inflation rate and

In the 1970s in the United States, the inflation rate and the natural rate of unemployment both rose. Let’s use this model of time inconsistency to examine this phenomenon. Assume that policy is discr...

Q: Use the neoclassical theory of distribution to predict the impact on the

Use the neoclassical theory of distribution to predict the impact on the real wage and the real rental price of capital of each of the following events: a. A wave of immigration increases the labor fo...

Q: Suppose that the tradeoff between unemployment and inflation is determined by the

Suppose that the tradeoff between unemployment and inflation is determined by the Phillips curve: u = un - a(π - Eπ), where u denotes the unemployment rate, un the natural rate, p the rate of inflatio...

Q: What are the inside lag and the outside lag? Which has

What are the inside lag and the outside lag? Which has the longer inside lag—monetary or fiscal policy? Which has the longer outside lag? Why?

Q: On April 1, 1996, Taco Bell, the fast-

On April 1, 1996, Taco Bell, the fast-food chain, ran a full-page ad in the New York Times with this news: “In an effort to help the national debt, Taco Bell is pleased to announce that we have agreed...

Q: What was unusual about U.S. fiscal policy from 1980

What was unusual about U.S. fiscal policy from 1980 to 1995?

Q: In each of the following cases, identify whether the problem is

In each of the following cases, identify whether the problem is adverse selection or moral hazard, and explain your answer. How might the problem be dealt with? a. Rick has gotten a large advance to w...

Q: Explain the difference between debt finance and equity finance.

Explain the difference between debt finance and equity finance.

Q: List three macroeconomic issues that have been in the news lately.

List three macroeconomic issues that have been in the news lately.

Q: Why do economists build models?

Why do economists build models?

Q: A farmer grows a bushel of wheat and sells it to a

A farmer grows a bushel of wheat and sells it to a miller for $1. The miller turns the wheat into flour and then sells the flour to a baker for $3. The baker uses the flour to make bread and sells the...

Q: What are the four components of GDP? Give an example of

What are the four components of GDP? Give an example of each.

Q: : What determines the amount of output an economy produces?

What determines the amount of output an economy produces?

Q: Suppose the production function in medieval Europe is Y 5 K 0

Suppose the production function in medieval Europe is Y 5 K 0.5L0.5, where K is the amount of land and L is the amount of labor. The economy begins with 100 units of land and 100 units of labor. Use a...

Q: Explain how a competitive, profit-maximizing firm decides how much

Explain how a competitive, profit-maximizing firm decides how much of each factor of production to demand.

Q: Explain how each of the following events affects the monetary base,

Explain how each of the following events affects the monetary base, the money multiplier, and the money supply. a. The Federal Reserve buys bonds in an open market operation. b. The Fed increases the...

Q: What is fiat money? What is commodity money?

What is fiat money? What is commodity money?

Q: Suppose a country has a money demand function (M/P

Suppose a country has a money demand function (M/P)d 5 kY, where k is a constant parameter. The money supply grows by 12 percent per year, and real income grows by 4 percent per year. a. What is the a...

Q: What does the assumption of constant velocity imply?

What does the assumption of constant velocity imply?

Q: On September 21, 1995, “House Speaker Newt Gingrich threatened

On September 21, 1995, “House Speaker Newt Gingrich threatened to send the United States into default on its debt for the first time in the nation’s history, to force the Clinton Administration to bal...

Q: Consider an economy described by the following equations: Y=

Consider an economy described by the following equations: Y= C + I + G + NX, Y = 8,000, G = 2,500, T = 2,000, C = 500 + 2/3 (Y - T), I = 900 - 50r, NX = 1,500 - 250e, R= r* = 8. a. In this economy, so...

Q: Define the nominal exchange rate and the real exchange rate.

Define the nominal exchange rate and the real exchange rate.

Q: The residents of a certain dormitory have collected the following data:

The residents of a certain dormitory have collected the following data: people who live in the dorm can be classified as either involved in a relationship or uninvolved. Among involved people, 10 perc...

Q: What are the three functions of money? Which of the functions

What are the three functions of money? Which of the functions do the following items satisfy? Which do they not satisfy? a. A credit card b. A painting by Rembrandt c. A subway token

Q: Describe the difference between frictional unemployment and structural unemployment.

Describe the difference between frictional unemployment and structural unemployment.

Q: In the discussion of German and Japanese postwar growth, the text

In the discussion of German and Japanese postwar growth, the text describes what happens when part of the capital stock is destroyed in a war. By contrast, suppose that a war does not directly affect...

Q: Why might an economic policymaker choose the Golden Rule level of capital

Why might an economic policymaker choose the Golden Rule level of capital?

Q: Labor productivity is defined as Y/L, the amount of

Labor productivity is defined as Y/L, the amount of output divided by the amount of labor input. Start with the growth-accounting equation and show that the growth in labor productivity depends on gro...

Q: An economy has a Cobb–Douglas production function: Y =

An economy has a Cobb–Douglas production function: Y = K a(LE)1-a. (For a review of the Cobb–Douglas production function, see Chapter 3.) The economy has a capital share of a third, a saving rate of 2...

Q: In the steady state of the Solow model, at what rate

In the steady state of the Solow model, at what rate does output per person grow? At what rate does capital per person grow? How does this compare with the U.S. experience?

Q: Suppose the Fed reduces the money supply by 5 percent. Assume

Suppose the Fed reduces the money supply by 5 percent. Assume the velocity of money is constant. a. What happens to the aggregate demand curve? b. What happens to the level of output and the price lev...

Q: Give an example of a price that is sticky in the short

Give an example of a price that is sticky in the short run but flexible in the long run.

Q: In the Keynesian cross model, assume that the consumption function is

In the Keynesian cross model, assume that the consumption function is given by C = 120 + 0.8 (Y - T). Planned investment is 200; government purchases and taxes are both 400. a. Graph planned expenditu...

Q: Use the theory of liquidity preference to explain why an increase in

Use the theory of liquidity preference to explain why an increase in the money supply lowers the interest rate. What does this explanation assume about the price level?

Q: Describe the functions of money.

Describe the functions of money.

Q: Use the IS–LM model to predict the short run effects

Use the IS–LM model to predict the short run effects of each of the following shocks on income, the interest rate, consumption, and investment. In each case, explain what the Fed should do to keep inc...

Q: What is the impact of an increase in taxes on the interest

What is the impact of an increase in taxes on the interest rate, income, consumption, and investment?

Q: Over the past several decades, the economies of the world have

Over the past several decades, the economies of the world have become more financially integrated. That is, investors in all nations have become more willing and able to take advantage of financial op...

Q: A small open economy is described by the following equations:

A small open economy is described by the following equations: C =50 +.75(Y - T ) I = 200 - 20r NX = 200 - 50Ɛ M/P = Y - 40r G = 200 T = 200 M = 3000 P = 3 r* = 5 a. Derive and graph the IS* and LM* cu...

Q: In the Mundell–Fleming model with floating exchange rates, explain

In the Mundell–Fleming model with floating exchange rates, explain what happens to aggregate income, the exchange rate, and the trade balance when the money supply is reduced. What would happen if exc...

Q: Suppose that an economy has the Phillips curve π = π

Suppose that an economy has the Phillips curve π = π -1 - 0.5(u - 5). a. What is the natural rate of unemployment? b. Graph the short-run and long-run relationships between inflation and unemployment...

Q: How is the Phillips curve related to aggregate supply?

How is the Phillips curve related to aggregate supply?

Q: Suppose the monetary-policy rule has the wrong natural rate of

Suppose the monetary-policy rule has the wrong natural rate of interest. That is, the central bank follows this rule: where p’ does not equal r, the natural rate of interest in the...

Q: On a carefully labeled graph, draw the dynamic aggregate demand curve

On a carefully labeled graph, draw the dynamic aggregate demand curve. Explain why it has the slope it has.

Q: Gabe and Gita both obey the two-period Fisher model of

Gabe and Gita both obey the two-period Fisher model of consumption. Gabe earns $100 in the first period and $100 in the second period. Gita earns nothing in the first period and $210 in the second per...

Q: In the Cagan model, if the money supply is expected to

In the Cagan model, if the money supply is expected to grow at some constant rate µ (so that Emt+s = mt + sµ), then Equation A9 can be shown to imply that pt = mt + ÿµ. a. Interpret this result. b. Wh...

Q: Describe the evidence that was consistent with Keynes’s conjectures and the evidence

Describe the evidence that was consistent with Keynes’s conjectures and the evidence that was inconsistent with them.

Q: Suppose that the government levies a tax on oil companies equal to

Suppose that the government levies a tax on oil companies equal to a proportion of the value of the company’s oil reserves. (The government assures the firms that the tax is for one time only.) Accord...

Q: What is Tobin’s q, and what does it have to do

What is Tobin’s q, and what does it have to do with investment?

Q: When cities pass laws limiting the rent landlords can charge on apartments

When cities pass laws limiting the rent landlords can charge on apartments, the laws usually apply to existing buildings and exempt any buildings not yet built. Advocates of rent control argue that th...

Q: Why would more accurate economic forecasting make it easier for policymakers to

Why would more accurate economic forecasting make it easier for policymakers to stabilize the economy? Describe two ways economists try to forecast developments in the economy.

Q: Draft a letter to the senator described in Section 19-3

Draft a letter to the senator described in Section 19-3, explaining the logic of the Ricardian view of government debt and evaluating its practical relevance.

Q: Why do many economists project increasing budget deficits and government debt over

Why do many economists project increasing budget deficits and government debt over the next several decades?

Q: Nation A has a well-developed financial system, where resources

Nation A has a well-developed financial system, where resources flow to the capital investments with the highest marginal product. Nation B has a less-developed financial system from which some would-...

Q: What is the main advantage of holding a stock mutual fund rather

What is the main advantage of holding a stock mutual fund rather than an individual stock?

Q: What do you think are the defining characteristics of a science?

What do you think are the defining characteristics of a science? Do you think macroeconomics should be called a science? Why or why not?

Q: In the country of Wiknam, the velocity of money is constant

In the country of Wiknam, the velocity of money is constant. Real GDP grows by 3 percent per year, the money stock grows by 8 percent per year, and the nominal interest rate is 9 percent. What is a. t...

Q: What is a market-clearing model? When is it appropriate

What is a market-clearing model? When is it appropriate to assume that markets clear?

Q: Suppose a woman marries her butler. After they are married,

Suppose a woman marries her butler. After they are married, her husband continues to wait on her as before, and she continues to support him as before (but as a husband rather than as an employee). Ho...

Q: What does the consumer price index measure? List three ways in

What does the consumer price index measure? List three ways in which it differs from the GDP deflator.

Q: If a 10 percent increase in both capital and labor causes output

If a 10 percent increase in both capital and labor causes output to increase by less than 10 percent, the production function is said to exhibit decreasing returns to scale. If it causes output to inc...

Q: What is the role of constant returns to scale in the distribution

What is the role of constant returns to scale in the distribution of income?

Q: An economy has a monetary base of 1,000 $1

An economy has a monetary base of 1,000 $1 bills. Calculate the money supply in scenarios (a)–(d) and then answer part (e). a. All money is held as currency. b. All money is held as demand deposits. B...

Q: What are open-market operations, and how do they influence

What are open-market operations, and how do they influence the money supply?

Q: An economy has the following money demand function: (M/

An economy has the following money demand function: (M/P)d = .2Y/i ½. a. Derive an expression for the velocity of money. What does velocity depend on? Explain why this dependency may occur. b. Calcula...

Q: Who pays the inflation tax?

Who pays the inflation tax?

Q: The country of Leverett is a small open economy. Suddenly,

The country of Leverett is a small open economy. Suddenly, a change in world fashions makes the exports of Leverett unpopular. a. What happens in Leverett to saving, investment, net exports, the inter...

Q: Describe some of the trade-offs faced by each of the

Describe some of the trade-offs faced by each of the following: a. a family deciding whether to buy a new car b. a member of Congress deciding how much to spend on national parks c. a company presiden...

Q: Draw an example of a production possibilities frontier for Robinson Crusoe,

Draw an example of a production possibilities frontier for Robinson Crusoe, a shipwrecked sailor who spends his time gathering coconuts and catching fish. Does this frontier limit Crusoe’s consumption...

Q: The first principle of economics discussed in Chapter 1 is that people

The first principle of economics discussed in Chapter 1 is that people face trade-offs. Use a production possibilities frontier to illustrate society’s trade-off between two “goods”—a clean environmen...

Q: Should an economic model describe reality exactly?

Should an economic model describe reality exactly?

Q: Why might economic advisers to the president disagree about a question of

Why might economic advisers to the president disagree about a question of policy?

Q: When two individuals produce efficiently and then make a mutually beneficial trade

When two individuals produce efficiently and then make a mutually beneficial trade based on comparative advantage, a. they both obtain consumption outside their production possibilities frontier. b. t...

Q: Pat and Kris are roommates. They spend most of their time

Pat and Kris are roommates. They spend most of their time studying (of course), but they leave some time for their favorite activities: making pizza and brewing root beer. Pat takes 4 hours to brew a...

Q: Give an example in which one person has an absolute advantage in

Give an example in which one person has an absolute advantage in doing something but another person has a comparative advantage.

Q: Suppose that a skilled brain surgeon also happens to be the world’s

Suppose that a skilled brain surgeon also happens to be the world’s fastest typist. Should she do her own typing or hire a secretary? Explain.

Q: Movie tickets and film streaming services are substitutes. If the price

Movie tickets and film streaming services are substitutes. If the price of film streaming increases, what happens in the market for movie tickets? a. The supply curve shifts to the left. b. The suppl...

Q: Consider the market for minivans. For each of the events listed

Consider the market for minivans. For each of the events listed here, identify which of the determinants of demand or supply are affected. Also indicate whether demand or supply increases or decreases...

Q: Does a change in consumers’ tastes lead to a movement along the

Does a change in consumers’ tastes lead to a movement along the demand curve or to a shift in the demand curve? Does a change in price lead to a movement along the demand curve or to a shift in the de...

Q: A change in which of the following will NOT shift the demand curve

A change in which of the following will NOT shift the demand curve for hamburgers? a. the price of hot dogs b. the price of hamburgers c. the price of hamburger buns d. the income of hamburger consume...

Q: Make up an example of a monthly supply schedule for pizza,

Make up an example of a monthly supply schedule for pizza, and graph the implied supply curve. Give an example of something that would shift this supply curve, and briefly explain your reasoning. Woul...

Q: A linear, downward-sloping demand curve is a.

A linear, downward-sloping demand curve is a. inelastic b. unit elastic. c. elastic. d. inelastic at some points, and elastic at others.

Q: Suppose the price elasticity of demand for heating oil is 0.

Suppose the price elasticity of demand for heating oil is 0.2 in the short run and 0.7 in the long run. a. If the price of heating oil rises from $1.80 to $2.20 per gallon, what happens to the quantit...

Q: If the elasticity is greater than 1, is demand elastic or

If the elasticity is greater than 1, is demand elastic or inelastic? If the elasticity equals zero, is demand perfectly elastic or perfectly inelastic?

Q: How might a drought that destroys half of all farm crops be

How might a drought that destroys half of all farm crops be good for farmers? If such a drought is good for farmers, why don’t farmers destroy their own crops in the absence of a drought?

Q: A $1 per unit tax levied on consumers of a good

A $1 per unit tax levied on consumers of a good is equivalent to a. a $1 per unit tax levied on producers of the good. b. a $1 per unit subsidy paid to producers of the good. c. a price floor that rai...

Q: A recent study found that the demand-and-supply schedules

A recent study found that the demand-and-supply schedules for Frisbees are as follows: a. What are the equilibrium price and quantity of Frisbees? b. Frisbee manufacturers persuade the government th...

Q: What mechanisms allocate resources when the price of a good is not

What mechanisms allocate resources when the price of a good is not allowed to bring supply and demand into equilibrium?

Q: John has been working as a tutor for $300 a semester

John has been working as a tutor for $300 a semester. When the university raises the price it pays tutors to $400, Jasmine enters the market and begins tutoring as well. How much does producer surplus...

Q: Suppose the demand for French bread rises. Explain what happens to

Suppose the demand for French bread rises. Explain what happens to producer surplus in the market for French bread. Explain what happens to producer surplus in the market for flour. Illustrate your an...

Q: Explain each of the following statements using supply-and-demand

Explain each of the following statements using supply-and-demand diagrams. a. “When a cold snap hits Florida, the price of orange juice rises in supermarkets throughout the country.” b. “When the weat...

Q: In a supply-and-demand diagram, show producer and

In a supply-and-demand diagram, show producer and consumer surplus at the market equilibrium.

Q: Draw the supply and demand curves for turkey. In the equilibrium

Draw the supply and demand curves for turkey. In the equilibrium, show producer and consumer surplus. Explain why producing more turkeys would lower total surplus.

Q: Eggs have a supply curve that is linear and upward-sloping

Eggs have a supply curve that is linear and upward-sloping and a demand curve that is linear and downward-sloping. If a 2 cent per egg tax is increased to 3 cents, the deadweight loss of the tax a. i...

Q: Consider the market for rubber bands. a. If this

Consider the market for rubber bands. a. If this market has very elastic supply and very inelastic demand, how would the burden of a tax on rubber bands be shared between consumers and producers? Use...

Q: How do the elasticities of supply and demand affect the deadweight loss

How do the elasticities of supply and demand affect the deadweight loss of a tax? Why do they have this effect?

Q: If the government doubles the tax on gasoline, can you be

If the government doubles the tax on gasoline, can you be sure that revenue from the gasoline tax will rise? Can you be sure that the deadweight loss from the gasoline tax will rise? Explain.

Q: When a nation opens itself to trade in a good and be

When a nation opens itself to trade in a good and be- comes an importer, a. producer surplus decreases, but consumer surplus and total surplus both increase. b. producer surplus decreases, consumer su...

Q: When China’s clothing industry expands, the increase in world supply lowers

When China’s clothing industry expands, the increase in world supply lowers the world price of clothing. a. Draw an appropriate diagram to analyze how this change in price affects consumer surplus, pr...

Q: Draw the supply-and-demand diagram for an importing country

Draw the supply-and-demand diagram for an importing country. Identify consumer surplus and producer surplus before trade is allowed. Identify consumer surplus and producer surplus with free trade. Wha...

Q: The textile industry of Autarka advocates a ban on the import of

The textile industry of Autarka advocates a ban on the import of wool suits. Describe five arguments its lobbyists might make. Give a response to each of these arguments.

Q: What is a competitive market? Briefly describe a type of market

What is a competitive market? Briefly describe a type of market that is not perfectly competitive.

Q: Which of the following does NOT add to U.S.

Which of the following does NOT add to U.S. GDP? a. Air France buys a plane from Boeing, the U.S. air- craft manufacturer. b. General Motors builds a new auto factory in North Carolina. c. The city of...

Q: The government purchases component of GDP does not include spending on transfer

The government purchases component of GDP does not include spending on transfer payments such as Social Security. Thinking about the definition of GDP, explain why transfer payments are excluded.

Q: A farmer sells wheat to a baker for $2. The

A farmer sells wheat to a baker for $2. The baker uses the wheat to make bread, which is sold for $3. What is the total contribution of these transactions to GDP?

Q: List the four components of expenditure. Which is the largest?

List the four components of expenditure. Which is the largest?

Q: If a Pennsylvania gun manufacturer raises the price of rifles it sells

If a Pennsylvania gun manufacturer raises the price of rifles it sells to the U.S. Army, its price hikes will increase a. both the CPI and the GDP deflator. b. neither the CPI nor the GDP deflator. c....

Q: Suppose that people consume only three goods, as shown in this

Suppose that people consume only three goods, as shown in this table: a. What is the percentage change in the price of each of the three goods? b. Using a method similar to the CPI, compute the percen...

Q: If the price of imported French wine rises, is the CPI

If the price of imported French wine rises, is the CPI or the GDP deflator affected more? Why?

Q: Most economists are ________ that natural resources will eventually limit economic growth

Most economists are ________ that natural resources will eventually limit economic growth. As evidence, they note that the prices of most natural resources, adjusted for overall inflation, have tended...

Q: Societies choose what share of their resources to devote to consumption and

Societies choose what share of their resources to devote to consumption and what share to devote to investment. Some of these decisions involve private spending; others involve government spending. a....

Q: In what way is a college degree a form of capital?

In what way is a college degree a form of capital?

Q: What is a market? What are the characteristics of a perfectly

What is a market? What are the characteristics of a perfectly competitive market?

Q: Describe three ways a government policymaker can try to raise the growth

Describe three ways a government policymaker can try to raise the growth in living standards in a society. Are there any drawbacks to these policies?

Q: A marginal change is one that a. is not important

A marginal change is one that a. is not important for public policy. b. incrementally alters an existing plan. c. makes an outcome inefficient. d. does not influence incentives.

Q: You win $100 in a basketball pool. You have a

You win $100 in a basketball pool. You have a choice between spending the money now and putting it away for a year in a bank account that pays 5 percent interest. What is the opportunity cost of spend...

Q: Why should policymakers think about incentives?

Why should policymakers think about incentives?

Q: An economy produces hot dogs and hamburgers. If a discovery of

An economy produces hot dogs and hamburgers. If a discovery of the remarkable health benefits of hot dogs were to change consumers’ preferences, it would a. expand the production possibilities frontie...

Q: An economy consists of three workers: Larry, Moe, and

An economy consists of three workers: Larry, Moe, and Curly. Each works 10 hours a day and can pro- duce two services: mowing lawns and washing cars. In an hour, Larry can either mow one lawn or wash...

Q: Which goods will a nation typically import? a. those

Which goods will a nation typically import? a. those goods in which the nation has an absolute advantage b. those goods in which the nation has a comparative advantage c. those goods in which other na...

Q: Suppose that there are 10 million workers in Canada and that each

Suppose that there are 10 million workers in Canada and that each of these workers can produce either 2 cars or 30 bushels of wheat in a year. a. What is the opportunity cost of producing a car in Can...

Q: Is absolute advantage or comparative advantage more important for trade? Explain

Is absolute advantage or comparative advantage more important for trade? Explain your reasoning using the example in your answer to question 3.

Q: The discovery of a large new reserve of crude oil will shift

The discovery of a large new reserve of crude oil will shift the ________ curve for gasoline, leading to a ________ equilibrium price. a. supply, higher b. supply, lower c. demand, higher d. demand, l...

Q: A life-saving medicine without any close substitutes will tend to

A life-saving medicine without any close substitutes will tend to have a. a small elasticity of demand. b. a large elasticity of demand. c. a small elasticity of supply. d. a large elasticity of suppl...

Q: Consider the markets for film streaming services, TV screens, and

Consider the markets for film streaming services, TV screens, and tickets at movie theaters. a. For each pair, identify whether they are complements or substitutes: • Film streaming and TV screens •...

Q: Harry’s income declines, and as a result, he buys more

Harry’s income declines, and as a result, he buys more pumpkin juice. Is pumpkin juice an inferior or a nor- mal good? What happens to Harry’s demand curve for pumpkin juice?

Q: On the appropriate diagram, show what happens to the market for

On the appropriate diagram, show what happens to the market for pizza if the price of tomatoes rises. On a separate diagram, show what happens to the market for pizza if the price of hamburgers falls....

Q: The ability of firms to enter and exit a market over time

The ability of firms to enter and exit a market over time means that, in the long run, a. the demand curve is more elastic. b. the demand curve is less elastic. c. the supply curve is more elastic. d....

Q: A price change causes the quantity demanded of a good to decrease

A price change causes the quantity demanded of a good to decrease by 30 percent, while the total revenue of that good increases by 15 percent. Is the demand curve elastic or inelastic? Explain.

Q: On a supply-and-demand diagram, show equilibrium price

On a supply-and-demand diagram, show equilibrium price, equilibrium quantity, and the total revenue received by producers.

Q: Which of the following would increase quantity supplied, decrease quantity demanded

Which of the following would increase quantity supplied, decrease quantity demanded, and increase the price that consumers pay? a. the imposition of a binding price floor b. the removal of a binding p...

Q: Suppose the federal government requires beer drinkers to pay a $2

Suppose the federal government requires beer drinkers to pay a $2 tax on each case of beer purchased. (In fact, both the federal and state governments impose beer taxes of some sort.) a. Draw a supply...

Q: Explain why economists usually oppose controls on prices.

Explain why economists usually oppose controls on prices.

Q: An efficient allocation of resources maximizes a. consumer surplus.

An efficient allocation of resources maximizes a. consumer surplus. b. producer surplus. c. consumer surplus plus producer surplus. d. consumer surplus minus producer surplus.

Q: For each of the following pairs of goods, which good would

For each of the following pairs of goods, which good would you expect to have more elastic demand and why? a. required textbooks or mystery novels b. Beethoven recordings or classical music recordings...

Q: It is a hot day, and Bert is thirsty. Here

It is a hot day, and Bert is thirsty. Here is the value he places on each bottle of water: Value of first bottle $7 Value of second bottle $5 Value of third bottle $3 Value of fourth bottle $1 a. Fro...

Q: What is efficiency? Is it the only goal of economic policymakers

What is efficiency? Is it the only goal of economic policymakers?

Q: Peanut butter has an upward-sloping supply curve and a downward

Peanut butter has an upward-sloping supply curve and a downward-sloping demand curve. If a 10 cent per pound tax is increased to 15 cents, the government’s tax revenue a. increases by less than 50 per...

Q: Suppose that the government imposes a tax on heating oil.

Suppose that the government imposes a tax on heating oil. a. Would the deadweight loss from this tax likely be greater in the first year after it is imposed or in the fifth year? Explain. b. Would the...

Q: Why do experts disagree about whether labor taxes have small or large

Why do experts disagree about whether labor taxes have small or large deadweight losses?

Q: If a nation that imports a good imposes a tariff, it

If a nation that imports a good imposes a tariff, it will increase a. the domestic quantity demanded. b. the domestic quantity supplied. c. the quantity imported from abroad. d. all of the above.

Q: Consider the arguments for restricting trade. a. Imagine that

Consider the arguments for restricting trade. a. Imagine that you are a lobbyist for timber, an established industry suffering from low-priced foreign competition, and you are trying to get Congress t...

Q: Describe what a tariff is and its economic effects

Describe what a tariff is and its economic effects

Q: An American buys a pair of shoes made in Italy. How

An American buys a pair of shoes made in Italy. How do the U.S. national income accounts treat the transaction? a. Net exports and GDP both rise. b. Net exports and GDP both fall. c. Net exports fall,...

Q: As the chapter states, GDP does not include the value of

As the chapter states, GDP does not include the value of used goods that are resold. Why would including such transactions make GDP a less informative mea- sure of economic well-being?

Q: Define the price elasticity of demand and the income elasticity of demand

Define the price elasticity of demand and the income elasticity of demand.

Q: Many years ago, Peggy paid $500 to put together a

Many years ago, Peggy paid $500 to put together a re- cord collection. Today, she sold her albums at a garage sale for $100. How does this sale affect current GDP?

Q: Define real GDP and nominal GDP. Which is a better measure

Define real GDP and nominal GDP. Which is a better measure of economic well-being? Why?

Q: Because consumers can sometimes substitute cheaper goods for those that have risen

Because consumers can sometimes substitute cheaper goods for those that have risen in price, a. the CPI overstates inflation. b. the CPI understates inflation. c. the GDP deflator overstates inflation...

Q: Over a long period of time, the price of a candy

Over a long period of time, the price of a candy bar rose from $0.20 to $1.20. Over the same period, the CPI rose from 150 to 300. Adjusted for overall inflation, how much did the price of the candy b...

Q: Because capital is subject to diminishing returns, higher saving and investment

Because capital is subject to diminishing returns, higher saving and investment do not lead to higher a. income in the long run. b. income in the short run. c. growth in the long run. d. growth in the...

Q: What is the opportunity cost of investing in capital? Do you

What is the opportunity cost of investing in capital? Do you think a country can overinvest in capital? What is the opportunity cost of investing in human capital? Do you think a country can overinves...

Q: Explain how higher saving leads to a higher standard of living.

Explain how higher saving leads to a higher standard of living. What might deter a policymaker from trying to raise the rate of saving?

Q: Adam Smith’s “invisible hand” refers to a. the

Adam Smith’s “invisible hand” refers to a. the subtle and often hidden methods that businesses use to profit at consumers’ expense. b. the ability of free markets to reach desirable outcomes, despite...

Q: The company that you manage has invested $5 million in developing

The company that you manage has invested $5 million in developing a new product, but the development is not quite finished. At a recent meeting, your sales people report that the introduction of compe...

Q: Why isn’t trade among countries like a game with some winners and

Why isn’t trade among countries like a game with some winners and some losers?

Q: Define the price elasticity of demand. • Explain the relationship between

Define the price elasticity of demand. • Explain the relationship between total revenue and the price elasticity of demand.

Q: All of the following topics fall within the study of microeconomics EXCEPT

All of the following topics fall within the study of microeconomics EXCEPT a. the impact of cigarette taxes on the smoking behavior of teenagers. b. the role of Microsoft’s market power in the pricing...

Q: Classify the following topics as relating to microeconomics or macroeconomics.

Classify the following topics as relating to microeconomics or macroeconomics. a. a family’s decision about how much income to save b. the effect of government regulations on auto emissions c. the im...

Q: Name one economic interaction that isn’t covered by the simplified circular-

Name one economic interaction that isn’t covered by the simplified circular-flow diagram.

Q: Suppose that in the United States, producing an air- craft

Suppose that in the United States, producing an air- craft takes 10,000 hours of labor and producing a shirt takes 2 hours of labor. In China, producing an aircraft takes 40,000 hours of labor and pro...

Q: England and Scotland both produce scones and sweaters. Suppose that an

England and Scotland both produce scones and sweaters. Suppose that an English worker can produce 50 scones per hour or 1 sweater per hour. Suppose that a Scottish worker can produce 40 scones per hou...

Q: If two parties trade based on comparative advantage and both gain,

If two parties trade based on comparative advantage and both gain, in what range must the price of the trade lie?

Q: If the economy goes into a recession and incomes fall, what

If the economy goes into a recession and incomes fall, what happens in the markets for inferior goods? a. Prices and quantities both rise. b. Prices and quantities both fall. c. Prices rise and quanti...

Q: Over the past 40 years, technological advances have reduced the cost

Over the past 40 years, technological advances have reduced the cost of computer chips. How do you think this has affected the market for computers? For computer software? For typewriters?

Q: What are the supply schedule and the supply curve, and how

What are the supply schedule and the supply curve, and how are they related? Why does the supply curve slope upward?

Q: An increase in the supply of a good will decrease the total

An increase in the supply of a good will decrease the total revenue producers receive if a. the demand curve is inelastic. b. the demand curve is elastic. c. the supply curve is inelastic. d. the supp...

Q: When the government imposes a binding price floor, it causes

When the government imposes a binding price floor, it causes a. the supply curve to shift to the left. b. the demand curve to shift to the right. c. a shortage of the good to develop. d. a surplus of...

Q: Cups of coffee and donuts are complements. Both have inelastic demand

Cups of coffee and donuts are complements. Both have inelastic demand. A hurricane destroys half the coffee bean crop. Use appropriately labeled diagrams to answer the following questions. a. What hap...

Q: If demand is elastic, how will an increase in price change

If demand is elastic, how will an increase in price change total revenue? Explain.

Q: Which of the following would increase quantity supplied, increase quantity demanded

Which of the following would increase quantity supplied, increase quantity demanded, and decrease the price that consumers pay? a. the imposition of a binding price floor b. the removal of a binding p...

Q: A senator wants to raise tax revenue and make workers better off

A senator wants to raise tax revenue and make workers better off. A staff member proposes raising the payroll tax paid by firms and using part of the extra revenue to reduce the payroll tax paid by wo...

Q: Suppose the government removes a tax on buyers of a good and

Suppose the government removes a tax on buyers of a good and levies a tax of the same size on sellers of the good. How does this change in tax policy affect the price that buyers pay sellers for this...

Q: When a market is in equilibrium, the buyers are those with

When a market is in equilibrium, the buyers are those with the ________ willingness to pay and the sellers are those with the ________ costs. a. highest, highest b. highest, lowest c. lowest, highest...

Q: Ernie owns a water pump. Because pumping large amounts of water

Ernie owns a water pump. Because pumping large amounts of water is harder than pumping small amounts, the cost of producing a bottle of water rises as he pumps more. Here is the cost he incurs to prod...

Q: Name two types of market failure. Explain why each may cause

Name two types of market failure. Explain why each may cause market outcomes to be inefficient.

Q: The Laffer curve illustrates that, in some circum- stances,

The Laffer curve illustrates that, in some circum- stances, the government can reduce a tax on a good and increase the a. deadweight loss. b. government’s tax revenue. c. equilibrium quantity. d. pric...

Q: After economics class one day, your friend suggests that taxing food

After economics class one day, your friend suggests that taxing food would be a good way to raise revenue because the demand for food is quite inelastic. In what sense is taxing food a “good” way to r...

Q: Give three examples of important trade-offs that you face in

Give three examples of important trade-offs that you face in your life.

Q: Lovers of classical music persuade Congress to impose a price ceiling of

Lovers of classical music persuade Congress to impose a price ceiling of $40 per concert ticket. As a result of this policy, do more or fewer people attend classical music concerts? Explain.

Q: What happens to the deadweight loss and tax revenue when a tax

What happens to the deadweight loss and tax revenue when a tax is increased?

Q: Which of the following trade policies would benefit producers, hurt consumers

Which of the following trade policies would benefit producers, hurt consumers, and increase the amount of trade? a. the increase of a tariff in an importing country b. the reduction of a tariff in an...

Q: The nation of Textilia does not allow imports of clothing. In

The nation of Textilia does not allow imports of clothing. In its equilibrium without trade, a T-shirt costs $20, and the equilibrium quantity is 3 million T-shirts. One day, after reading Adam Smith’...

Q: List five arguments often given to support trade restrictions. How do

List five arguments often given to support trade restrictions. How do economists respond to these arguments?

Q: Which is the largest component of GDP? a. consumption

Which is the largest component of GDP? a. consumption b. investment c. government purchases d. net exports.

Q: Below are some data from the land of milk and honey.

Below are some data from the land of milk and honey. a. Compute nominal GDP, real GDP, and the GDP deflator for each year, using 2016 as the base year. b. Compute the percentage change in nominal GDP,...

Q: List the four components of GDP. Give an example of each

List the four components of GDP. Give an example of each.

Q: Why should policymakers care about GDP?

Why should policymakers care about GDP?

Q: If the CPI is 200 in year 1980 and 300 today,

If the CPI is 200 in year 1980 and 300 today, then $600 in 1980 has the same purchasing power as ________ today a. $400 b. $500 c. $700 d. $900

Q: A small nation of ten people idolizes the TV show The Voice

A small nation of ten people idolizes the TV show The Voice. All they produce and consume are karaoke machines and CDs, in the following amounts: a. Using a method similar to the CPI, compute the perc...

Q: Give an example of a price ceiling and an example of a

Give an example of a price ceiling and an example of a price floor.

Q: Explain the meaning of nominal interest rate and real interest rate.

Explain the meaning of nominal interest rate and real interest rate. How are they related?

Q: When the Japanese car maker Toyota expands one of its car factories

When the Japanese car maker Toyota expands one of its car factories in the United States, what is the likely impact of this event on the gross domestic product and gross national product of the United...

Q: In the 1990s and the first decade of the 2000s, investors

In the 1990s and the first decade of the 2000s, investors from the Asian economies of Japan and China made significant direct and portfolio investments in the United States. At the time, many American...

Q: Does a higher rate of saving lead to higher growth temporarily or

Does a higher rate of saving lead to higher growth temporarily or indefinitely?

Q: Governments may intervene in a market economy in order to a

Governments may intervene in a market economy in order to a. protect property rights. b. correct a market failure due to externalities. c. achieve a more equal distribution of income. d. All of the ab...

Q: A 1996 bill reforming the federal government’s anti- poverty programs limited

A 1996 bill reforming the federal government’s anti- poverty programs limited many welfare recipients to only two years of benefits. a. How does this change affect the incentives for working? b. How m...

Q: What does the “invisible hand” of the marketplace do?

What does the “invisible hand” of the marketplace do?

Q: Which of the following is a positive, rather than a normative

Which of the following is a positive, rather than a normative, statement? a. Law X will reduce national income. b. Law X is a good piece of legislation c. Congress ought to pass law X. d. The presiden...

Q: Classify each of the following statements as positive or normative. Explain

Classify each of the following statements as positive or normative. Explain. a. Society faces a short-run trade-off between inflation and unemployment. b. A reduction in the rate of money growth will...

Q: Draw and explain a production possibilities frontier for an economy that produces

Draw and explain a production possibilities frontier for an economy that produces milk and cookies. What happens to this frontier if a disease kills half of the economy’s cows?

Q: Define price ceiling and price floor and give an example of each

Define price ceiling and price floor and give an example of each. Which leads to a shortage? Which leads to a surplus? Why?

Q: Kayla can cook dinner in 30 minutes and wash the laundry in

Kayla can cook dinner in 30 minutes and wash the laundry in 20 minutes. Her roommate takes half as long to do each task. How should the roommates allocate the work? a. Kayla should do more of the cook...

Q: The following table describes the production possibilities of two cities in the

The following table describes the production possibilities of two cities in the country of Baseballia: Pairs of Red Socks Pairs of White Socks per Worker per Hour per Worker per Hour Boston 3 3 Chicag...

Q: Why do economists oppose policies that restrict trade among nations?

Why do economists oppose policies that restrict trade among nations?

Q: Which of the following might lead to an increase in the equilibrium

Which of the following might lead to an increase in the equilibrium price of jelly and a decrease in the equilibrium quantity of jelly sold? a. an increase in the price of peanut better, a complemen...

Q: Using supply-and-demand diagrams show the effect of the

Using supply-and-demand diagrams show the effect of the following events on the market for sweatshirts. a. A hurricane in South Carolina damages the cotton crop. b. The price of leather jackets falls....

Q: Does a change in producers’ technology lead to a movement along the

Does a change in producers’ technology lead to a movement along the supply curve or to a shift in the supply curve? Does a change in price lead to a movement along the supply curve or to a shift in th...

Q: Over time, technological advance increases consumers’ incomes and reduces the price

Over time, technological advance increases consumers’ incomes and reduces the price of smart phones. Each of these forces increases the amount consumers spend on smart phones if the income elasticity...

Q: The price of coffee rose sharply last month, while the quantity

The price of coffee rose sharply last month, while the quantity sold remained the same. Five people suggest various explanations: Leonard: Demand increased, but supply was perfectly inelastic. Sheldon...

Q: What do we call a good with an income elasticity less than

What do we call a good with an income elasticity less than zero?

Q: When a good is taxed, the burden of the tax falls

When a good is taxed, the burden of the tax falls mainly on consumers if a. the tax is levied on consumers. b. the tax is levied on producers. c. supply is inelastic, and demand is elastic. d. supply...

Q: Jen values her time at $60 an hour. She spends

Jen values her time at $60 an hour. She spends 2 hours giving Colleen a massage. Colleen was willing to pay as much at $300 for the massage, but they negotiate a price of $200. In this transaction, a....

Q: If the government places a $500 tax on luxury cars,

If the government places a $500 tax on luxury cars, will the price paid by consumers rise by more than $500, less than $500, or exactly $500? Explain.

Q: How does a tax on a good affect the price paid by

How does a tax on a good affect the price paid by buy- ers, the price received by sellers, and the quantity sold?

Q: Producing a quantity larger than the equilibrium of supply and demand is

Producing a quantity larger than the equilibrium of supply and demand is inefficient because the marginal buyer’s willingness to pay is a. negative. b. zero. c. positive but less than the marginal sel...

Q: Consider a market in which Bert from problem 4 is the buyer

Consider a market in which Bert from problem 4 is the buyer and Ernie from problem 5 is the seller. a. Use Ernie’s supply schedule and Bert’s demand schedule to find the quantity supplied and quantity...

Q: If a policymaker wants to raise revenue by taxing goods while minimizing

If a policymaker wants to raise revenue by taxing goods while minimizing the deadweight losses, he should look for goods with ________ elasticities of demand and ________ elasticities of supply. a. sm...

Q: Daniel Patrick Moynihan, the late senator from New York, once

Daniel Patrick Moynihan, the late senator from New York, once introduced a bill that would levy a 10,000 percent tax on certain hollow-tipped bullets. a. Do you expect that this tax would raise much r...

Q: The main difference between imposing a tariff and handing out licenses under

The main difference between imposing a tariff and handing out licenses under an import quota is that a tariff increases a. consumer surplus. b. producer surplus. c. international trade. d. government...

Q: China is a major producer of grains, such as wheat,

China is a major producer of grains, such as wheat, corn, and rice. Some years ago, the Chinese government, concerned that grain exports were driving up food prices for domestic consumers, imposed a t...

Q: What is the difference between the unilateral and multilateral approaches to achieving

What is the difference between the unilateral and multilateral approaches to achieving free trade? Give an example of each.

Q: If all quantities produced rise by 10 percent and all prices fall

If all quantities produced rise by 10 percent and all prices fall by 10 percent, which of the following occurs? a. Real GDP rises by 10 percent, while nominal GDP falls by 10 percent. b. Real GDP rise...

Q: Melissa buys an iPhone for $240 and gets consumer surplus of

Melissa buys an iPhone for $240 and gets consumer surplus of $160. a. What is her willingness to pay? b. If she had bought the iPhone on sale for $180, what would her consumer surplus have been? c. If...

Q: Consider an economy that produces only chocolate bars. In year 1

Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 3 bars and the price is $4. In year 2, the quantity produced is 4 bars and the price is $5. In year 3, the qu...

Q: Why do economists use real GDP rather than nominal GDP to gauge

Why do economists use real GDP rather than nominal GDP to gauge economic well-being?

Q: You deposit $2,000 in a savings account, and

You deposit $2,000 in a savings account, and a year later you have $2,100. Meanwhile, the CPI rises from 200 to 204. In this case, the nominal interest rate is _____ percent, and the real interest rat...

Q: Which of the problems in the construction of the CPI might be

Which of the problems in the construction of the CPI might be illustrated by each of the following situations? Explain. a. the invention of cell phones b. the introduction of air bags in cars c. incre...

Q: Thomas Robert Malthus believed that population growth would a. put

Thomas Robert Malthus believed that population growth would a. put stress on the economy’s ability to produce food, dooming humans to remain in poverty. b. spread the capital stock too thinly across t...

Q: In many developing nations, young women have lower enrollment rates in

In many developing nations, young women have lower enrollment rates in secondary school than do young men. Describe several ways in which greater educational opportunities for young women could lead t...

Q: Why would removing a trade restriction, such as a tariff,

Why would removing a trade restriction, such as a tariff, lead to more rapid economic growth?

Q: If a nation has high and persistent inflation, the most likely

If a nation has high and persistent inflation, the most likely explanation is a. the central bank creating excessive amounts of money. b. unions bargaining for excessively high wages. c. the governmen...

Q: What are the two main causes of market failure? Give an

What are the two main causes of market failure? Give an example of each.

Q: Use a production possibilities frontier to describe the idea of “efficiency

Use a production possibilities frontier to describe the idea of “efficiency.”

Q: Explain how buyers’ willingness to pay, consumer surplus, and the

Explain how buyers’ willingness to pay, consumer surplus, and the demand curve are related.

Q: A German worker takes 400 hours to produce a car and 2

A German worker takes 400 hours to produce a car and 2 hours to produce a case of wine. A French worker takes 600 hours to produce a car and X hours to produce a case of wine. a. For what values of X...

Q: Ketchup is a complement (as well as a condiment) for

Ketchup is a complement (as well as a condiment) for hot dogs. If the price of hot dogs rises, what happens in the market for ketchup? For tomatoes? For tomato juice? For orange juice?

Q: Define the equilibrium of a market. Describe the forces that move

Define the equilibrium of a market. Describe the forces that move a market toward its equilibrium.

Q: Suppose that your demand schedule for pizza is as follows:

Suppose that your demand schedule for pizza is as follows: a. Use the midpoint method to calculate your price elasticity of demand as the price of pizza increases from $8 to $10 if (i) your income i...

Q: How is the price elasticity of supply calculated? Explain what it

How is the price elasticity of supply calculated? Explain what it measures.

Q: Congress and the president decide that the United States should reduce air

Congress and the president decide that the United States should reduce air pollution by reducing its use of gasoline. They impose a $0.50 tax on each gallon of gasoline sold. a. Should they impose thi...

Q: What determines how the burden of a tax is divided between buyers

What determines how the burden of a tax is divided between buyers and sellers? Why?

Q: The cost of producing flat-screen TVs has fallen over the

The cost of producing flat-screen TVs has fallen over the past decade. Let’s consider some implications of this fact. a. Draw a supply-and-demand diagram to show the effect of falling production costs...

Q: The government places a tax on the purchase of socks.

The government places a tax on the purchase of socks. a. Illustrate the effect of this tax on equilibrium price and quantity in the sock market. Identify the following areas both before and after the...

Q: Consider a country that imports a good from abroad. For each

Consider a country that imports a good from abroad. For each of following statements, state whether it is true or false. Explain your answer. a. “The greater the elasticity of demand, the greater the...

Q: Draw a demand curve for turkey. In your diagram, show

Draw a demand curve for turkey. In your diagram, show a price of turkey and the consumer surplus at that price. Explain in words what this consumer surplus measures.

Q: Consider the following data on U.S. GDP: Year

Consider the following data on U.S. GDP: Year Nominal GDP (in billions of dollars) GDP What was the growth rate of nominal GDP between 1994 and 2014? (Hint: The growth rate of a variable X over an N-y...

Q: In the year 2017, the economy produces 100 loaves of bread

In the year 2017, the economy produces 100 loaves of bread that sell for $2 each. In the year 2018, the economy produces 200 loaves of bread that sell for $3 each. Calculate nominal GDP, real GDP, and...

Q: A dozen eggs cost $0.88 in January 1980 and

A dozen eggs cost $0.88 in January 1980 and $2.11 in January 2015. The average wage for production workers was $7.58 per hour in January 1980 and $19.64 in January 2015. a. By what percentage did the...

Q: The International Property Right Index scores countries based on the legal and

The International Property Right Index scores countries based on the legal and political environment and how well property rights are protected. Go online and find a recent ranking. Choose three count...

Q: How does the rate of population growth influence the level of GDP

How does the rate of population growth influence the level of GDP per person?

Q: Explain whether each of the following government activities is motivated by a

Explain whether each of the following government activities is motivated by a concern about equality or a concern about efficiency. In the case of efficiency, discuss the type of market failure involv...

Q: Why is productivity important?

Why is productivity important?

Q: What are the two subfields into which economics is divided? Explain

What are the two subfields into which economics is divided? Explain what each subfield studies.

Q: Suppose that in a year an American worker can produce 100 shirts

Suppose that in a year an American worker can produce 100 shirts or 20 computers and a Chinese worker can produce 100 shirts or 10 computers. a. For each country, graph the production possibilities fr...

Q: The market for pizza has the following demand and supply schedules:

The market for pizza has the following demand and supply schedules: a. Graph the demand and supply curves. What are the equilibrium price and quantity in this market? b. If the actual price in this m...

Q: A tax on a good has a deadweight loss if a

A tax on a good has a deadweight loss if a. the reduction in consumer and producer surplus is greater than the tax revenue b. the tax revenue is greater than the reduction in consumer and producer sur...

Q: Beer and pizza are complements because they are often enjoyed together.

Beer and pizza are complements because they are often enjoyed together. When the price of beer rises, what happens to the supply, demand, quantity supplied, quantity demanded, and price in the market...

Q: The New York Times reported (Feb. 17, 1996)

The New York Times reported (Feb. 17, 1996) that subway ridership declined after a fare increase: “There were nearly four million fewer riders in December 1995, the first full month after the price of...

Q: If a fixed quantity of a good is available, and no

If a fixed quantity of a good is available, and no more can be made, what is the price elasticity of supply?

Q: A case study in this chapter discusses the federal minimum-wage

A case study in this chapter discusses the federal minimum-wage law. a. Suppose the minimum wage is above the equilibrium wage in the market for unskilled labor. Using a supply-and-demand diagram of t...

Q: There are four consumers willing to pay the following amounts for haircuts

There are four consumers willing to pay the following amounts for haircuts: Gloria: $35 Jay: $10 Claire: $40 Phil: $25 There are four haircutting businesses with the following costs: Firm A: $15 Firm...

Q: This chapter analyzed the welfare effects of a tax on a good

This chapter analyzed the welfare effects of a tax on a good. Now consider the opposite policy. Suppose that the government subsidizes a good: For each unit of the good sold, the government pays $2 to...

Q: Having rejected a tariff on textiles (a tax on imports),

Having rejected a tariff on textiles (a tax on imports), the president of Isoland is now considering the same- sized tax on textile consumption (including both imported and domestically produced texti...

Q: Why is it desirable for a country to have a large GDP

Why is it desirable for a country to have a large GDP? Give an example of something that would raise GDP and yet be undesirable.

Q: The chapter explains that Social Security benefits are increased each year in

The chapter explains that Social Security benefits are increased each year in proportion to the increase in the CPI, even though most economists believe that the CPI overstates actual inflation. a. If...

Q: International data show a positive correlation between income per person and the

International data show a positive correlation between income per person and the health of the population. a. Explain how higher income might cause better health outcomes. b. Explain how better health...

Q: The market for pizza is characterized by a downward-sloping demand

The market for pizza is characterized by a downward-sloping demand curve and an upward-sloping supply curve. a. Draw the competitive market equilibrium. Label the price, quantity, consumer surplus, an...

Q: Describe two ways the U.S. government tries to encourage

Describe two ways the U.S. government tries to encourage advances in technological knowledge.

Q: Discuss each of the following statements from the standpoints of equality and

Discuss each of the following statements from the standpoints of equality and efficiency a. “Everyone in society should be guaranteed the best healthcare possible.” b. “When workers are laid off, the...

Q: What is inflation and what causes it?

What is inflation and what causes it?

Q: What is the difference between a positive and a normative statement?

What is the difference between a positive and a normative statement? Give an example of each.

Q: Are the following statements true or false? Explain in each case

Are the following statements true or false? Explain in each case. a. “Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods.”...

Q: Consider the following events: Scientists reveal that eating oranges decreases the

Consider the following events: Scientists reveal that eating oranges decreases the risk of diabetes, and at the same time, farmers use a new fertilizer that makes orange trees produce more oranges. Il...

Q: Describe the role of prices in market economies.

Describe the role of prices in market economies.

Q: Two drivers, Walt and Jessie, each drive up to a

Two drivers, Walt and Jessie, each drive up to a gas station. Before looking at the price, each places an order. Walt says, “I’d like 10 gallons of gas.” Jessie says, “I’d like $10 worth of gas.” What...

Q: A storm destroys half the fava bean crop. Is this event

A storm destroys half the fava bean crop. Is this event more likely to hurt fava bean farmers if the demand for fava beans is very elastic or very inelastic? Explain.

Q: At Fenway Park, home of the Boston Red Sox, seating

At Fenway Park, home of the Boston Red Sox, seating is limited to about 38,000. Hence, the number of tickets issued is fixed at that figure. Seeing a golden opportunity to raise revenue, the City of B...

Q: What happens to consumer and producer surplus when the sale of a

What happens to consumer and producer surplus when the sale of a good is taxed? How does the change in consumer and producer surplus compare to the tax revenue? Explain.

Q: One of the largest changes in the economy over the past several

One of the largest changes in the economy over the past several decades is that technological advances have reduced the cost of making computers. a. Draw a supply-and-demand diagram to show what happe...

Q: Hotel rooms in Smalltown go for $100, and 1,

Hotel rooms in Smalltown go for $100, and 1,000 rooms are rented on a typical day. a. To raise revenue, the mayor decides to charge hotels a tax of $10 per rented room. After the tax is imposed, the g...

Q: Assume the United States is an importer of televisions and there are

Assume the United States is an importer of televisions and there are no trade restrictions. U.S. consumers buy 1 million televisions per year, of which 400,000 are produced domestically and 600,000 ar...

Q: A farmer grows wheat, which she sells to a miller for

A farmer grows wheat, which she sells to a miller for $100. The miller turns the wheat into flour, which she sells to a baker for $150. The baker turns the wheat into bread, which she sells to consume...

Q: Suppose that a borrower and a lender agree on the nominal interest

Suppose that a borrower and a lender agree on the nominal interest rate to be paid on a loan. Then inflation turns out to be higher than they both expected. a. Is the real interest rate on this loan h...

Q: The great 18th-century economist Adam Smith wrote, “Little

The great 18th-century economist Adam Smith wrote, “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable adminis...

Q: In what ways is your standard of living different from that of

In what ways is your standard of living different from that of your parents or grandparents when they were your age? Why have these changes occurred?

Q: How are inflation and unemployment related in the short run?

How are inflation and unemployment related in the short run?

Q: Why do economists sometimes offer conflicting advice to policymakers?

Why do economists sometimes offer conflicting advice to policymakers?

Q: Because bagels and cream cheese are often eaten together, they are

Because bagels and cream cheese are often eaten together, they are complements. a. We observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels have risen. What co...

Q: An economic model is a. a mechanical machine that replicates

An economic model is a. a mechanical machine that replicates the functioning of the economy. b. a fully detailed, realistic description of the economy. c. a simplified representation of some aspect of...

Q: Draw the supply and demand curves for cookies. If the government

Draw the supply and demand curves for cookies. If the government imposes a tax on cookies, show what happens to the price paid by buyers, the price received by sellers, and the quantity of cookies sol...

Q: Consider public policy aimed at smoking. a. Studies indicate

Consider public policy aimed at smoking. a. Studies indicate that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes currently costs $5 and the government wants to red...

Q: A market is described by the following supply and demand curves:

A market is described by the following supply and demand curves: QS = 2P QD = 300 - P a. Solve for the equilibrium price and quantity. b. If the government imposes a price ceiling of $90, does a shor...

Q: A friend of yours is considering two cell phone service providers.

A friend of yours is considering two cell phone service providers. Provider A charges $120 per month for the service regardless of the number of phone calls made. Provider B does not have a fixed serv...

Q: Suppose that a market is described by the following supply and demand

Suppose that a market is described by the following supply and demand equations: QS = 2P QD = 300 - P a. Solve for the equilibrium price and the equilibrium quantity. b. Suppose that a tax of T is pl...

Q: Consider a small country that exports steel. Suppose that a “

Consider a small country that exports steel. Suppose that a “pro-trade” government decides to subsidize the export of steel by paying a certain amount for each ton sold abroad. How does this export su...

Q: Goods and services that are not sold in markets, such as

Goods and services that are not sold in markets, such as food produced and consumed at home, are generally not included in GDP. Can you think of how this might cause the numbers in the second column o...

Q: Suppose Americans decide to save more of their in- comes.

Suppose Americans decide to save more of their in- comes. If banks lend this extra saving to businesses, which use the funds to build new factories, how might this lead to faster growth in productivit...

Q: Suppose that the price of basketball tickets at your college is determined

Suppose that the price of basketball tickets at your college is determined by market forces. Currently, the demand and supply schedules are as follows: a. Draw the demand and supply curves. What is un...

Q: You are the curator of a museum. The museum is running

You are the curator of a museum. The museum is running short of funds, so you decide to increase revenue. Should you increase or decrease the price of admission? Explain.

Q: Consider how health insurance affects the quantity of healthcare services performed.

Consider how health insurance affects the quantity of healthcare services performed. Suppose that the typical medical procedure has a cost of $100, yet a person with health insurance pays only $20 out...

Q: If a nation that does not allow international trade in steel has

If a nation that does not allow international trade in steel has a domestic price of steel lower than the world price, then a. the nation has a comparative advantage in producing steel and would becom...

Q: The participation of women in the U.S. labor force

The participation of women in the U.S. labor force has risen dramatically since 1970. a. How do you think this rise affected GDP? b. Now imagine a measure of well-being that includes time spent workin...

Q: During the Revolutionary War, the American colonies could not raise enough

During the Revolutionary War, the American colonies could not raise enough tax revenue to fully fund the war effort. To make up the difference, the colonies decided to print more money. Printing money...

Q: One day, Barry the Barber, Inc., collects $400

One day, Barry the Barber, Inc., collects $400 for hair- cuts. Over this day, his equipment depreciates in value by $50. Of the remaining $350, Barry sends $30 to the government in sales taxes, takes...

Q: Explain why the following might be true: A drought around the

Explain why the following might be true: A drought around the world raises the total revenue that farmers receive from the sale of grain, but a drought only in Kansas reduces the total revenue that Ka...

Q: If the price of a hot dog is $2 and the

If the price of a hot dog is $2 and the price of a ham- burger is $4, then 30 hot dogs contribute as much to GDP as _____ hamburgers. a. 5 b. 15 c. 30 d. 60

Q: Over the past century, real GDP per person in the United

Over the past century, real GDP per person in the United States has grown about _____ percent per year, which means it doubles about every _____ years. a. 2, 14 b. 2, 35 c. 5, 14 d. 5, 35

Q: Most countries, including the United States, import substantial amounts of

Most countries, including the United States, import substantial amounts of goods and services from other countries. Yet the chapter says that a nation can enjoy a high standard of living only if it ca...

Q: What does the level of a nation’s GDP measure? What does

What does the level of a nation’s GDP measure? What does the growth rate of GDP measure? Would you rather live in a nation with a high level of GDP and a low growth rate or in a nation with a low leve...

Q: What has been the approximate long-run growth rate of real

What has been the approximate long-run growth rate of real GDP per person in the United States? Name a country that has had faster growth and a country that has had slower growth.

Q: Economics is best defined as the study of a. how

Economics is best defined as the study of a. how society manages its scarce resources. b. how to run a business most profitably. c. how to predict inflation, unemployment, and stock prices. d. how t...

Q: You are trying to decide whether to take a vacation. Most

You are trying to decide whether to take a vacation. Most of the costs of the vacation (airfare, hotel, and forgone wages) are measured in dollars, but the benefits of the vacation are psychological....

Q: What items would you include to figure out the opportunity cost of

What items would you include to figure out the opportunity cost of a vacation to Disney World?

Q: In what ways is economics a science?

In what ways is economics a science?

Q: Why is a country better off not isolating itself from all other

Why is a country better off not isolating itself from all other countries? Why do we have markets, and according to economists, what roles should government play in them?

Q: The circular-flow diagram illustrates that, in markets for the

The circular-flow diagram illustrates that, in markets for the factors of production, a. households are sellers, and firms are buyers. b. households are buyers, and firms are sellers. c. households an...

Q: What components of GDP (if any) would each of the

What components of GDP (if any) would each of the following transactions affect? Explain. a. Uncle Henry buys a new refrigerator from a domestic manufacturer. b. Aunt Jane buys a new house from a loc...

Q: Imagine a society that produces military goods and consumer goods, which

Imagine a society that produces military goods and consumer goods, which we’ll call “guns” and “butter.” a. Draw a production possibilities frontier for guns and butter. Using the concept of opportuni...

Q: Why do economists make assumptions?

Why do economists make assumptions?

Q: Give an example of a positive statement and an example of a

Give an example of a positive statement and an example of a normative statement that somehow relates to your daily life. Name three parts of government that regularly rely on advice from economists.

Q: Once again, in an hour, Mateo can wash 2 cars

Once again, in an hour, Mateo can wash 2 cars or mow 1 lawn, and Tyler can wash 3 cars or mow 1 lawn. Who has the comparative advantage in car washing, and who has the comparative advantage in lawn mo...

Q: American and Japanese workers can each produce 4 cars a year.

American and Japanese workers can each produce 4 cars a year. An American worker can produce 10 tons of grain a year, whereas a Japanese worker can produce 5 tons of grain a year. To keep things simpl...

Q: Explain how absolute advantage and comparative advantage differ.

Explain how absolute advantage and comparative advantage differ.

Q: Robinson Crusoe can gather 10 coconuts or catch 1 fish per hour

Robinson Crusoe can gather 10 coconuts or catch 1 fish per hour. His friend Friday can gather 30 coconuts or catch 2 fish per hour. What is Crusoe’s opportunity cost of catching 1 fish? What is Friday...

Q: An increase in ________ will cause a movement along a given demand

An increase in ________ will cause a movement along a given demand curve, which is called a change in ________. a. supply, demand b. supply, quantity demanded c. demand, supply d. demand, quantity sup...

Q: In what sense is economics like a science? Draw a production

In what sense is economics like a science? Draw a production possibilities frontier for a society that produces food and clothing. Show an efficient point, an inefficient point, and an infeasible poin...

Q: “An increase in the demand for notebooks raises the quantity of

“An increase in the demand for notebooks raises the quantity of notebooks demanded but not the quantity supplied.” Is this statement true or false? Explain.

Q: Explain why an economy’s income must equal its expenditure.

Explain why an economy’s income must equal its expenditure.

Q: What are the demand schedule and the demand curve, and how

What are the demand schedule and the demand curve, and how are they related? Why does the demand curve slope downward?

Q: Make up an example of a monthly demand schedule for pizza,

Make up an example of a monthly demand schedule for pizza, and graph the implied demand curve. Give an example of something that would shift this demand curve, and briefly explain your reasoning. Woul...

Q: The price of a good rises from $8 to $12

The price of a good rises from $8 to $12, and the quantity demanded falls from 110 to 90 units. Calculated with the midpoint method, the price elasticity of demand is a. 1/5. b. 1/2. c. 2. d. 5.

Q: Suppose that business travelers and vacationers have the following demand for airline

Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston: a. As the price of tickets rises from $200 to $250, what is the price elasticity...

Q: List and explain the four determinants of the price elasticity of demand

List and explain the four determinants of the price elasticity of demand discussed in the chapter.

Q: Define the price elasticity of supply. Explain why the price elasticity

Define the price elasticity of supply. Explain why the price elasticity of supply might be different in the long run than in the short run.

Q: In a market with a binding price ceiling, an increase in

In a market with a binding price ceiling, an increase in the ceiling will ________ the quantity supplied, ________ the quantity demanded, and reduce the ________. a. increase, decrease, surplus b. dec...

Q: The government has decided that the free-market price of cheese

The government has decided that the free-market price of cheese is too low. a. Suppose the government imposes a binding price floor in the cheese market. Draw a supply-and- demand diagram to show the...

Q: Which causes a shortage of a good—a price ceiling or

Which causes a shortage of a good—a price ceiling or a price floor? Justify your answer with a graph.

Q: In an hour, Mateo can wash 2 cars or mow 1

In an hour, Mateo can wash 2 cars or mow 1 lawn, and Tyler can wash 3 cars or mow 1 lawn. Who has the absolute advantage in car washing, and who has the absolute advantage in lawn mowing? a. Mateo in...

Q: What two things does GDP measure? How can it measure two

What two things does GDP measure? How can it measure two things at once?

Q: In a supply-and-demand diagram, show how a

In a supply-and-demand diagram, show how a tax on car buyers of $1,000 per car affects the quantity of cars sold and the price of cars. In another diagram, show how a tax on car sellers of $1,000 per...

Q: The demand curve for cookies is downward-sloping. When the

The demand curve for cookies is downward-sloping. When the price of cookies is $2, the quantity demanded is 100. If the price rises to $3, what happens to consumer surplus? a. It falls by less than $1...

Q: An early freeze in California sours the lemon crop. Explain what

An early freeze in California sours the lemon crop. Explain what happens to consumer surplus in the market for lemons. Explain what happens to consumer surplus in the market for lemonade. Illustrate y...

Q: Explain how sellers’ costs, producer surplus, and the supply curve

Explain how sellers’ costs, producer surplus, and the supply curve are related.

Q: Draw a supply curve for turkey. In your diagram, show

Draw a supply curve for turkey. In your diagram, show a price of turkey and the producer surplus at that price. Explain in words what this producer surplus measures.

Q: Sofia pays Sam $50 to mow her lawn every week.

Sofia pays Sam $50 to mow her lawn every week. When the government levies a mowing tax of $10 on Sam, he raises his price to $60. Sofia continues to hire him at the higher price. What is the change in...

Q: Evaluate the following two statements. Do you agree? Why or

Evaluate the following two statements. Do you agree? Why or why not? a. “A tax that has no deadweight loss cannot raise any revenue for the government.” b. “A tax that raises no revenue for the govern...

Q: Draw a supply-and-demand diagram with a tax on

Draw a supply-and-demand diagram with a tax on the sale of a good. Show the deadweight loss. Show the tax revenue.

Q: The demand for beer is more elastic than the demand for milk

The demand for beer is more elastic than the demand for milk. Would a tax on beer or a tax on milk have a larger deadweight loss? Why?

Q: When the nation of Ectenia opens itself to world trade in coffee

When the nation of Ectenia opens itself to world trade in coffee beans, the domestic price of coffee beans falls. Which of the following describes the situation? a. Domestic production of coffee rises...

Q: The CPI measures approximately the same economic phenomenon as a.

The CPI measures approximately the same economic phenomenon as a. nominal GDP. b. real GDP. c. the GDP deflator. d. the unemployment rate.

Q: Maria can read 20 pages of economics in an hour. She

Maria can read 20 pages of economics in an hour. She can also read 50 pages of sociology in an hour. She spends 5 hours per day studying. a. Draw Maria’s production possibilities frontier for reading...

Q: Suppose that Congress imposes a tariff on imported automobiles to protect the

Suppose that Congress imposes a tariff on imported automobiles to protect the U.S. auto industry from foreign competition. Assuming that the United States is a price taker in the world auto market, sh...

Q: When does a country become an exporter of a good? An

When does a country become an exporter of a good? An importer?

Q: Draw a supply-and-demand diagram for wool suits in

Draw a supply-and-demand diagram for wool suits in the country of Autarka. When trade is allowed, the price of a suit falls from 3 to 2 ounces of gold. In your diagram, show the change in consumer sur...

Q: Angus the sheep farmer sells wool to Barnaby the knitter for $

Angus the sheep farmer sells wool to Barnaby the knitter for $20. Barnaby makes two sweaters, each of which has a market price of $40. Collette buys one of them, while the other remains on the shelf o...

Q: Fill in the blanks: /

Fill in the blanks:

Q: Which contributes more to GDP—the production of an economy car

Which contributes more to GDP—the production of an economy car or the production of a luxury car? Why?

Q: Which contributes more to GDP—the production of a pound of

Which contributes more to GDP—the production of a pound of hamburger or the production of a pound of caviar? Why?

Q: The largest component in the basket of goods and services used to

The largest component in the basket of goods and services used to compute the CPI is a. food and beverages. b. housing. c. medical care. d. apparel.

Q: The residents of Vegopia spend all of their income on cauliflower,

The residents of Vegopia spend all of their income on cauliflower, broccoli, and carrots. In 2016, they spend a total of $200 for 100 heads of cauliflower, $75 for 50 bunches of broccoli, and $50 for...

Q: Draw a circular-flow diagram. Identify the parts of the

Draw a circular-flow diagram. Identify the parts of the model that correspond to the flow of goods and ser- vices and the flow of dollars for each of the following activities. a. Selena pays a storek...

Q: Describe the three problems that make the CPI an imperfect measure of

Describe the three problems that make the CPI an imperfect measure of the cost of living.

Q: Under what conditions is the production possibilities frontier linear rather than bowed

Under what conditions is the production possibilities frontier linear rather than bowed out?

Q: Henry Ford paid his workers $5 a day in 1914.

Henry Ford paid his workers $5 a day in 1914. If the CPI was 10 in 1914 and 237 in 2015, how much is the Ford paycheck worth in 2015 dollars?

Q: The world’s rich countries, such as the United States and Germany

The world’s rich countries, such as the United States and Germany, have income per person that is about _____ times the income per person in the world’s poor countries, such as Pakistan and India. a....

Q: Suppose that society decided to reduce consumption and increase investment.

Suppose that society decided to reduce consumption and increase investment. a. How would this change affect economic growth? b. What groups in society would benefit from this change? What groups might...

Q: List and describe four determinants of productivity.

List and describe four determinants of productivity.

Q: List and describe four determinants of a country’s productivity.

List and describe four determinants of a country’s productivity.

Q: Your opportunity cost of going to a movie is a.

Your opportunity cost of going to a movie is a. the price of the ticket. b. the price of the ticket plus the cost of any soda and popcorn you buy at the theater. c. the total cash expenditure needed t...

Q: You were planning to spend Saturday working at your part-time

You were planning to spend Saturday working at your part-time job, but a friend asks you to go skiing. What is the true cost of going skiing? Now suppose you had been planning to spend the day studyin...

Q: Water is necessary for life. Is the marginal benefit of a

Water is necessary for life. Is the marginal benefit of a glass of water large or small?

Q: Suppose that the year you were born someone bought $100 of

Suppose that the year you were born someone bought $100 of goods and services for your baby shower. How much would you guess it would cost today to buy a similar amount of goods and services? Now find...

Q: List and briefly explain the three principles that describe how the economy

List and briefly explain the three principles that describe how the economy as a whole works.

Q: A point inside the production possibilities frontier is a. efficient

A point inside the production possibilities frontier is a. efficient but not feasible. b. feasible but not efficient. c. both efficient and feasible. d. neither efficient nor feasible.

Q: The world price of wine is below the price that would prevail

The world price of wine is below the price that would prevail in Canada in the absence of trade. a. Assuming that Canadian imports of wine are a small part of total world wine production, draw a graph...

Q: What does the domestic price that prevails without international trade tell us

What does the domestic price that prevails without international trade tell us about a nation’s comparative advantage?

Q: The country Autarka does not allow international trade. In Autarka,

The country Autarka does not allow international trade. In Autarka, you can buy a wool suit for 3 ounces of gold. Meanwhile, in neighboring coun-tries, you can buy the same suit for 2 ounces of gold....

Q: Which do you think has a greater effect on the CPI:

Which do you think has a greater effect on the CPI: a 10 percent increase in the price of chicken or a 10 percent increase in the price of caviar? Why?

Q: Explain briefly what the CPI measures and how it is constructed.

Explain briefly what the CPI measures and how it is constructed. Identify one reason why the CPI is an imperfect measure of the cost of living.

Q: In June 2009, at the trough of the Great Recession,

In June 2009, at the trough of the Great Recession, the Bureau of Labor Statistics announced that of all adult Americans, 140,196,000 were employed, 14,729,000 were unemployed, and 80,729,000 were not...

Q: Explain how an increase in the price level affects the real value

Explain how an increase in the price level affects the real value of money.

Q: If a Japanese car costs 1,500,000 yen,

If a Japanese car costs 1,500,000 yen, a similar American car costs $30,000, and a dollar can buy 100 yen, what are the nominal and real exchange rates?

Q: Over the past 20 years, Mexico has had high inflation and

Over the past 20 years, Mexico has had high inflation and Japan has had low inflation. What do you predict has happened to the number of Mexican pesos a person can buy with a Japanese yen?

Q: The government in an open economy cuts spending to reduce the budget

The government in an open economy cuts spending to reduce the budget deficit. As a result, the interest rate ________, leading to a capital ________ and a real exchange rate ________. a. falls, outflo...

Q: The chapter notes that the rise in the U.S.

The chapter notes that the rise in the U.S. trade deficit during the 1980s was due largely to the rise in the U.S. budget deficit. On the other hand, the popular press sometimes claims that the increa...

Q: Suppose that a textile workers’ union encourages people to buy only American

Suppose that a textile workers’ union encourages people to buy only American-made clothes. What would this policy do to the trade balance and the real exchange rate? What is the impact on the textile...

Q: Suppose that Americans decided to spend a smaller fraction of their incomes

Suppose that Americans decided to spend a smaller fraction of their incomes. What would be the effect on saving, investment, interest rates, the real exchange rate, and the trade balance?

Q: A change in the expected price level shifts a. the

A change in the expected price level shifts a. the aggregate-demand curve. b. the short-run aggregate-supply curve, but not the long-run aggregate-supply curve. c. the long-run aggregate-supply curve...

Q: Suppose an economy is in long-run equilibrium. a

Suppose an economy is in long-run equilibrium. a. Use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium (call it point A). Be sure to include both short-run and...

Q: List and explain the three reasons the aggregate-demand curve slopes

List and explain the three reasons the aggregate-demand curve slopes downward.

Q: Explain the three reasons the aggregate-demand curve slopes downward.

Explain the three reasons the aggregate-demand curve slopes downward. Give an example of an event that would shift the aggregate-demand curve. In which direction would this event shift the curve?

Q: The government of a country increases the growth rate of the money

The government of a country increases the growth rate of the money supply from 5 percent per year to 50 percent per year. What happens to prices? What happens to nominal interest rates? Why might the...

Q: Suppose that a fall in consumer spending causes a recession.

Suppose that a fall in consumer spending causes a recession. a. Illustrate the immediate change in the economy using both an aggregate-supply/aggregate- demand diagram and a Phillips-curve diagram. On...

Q: Suppose GDP is $8 trillion, taxes are $1.

Suppose GDP is $8 trillion, taxes are $1.5 trillion, private saving is $0.5 trillion, and public saving is $0.2 trillion. Assuming this economy is closed; calculate consumption, government purchases,...

Q: In a system of fractional-reserve banking, even with-

In a system of fractional-reserve banking, even with-out any action by the central bank, the money supply declines if households choose to hold ________ currency or if banks choose to hold ________ ex...

Q: Happy Bank starts with $200 in bank capital. It then

Happy Bank starts with $200 in bank capital. It then accepts $800 in deposits. It keeps 12.5 percent (1/8th) of deposits in reserve. It uses the rest of its assets to make bank loans. a. Show the bala...

Q: Why don’t banks hold 100-percent reserves? How is the

Why don’t banks hold 100-percent reserves? How is the amount of reserves banks hold related to the amount of money the banking system creates?

Q: If an economy always has inflation of 10 percent per year,

If an economy always has inflation of 10 percent per year, which of the following costs of inflation will it NOT suffer? a. shoeleather costs from reduced holdings of money b. menu costs from more fre...

Q: If the tax rate is 40 percent, compute the before-

If the tax rate is 40 percent, compute the before-tax real interest rate and the after-tax real interest rate in each of the following cases. a. The nominal interest rate is 10 percent, and the inflat...

Q: What are the costs of inflation? Which of these costs do

What are the costs of inflation? Which of these costs do you think are most important for the U.S. economy?

Q: Suppose the economy is in a long-run equilibrium.

Suppose the economy is in a long-run equilibrium. a. Draw a diagram to illustrate the state of the economy. Be sure to show aggregate demand, short-run aggregate supply, and long-run aggregate supply....

Q: The theory of purchasing-power parity says that higher inflation in

The theory of purchasing-power parity says that higher inflation in a nation causes the nation’s currency to ________, leaving the ________ exchange rate unchanged. a. appreciate, nominal b. appreciat...

Q: What is happening to the U.S. real exchange rate

What is happening to the U.S. real exchange rate in each of the following situations? Explain. a. The U.S. nominal exchange rate is unchanged, but prices rise faster in the United States than abroad....

Q: If business leaders in Great Britain become more confident in their economy

If business leaders in Great Britain become more confident in their economy, their optimism will induce them to increase investment, causing the British pound to ________ and pushing the British trade...

Q: What is investment? How is it related to national saving in

What is investment? How is it related to national saving in a closed economy?

Q: A senator renounces his past support for protectionism: “The U

A senator renounces his past support for protectionism: “The U.S. trade deficit must be reduced, but import quotas only annoy our trading partners. If we subsidize U.S. exports instead, we can reduce...

Q: The idea that economic downturns result from an inadequate aggregate demand for

The idea that economic downturns result from an inadequate aggregate demand for goods and services is derived from the work of which economist? a. Adam Smith b. David Hume c. David Ricardo d. John May...

Q: For each of the three theories for the upward slope of the

For each of the three theories for the upward slope of the short-run aggregate-supply curve, carefully explain the following: a. how the economy recovers from a recession and returns to its long-run e...

Q: What might shift the aggregate-demand curve to the left?

What might shift the aggregate-demand curve to the left? Use the model of aggregate demand and aggregate supply to trace through the short-run and long-run effects of such a shift on output and the pr...

Q: Which of the following is an example of an automatic stabilizer?

Which of the following is an example of an automatic stabilizer? When the economy goes into a recession, a. more people become eligible for unemployment insurance benefits. b. stock prices decline, pa...

Q: In the early 1980s, new legislation allowed banks to pay interest

In the early 1980s, new legislation allowed banks to pay interest on checking deposits, which they could not do previously. a. If we define money to include checking deposits, what effect did this leg...

Q: From one year to the next, inflation rises from 4 to

From one year to the next, inflation rises from 4 to 5 percent, while unemployment rises from 6 to 7 percent. Which of the following events could be responsible for this change? a. The central bank i...

Q: Name two macroeconomic variables that decline when the economy goes into a

Name two macroeconomic variables that decline when the economy goes into a recession. Name one macroeconomic variable that rises during a recession.

Q: Suppose the Federal Reserve’s policy is to maintain low and stable inflation

Suppose the Federal Reserve’s policy is to maintain low and stable inflation by keeping unemployment at its natural rate. However, the Fed believes that the natural rate of unemployment is 4 percent w...

Q: Advocates of taxing consumption rather than income argue that a.

Advocates of taxing consumption rather than income argue that a. a consumption tax is a better automatic stabilizer. b. taxing consumption does not cause any deadweight losses. c. the rich consume a...

Q: The ability of insurance to spread risk is limited by a

The ability of insurance to spread risk is limited by a. risk aversion and moral hazard. b. risk aversion and adverse selection. c. moral hazard and adverse selection. d. risk aversion only.

Q: Suppose the federal government cuts taxes and increases spending, raising the

Suppose the federal government cuts taxes and increases spending, raising the budget deficit to 12 percent of GDP. If nominal GDP is rising 5 percent per year, are such budget deficits sustainable for...

Q: Explain two ways in which a government budget deficit hurts a future

Explain two ways in which a government budget deficit hurts a future worker.

Q: Give three examples of how our society discourages saving. What are

Give three examples of how our society discourages saving. What are the drawbacks of eliminating these disincentives?

Q: From 2008 to 2012, the ratio of government debt to GDP

From 2008 to 2012, the ratio of government debt to GDP in the United States a. increased markedly. b. decreased markedly. c. was stable at a historically high level. d. was stable at a historically lo...

Q: A company faces two kinds of risk. A firm-specific

A company faces two kinds of risk. A firm-specific risk is that a competitor might enter its market and take some of its customers. A market risk is that the economy might enter a recession, reducing...

Q: Explain the view of those economists who are skeptical of the efficient

Explain the view of those economists who are skeptical of the efficient markets hypothesis.

Q: Using a diagram of the labor market, show the effect of

Using a diagram of the labor market, show the effect of an increase in the minimum wage on the wage paid to workers, the number of workers supplied, the number of workers demanded, and the amount of u...

Q: Explain four ways in which a firm might increase its profits by

Explain four ways in which a firm might increase its profits by raising the wages it pays.

Q: List and discuss three key facts about economic fluctuations.

List and discuss three key facts about economic fluctuations.

Q: The Fed conducts a $10 million open-market purchase of

The Fed conducts a $10 million open-market purchase of government bonds. If the required reserve ratio is 10 percent, what are the largest and smallest possible increases in the money supply that coul...

Q: Your bank account pays an interest rate of 8 percent. You

Your bank account pays an interest rate of 8 percent. You are considering buying a share of stock in XYZ Corporation for $110. After 1, 2, and 3 years, it will pay a dividend of $5. You expect to sell...

Q: Bank A has a leverage ratio of 10, while Bank B

Bank A has a leverage ratio of 10, while Bank B has a leverage ratio of 20. Similar losses on bank loans at the two banks cause the value of their assets to fall by 7 percent. Which bank shows a large...

Q: Recall that money serves three functions in the economy. What are

Recall that money serves three functions in the economy. What are those functions? How does inflation affect the ability of money to serve each of these functions?

Q: If inflation is less than expected, who benefits— debtors or

If inflation is less than expected, who benefits— debtors or creditors? Explain.

Q: A can of soda costs $1.25 in the United

A can of soda costs $1.25 in the United States and 25 pesos in Mexico. What is the peso–dollar exchange rate (measured in pesos per dollar) if purchasing- power parity holds? If a monetary expansion c...

Q: Suppose the United States decides to subsidize the export of U.

Suppose the United States decides to subsidize the export of U.S. agricultural products, but it does not increase taxes or decrease any other government spending to offset this expenditure. Using a th...

Q: The economy begins in long-run equilibrium. Then one day

The economy begins in long-run equilibrium. Then one day, the president appoints a new chair of the Federal Reserve. This new chairman is well known for her view that inflation is not a major problem...

Q: What might shift the aggregate-supply curve to the left?

What might shift the aggregate-supply curve to the left? Use the model of aggregate demand and aggregate supply to trace through the short-run and long-run effects of such a shift on output and the pr...

Q: Suppose economists observe that an increase in government spending of $10

Suppose economists observe that an increase in government spending of $10 billion raises the total demand for goods and services by $30 billion. a. If these economists ignore the possibility of crowdi...

Q: Suppose the Federal Reserve announced that it would pursue contractionary monetary policy

Suppose the Federal Reserve announced that it would pursue contractionary monetary policy to reduce the inflation rate. Would the following conditions make the ensuing recession more or less severe? E...

Q: If the central bank wants to expand aggregate demand, it can

If the central bank wants to expand aggregate demand, it can ________ the money supply, which would ________ the interest rate. a. increase, increase b. increase, decrease c. decrease, increase d. dec...

Q: Comparing stocks and government bonds, which type of asset has more

Comparing stocks and government bonds, which type of asset has more risk? Which pays a higher average return?

Q: Explain how each of the following policies redistributes income across generations.

Explain how each of the following policies redistributes income across generations. Is the redistribution from young to old or from old to young? a. an increase in the budget deficit b. more generous...

Q: What are two situations in which most economists view a budget deficit

What are two situations in which most economists view a budget deficit as justifiable?

Q: Three students have each saved $1,000. Each has

Three students have each saved $1,000. Each has an investment opportunity in which he or she can invest up to $2,000. Here are the rates of return on the students’ investment projects: Harry 5 percent...

Q: When company executives buy and sell stock based on private information they

When company executives buy and sell stock based on private information they obtain as part of their jobs, they are engaged in insider trading. a. Give an example of inside information that might be u...

Q: Consider an economy with two labor markets—one for manufacturing workers

Consider an economy with two labor markets—one for manufacturing workers and one for service workers. Suppose initially that neither is unionized. a. If manufacturing workers formed a union, what impa...

Q: Assume that the reserve requirement is 5 percent. All other things

Assume that the reserve requirement is 5 percent. All other things being equal, will the money supply expand more if the Fed buys $2,000 worth of bonds or if someone deposits in a bank $2,000 that she...

Q: What is the discount rate? What happens to the money supply

What is the discount rate? What happens to the money supply when the Fed raises the discount rate?

Q: Suppose that people expect inflation to equal 3 percent, but in

Suppose that people expect inflation to equal 3 percent, but in fact, prices rise by 5 percent. Describe how this unexpectedly high inflation rate would help or hurt the following: a. the government b...

Q: A case study in the chapter analyzed purchasing-power parity for

A case study in the chapter analyzed purchasing-power parity for several countries using the price of Big Macs. Here are data for a few more countries: a. For each country, compute the predicted exch...

Q: Suppose that real interest rates increase across Europe. Explain how this

Suppose that real interest rates increase across Europe. Explain how this development will affect U.S. net capital outflow. Then explain how it will affect U.S. net exports by using a formula from the...

Q: In a competitive labor market, when the government increases the minimum

In a competitive labor market, when the government increases the minimum wage, the result is a(n) __________ in the quantity of labor supplied and a(n) __________ in the quantity of labor demanded. a....

Q: Explain how each of the following developments would affect the supply of

Explain how each of the following developments would affect the supply of money, the demand for money, and the interest rate. Illustrate your answers with diagrams. a. The Fed’s bond traders buy bonds...

Q: Explain whether each of the following events shifts the short-run

Explain whether each of the following events shifts the short-run aggregate-supply curve, the aggregate- demand curve, both, or neither. For each event that does shift a curve, draw a diagram to illus...

Q: An economy is operating with output that is $400 billion below

An economy is operating with output that is $400 billion below its natural level, and fiscal policymakers want to close this recessionary gap. The central bank agrees to adjust the money supply to hol...

Q: As described in the chapter, the Federal Reserve in 2008 faced

As described in the chapter, the Federal Reserve in 2008 faced a decrease in aggregate demand caused by the housing and financial crises and a decrease in short-run aggregate supply caused by rising c...

Q: What is the fundamental trade-off that society faces if it

What is the fundamental trade-off that society faces if it chooses to save more? How might the government increase national saving?

Q: Some economists say that the government can continue running a budget deficit

Some economists say that the government can continue running a budget deficit forever. How is that possible?

Q: Suppose the government borrows $20 billion more next year than this

Suppose the government borrows $20 billion more next year than this year. a. Use a supply-and-demand diagram to analyze this policy. Does the interest rate rise or fall? b. What happens to investment?...

Q: Jamal has a utility function U = W 1/2,

Jamal has a utility function U = W 1/2, where W is his wealth in millions of dollars and U is the utility he obtains from that wealth. In the final stage of a game show, the host offers Jamal a choice...

Q: Structural unemployment is sometimes said to result from a mismatch between the

Structural unemployment is sometimes said to result from a mismatch between the job skills that employers want and the job skills that workers have. To explore this idea, consider an economy with two...

Q: Suppose that the reserve requirement for checking deposits is 10 percent and

Suppose that the reserve requirement for checking deposits is 10 percent and that banks do not hold any excess reserves. a. If the Fed sells $1 million of government bonds, what is the effect on the e...

Q: Between January 2010 and January 2016, U.S. employment

Between January 2010 and January 2016, U.S. employment increased by 12.1 million workers, but the number of unemployed workers declined by only 7.3 million. How are these numbers consistent with each...

Q: What are reserve requirements? What happens to the money supply when

What are reserve requirements? What happens to the money supply when the Fed raises reserve requirements?

Q: What is the theory of liquidity preference? How does it help

What is the theory of liquidity preference? How does it help explain the downward slope of the aggregate-demand curve?

Q: Explain whether the following statements are true, false, or uncertain

Explain whether the following statements are true, false, or uncertain a. “Inflation hurts borrowers and helps lenders, because borrowers must pay a higher rate of interest.” b. “If prices change in a...

Q: Purchasing-power parity holds between the nations of Ectenia and Wiknam

Purchasing-power parity holds between the nations of Ectenia and Wiknam, where the only commodity is Spam. a. In 2015, a can of Spam costs 4 dollars in Ectenia and 24 pesos in Wiknam. What is the exch...

Q: Suppose that Americans decide to increase their saving. a.

Suppose that Americans decide to increase their saving. a. If the elasticity of U.S. net capital outflow with respect to the real interest rate is very high, will this increase in private saving have...

Q: For each of the following events, explain the short-run

For each of the following events, explain the short-run and long-run effects on output and the price level, assuming policymakers take no action. a. The stock market declines sharply, reducing consume...

Q: Suppose government spending increases. Would the effect on aggregate demand be

Suppose government spending increases. Would the effect on aggregate demand be larger if the Federal Reserve held the money supply constant in response or if the Fed were committed to maintaining a fi...

Q: Some income from capital is taxed twice. Explain.

Some income from capital is taxed twice. Explain.

Q: This chapter explains that investment can be increased both by reducing taxes

This chapter explains that investment can be increased both by reducing taxes on private saving and by reducing the government budget deficit. a. Why is it difficult to implement both of these policie...

Q: Assume that the banking system has total reserves of $100 billion

Assume that the banking system has total reserves of $100 billion. Assume also that required reserves are 10 percent of checking deposits and that banks hold no excess reserves and households hold no...

Q: How would the following transactions affect U.S. exports,

How would the following transactions affect U.S. exports, imports, and net exports? a. An American art professor spends the summer touring museums in Europe. b. Students in Paris flock to see the late...

Q: Why can’t the Fed control the money supply perfectly?

Why can’t the Fed control the money supply perfectly?

Q: Suppose firms become very optimistic about future business conditions and invest heavily

Suppose firms become very optimistic about future business conditions and invest heavily in new capital equipment. a. Draw an aggregate-demand/aggregate-supply diagram to show the short-run effect of...

Q: Use the theory of liquidity preference to explain how a decrease in

Use the theory of liquidity preference to explain how a decrease in the money supply affects the equilibrium interest rate. How does this change in monetary policy affect the aggregate-demand curve?

Q: In which of the following circumstances is expansionary fiscal policy more likely

In which of the following circumstances is expansionary fiscal policy more likely to lead to a short-run increase in investment? Explain. a. When the investment accelerator is large or when it is smal...

Q: What adverse effect might be caused by tax incentives to increase saving

What adverse effect might be caused by tax incentives to increase saving?

Q: Suppose that Congress passes a law requiring employers to provide employees some

Suppose that Congress passes a law requiring employers to provide employees some benefit (such as healthcare) that raises the cost of an employee by $4 per hour. a. What effect does this employer mand...

Q: Consider an economy described by the following equations: Y =

Consider an economy described by the following equations: Y = C + YY I + II G C = 100 + 0.75(Y – T) I = 500 - 50r G = 125 T = 100 TT where Y is GDP, C is consumption, I is investment, G is governme...

Q: Assume that the reserve requirement is 20 percent. Also assume that

Assume that the reserve requirement is 20 percent. Also assume that banks do not hold excess reserves and there is no cash held by the public. The Fed decides that it wants to expand the money supply...

Q: The economy of Elmendyn contains 2,000 $1 bills.

The economy of Elmendyn contains 2,000 $1 bills. a. If people hold all money as currency, what is the quantity of money? b. If people hold all money as demand deposits and banks maintain 100 percent r...

Q: For each of the following pairs, which bond would you expect

For each of the following pairs, which bond would you expect to pay a higher interest rate? Explain. a. a bond of the U.S. government or a bond of an Eastern European government b. a bond that repays...

Q: Are minimum-wage laws a better explanation for structural unemployment among

Are minimum-wage laws a better explanation for structural unemployment among teenagers or among college graduates? Why?

Q: What is the role of the financial system? Name and describe

What is the role of the financial system? Name and describe two markets that are part of the financial system in the U.S. economy. Name and describe two financial intermediaries.

Q: What is a share of stock? What is a bond?

What is a share of stock? What is a bond? Explain their differences and similarities.

Q: If the interest rate is zero, then $100 to be

If the interest rate is zero, then $100 to be paid in 10 years has a present value that is a. less than $100. b. exactly $100. c. more than $100. d. indeterminate.

Q: When the Federal Reserve increases the money supply and expands aggregate demand

When the Federal Reserve increases the money supply and expands aggregate demand, it moves the economy along the Phillips curve to a point with ________ inflation and ________ unemployment. a. higher,...

Q: According to an old myth, Native Americans sold the island of

According to an old myth, Native Americans sold the island of Manhattan about 400 years ago for $24. If they had invested this amount at an interest rate of 7 percent per year, how much, approximately...

Q: The interest rate is 7 percent. Use the concept of present

The interest rate is 7 percent. Use the concept of present value to compare $200 to be received in 10 years and $300 to be received in 20 years.

Q: The interest rate is 7 percent. What is the present value

The interest rate is 7 percent. What is the present value of $150 to be received in 10 years?

Q: The population of Ectenia is 100 people: 40 work full-

The population of Ectenia is 100 people: 40 work full-time, 20 work half-time but would prefer to work full-time, 10 are looking for a job, 10 would like to work but are so discouraged they have given...

Q: Suppose the natural rate of unemployment is 6 percent. On one

Suppose the natural rate of unemployment is 6 percent. On one graph, draw two Phillips curves that describe the four situations listed here. Label the point that shows the position of the economy in e...

Q: How is the unemployment rate measured? How might the unemployment rate

How is the unemployment rate measured? How might the unemployment rate overstate the amount of joblessness? How might it understate the amount of joblessness?

Q: How does a union in the auto industry affect wages and employment

How does a union in the auto industry affect wages and employment at General Motors and Ford? How does it affect wages and employment in other industries?

Q: Draw the short-run trade-off between inflation and unemployment

Draw the short-run trade-off between inflation and unemployment. How might the Fed move the economy from one point on this curve to another?

Q: Draw the Phillips curve. Use the model of aggregate demand and

Draw the Phillips curve. Use the model of aggregate demand and aggregate supply to show how policy can move the economy from a point on this curve with high inflation to a point with low inflation.

Q: Approximately how long does it take a change in monetary policy to

Approximately how long does it take a change in monetary policy to influence aggregate demand? a. 1 month b. 6 months c. 2 years d. 5 years

Q: The chapter suggests that the economy, like the human body,

The chapter suggests that the economy, like the human body, has “natural restorative powers.” a. Illustrate the short-run effect of a fall in aggregate demand using an aggregate-demand/aggregate- supp...

Q: What causes the lags in the effect of monetary and fiscal policies

What causes the lags in the effect of monetary and fiscal policies on aggregate demand? What are the implications of these lags for the debate over active versus passive policy?

Q: Explain why monetary and fiscal policies work with a lag. Why

Explain why monetary and fiscal policies work with a lag. Why do these lags matter in the choice between active and passive policy?

Q: Elaine wants to buy and operate an ice-cream truck but

Elaine wants to buy and operate an ice-cream truck but doesn’t have the financial resources to start the business. She borrows $10,000 from her friend George, to whom she promises an interest rate of...

Q: Many workers hold large amounts of stock issued by the firms at

Many workers hold large amounts of stock issued by the firms at which they work. Why do you suppose companies encourage this behavior? Why might a person not want to hold stock in the company where he...

Q: Why is it important for people who own stocks and bonds to

Why is it important for people who own stocks and bonds to diversify their holdings? What type of financial institution makes diversification easier?

Q: Define private saving, public saving, national saving, and investment

Define private saving, public saving, national saving, and investment. How are they related?

Q: What is “natural” about the natural rate of unemployment?

What is “natural” about the natural rate of unemployment? Why might the natural rate of unemployment differ across countries?

Q: A bank has capital of $200 and a leverage ratio of

A bank has capital of $200 and a leverage ratio of 5. If the value of the bank’s assets declines by 10 percent, then its capital will be reduced to a. $100. b. $150. c. $180. d. $185.

Q: The money supply includes all of the following EXCEPT a.

The money supply includes all of the following EXCEPT a. metal coins. b. paper currency. c. lines of credit accessible with credit cards. d. bank balances accessible with debit cards.

Q: If the interest rate is 10 percent, then the future value

If the interest rate is 10 percent, then the future value in 2 years of $100 today is a. $80. b. $83. c. $120. d. $121.

Q: A company has an investment project that would cost $10 million

A company has an investment project that would cost $10 million today and yield a payoff of $15 million in 4 years. a. Should the firm undertake the project if the interest rate is 11 percent? 10 perc...

Q: What benefit do people get from the market for insurance? What

What benefit do people get from the market for insurance? What two problems impede the insurance market from working perfectly?

Q: Describe three ways that a risk-averse person might reduce the

Describe three ways that a risk-averse person might reduce the risk she faces.

Q: Using the numbers in the preceding question, what is the size

Using the numbers in the preceding question, what is the size of Ectenia’s labor force? a. 50 b. 60 c. 70 d. 80

Q: Explain whether each of the following events increases, decreases, or

Explain whether each of the following events increases, decreases, or has no effect on the unemployment rate and the labor-force participation rate. a. After a long search, Jon finds a job. b. Tyrion...

Q: Is unemployment typically short-term or long-term? Explain

Is unemployment typically short-term or long-term? Explain.

Q: How would an increase in the world price of oil affect the

How would an increase in the world price of oil affect the amount of frictional unemployment? Is this unemployment undesirable? What public policies might affect the amount of unemployment caused by t...

Q: Chloe takes $100 of currency from her wallet and deposits it

Chloe takes $100 of currency from her wallet and deposits it into her checking account. If the bank adds the entire $100 to reserves, the money supply ________, but if the bank lends out some of the $...

Q: Beleaguered State Bank (BSB) holds $250 million in deposits

Beleaguered State Bank (BSB) holds $250 million in deposits and maintains a reserve ratio of 10 percent. a. Show a T-account for BSB. b. Now suppose that BSB’s largest depositor withdraws $10 million...

Q: Explain whether each of the following events increases or decreases the money

Explain whether each of the following events increases or decreases the money supply. a. The Fed buys bonds in open-market operations. b. The Fed reduces the reserve requirement. c. The Fed increases...

Q: Which of the following are considered money in the U.S

Which of the following are considered money in the U.S. economy? Which are not? Explain your answers by discussing each of the three functions of money. a. a U.S. penny b. a Mexican peso c. a Picasso...

Q: What is commodity money? What is fiat money? Which kind

What is commodity money? What is fiat money? Which kind do we use?

Q: What are the primary responsibilities of the Federal Reserve? If the

What are the primary responsibilities of the Federal Reserve? If the Fed wants to increase the supply of money, how does it usually do so?

Q: If nominal GDP is $400, real GDP is $200

If nominal GDP is $400, real GDP is $200, and the money supply is $100, then a. the price level is ½, and velocity is 2. b. the price level is ½, and velocity is 4. c. the price level is 2, and veloci...

Q: Suppose that changes in bank regulations expand the availability of credit cards

Suppose that changes in bank regulations expand the availability of credit cards so that people need to hold less cash. a. How does this event affect the demand for money? b. If the Fed does not respo...

Q: According to the quantity theory of money, what is the effect

According to the quantity theory of money, what is the effect of an increase in the quantity of money?

Q: List and describe six costs of inflation.

List and describe six costs of inflation.

Q: In an open economy, national saving equals domestic investment a

In an open economy, national saving equals domestic investment a. plus the net outflow of capital abroad. b. minus the net exports of goods and services. c. plus the government’s budget deficit. d. mi...

Q: Would each of the following transactions be included in net exports or

Would each of the following transactions be included in net exports or net capital outflow? Be sure to say whether it would represent an increase or a decrease in that variable. a. An American buys a...

Q: Who is responsible for setting monetary policy in the United States?

Who is responsible for setting monetary policy in the United States? How is this group chosen?

Q: Explain the relationship among saving, investment, and net capital outflow

Explain the relationship among saving, investment, and net capital outflow.

Q: Define nominal exchange rate and real exchange rate, and explain how

Define nominal exchange rate and real exchange rate, and explain how they are related. If the nominal exchange rate goes from 100 to 120 yen per dollar, has the dollar appreciated or depreciated?

Q: What distinguishes money from other assets in the economy?

What distinguishes money from other assets in the economy?

Q: Holding other things constant, an appreciation of a nation’s currency causes

Holding other things constant, an appreciation of a nation’s currency causes a. exports to rise and imports to fall. b. exports to fall and imports to rise. c. both exports and imports to rise. d. bot...

Q: Suppose that Congress is considering an investment tax credit, which subsidizes

Suppose that Congress is considering an investment tax credit, which subsidizes domestic investment. a. How does this policy affect national saving, domestic investment, net capital outflow, the inter...

Q: Why are budget deficits and trade deficits sometimes called the twin deficits

Why are budget deficits and trade deficits sometimes called the twin deficits?

Q: In the model of the open economy just developed, two markets

In the model of the open economy just developed, two markets determine two relative prices. What are the markets? What are the two relative prices?

Q: A sudden crash in the stock market shifts a. the

A sudden crash in the stock market shifts a. the aggregate-demand curve. b. the short-run aggregate-supply curve, but not the long-run aggregate-supply curve. c. the long-run aggregate-supply curve, b...

Q: Explain whether each of the following events will increase, decrease,

Explain whether each of the following events will increase, decrease, or have no effect on long-run aggregate supply. a. The United States experiences a wave of immigration. b. Congress raises the min...

Q: Draw a diagram with aggregate demand, short-run aggregate supply

Draw a diagram with aggregate demand, short-run aggregate supply, and long-run aggregate supply. Be careful to label the axes correctly.

Q: If the Fed wanted to use all of its policy tools to

If the Fed wanted to use all of its policy tools to decrease the money supply, what would it do?

Q: How does the economy’s behavior in the short run differ from its

How does the economy’s behavior in the short run differ from its behavior in the long run? Draw the model of aggregate demand and aggregate supply. What variables are on the two axes?

Q: If the government wants to contract aggregate demand, it can ________

If the government wants to contract aggregate demand, it can ________ government purchases or ________ taxes. a. increase, increase b. increase, decrease c. decrease, increase d. decrease, decrease

Q: The Federal Reserve expands the money supply by 5 percent.

The Federal Reserve expands the money supply by 5 percent. a. Use the theory of liquidity preference to illustrate in a graph the impact of this policy on the interest rate. b. Use the model of aggreg...

Q: List and describe the three functions of money.

List and describe the three functions of money.

Q: Use the theory of liquidity preference to explain how a decrease in

Use the theory of liquidity preference to explain how a decrease in the money supply affects the aggregate- demand curve.

Q: Suppose that the government reduces spending on highway construction by $10

Suppose that the government reduces spending on highway construction by $10 billion. Which way does the aggregate-demand curve shift? Explain why the shift might be larger or smaller than $10 billion....

Q: If the Federal Reserve increases the rate of money growth and maintains

If the Federal Reserve increases the rate of money growth and maintains it at the new higher rate, eventually expected inflation will ________ and the short-run Phillips curve will shift ________. a....

Q: Illustrate the effects of the following developments on both the short-

Illustrate the effects of the following developments on both the short-run and long-run Phillips curves. Give the economic reasoning underlying your answers. a. a rise in the natural rate of unemploym...

Q: Draw the long-run trade-off between inflation and unemployment

Draw the long-run trade-off between inflation and unemployment. Explain how the short-run and long-run trade-offs are related.

Q: Draw the short-run Phillips curve and the long-run

Draw the short-run Phillips curve and the long-run Phillips curve. Explain why they are different.

Q: Hyperinflations occur when the government runs a large budget ________, which the

Hyperinflations occur when the government runs a large budget ________, which the central bank finances with a substantial monetary ________. a. deficit, contraction b. deficit, expansion c. surplus,...

Q: According to traditional Keynesian analysis, which of the following will increase

According to traditional Keynesian analysis, which of the following will increase aggregate demand the most? a. $100 billion increase in taxation b. $100 billion decrease in taxation c. $100 billion i...

Q: Policymakers who want to stabilize the economy must decide how much to

Policymakers who want to stabilize the economy must decide how much to change the money supply, government spending, or taxes. Why is it difficult for policymakers to choose the appropriate strength o...

Q: According to traditional Keynesian analysis, why does a tax cut have

According to traditional Keynesian analysis, why does a tax cut have a smaller effect on GDP than a similarly sized increase in government spending? Why might the opposite be the case?

Q: According to traditional Keynesian analysis, which has a larger impact on

According to traditional Keynesian analysis, which has a larger impact on GDP—a dollar of tax cuts or a dollar of additional government spending? Why?

Q: The classical principle of monetary neutrality states that changes in the money

The classical principle of monetary neutrality states that changes in the money supply do not influence ________ variables and is thought most applicable in the ________ run. a. nominal, short b. nomi...

Q: If the government collects more in tax revenue than it spends,

If the government collects more in tax revenue than it spends, and households consume more than they get in after-tax income, then a. private and public saving are both positive. b. private and public...

Q: Explain the difference between saving and investment as defined by a macroeconomist

Explain the difference between saving and investment as defined by a macroeconomist. Which of the following situations represent investment and which represent saving? Explain. a. Your family takes ou...

Q: What is national saving? What is private saving? What is

What is national saving? What is private saving? What is public saving? How are these three variables related?

Q: If more Americans adopted a “live for today” approach to

If more Americans adopted a “live for today” approach to life, how would this affect saving, investment, and the interest rate?

Q: If the interest rate is 10 percent, then the present value

If the interest rate is 10 percent, then the present value of $100 to be paid in 2 years is a. $80 b. $83. c. $120. d. $121.

Q: Suppose that a country’s inflation rate increases sharply. What happens to

Suppose that a country’s inflation rate increases sharply. What happens to the inflation tax on the holders of money? Why is wealth that is held in savings accounts not subject to a change in the infl...

Q: Bond A pays $8,000 in 20 years. Bond

Bond A pays $8,000 in 20 years. Bond B pays $8,000 in 40 years. (To keep things simple, assume these are zero-coupon bonds, which means the $8,000 is the only payment the bondholder receives.) a. If t...

Q: What is diversification? Does a stockholder get a greater benefit from

What is diversification? Does a stockholder get a greater benefit from diversification when going from 1 to 10 stocks or when going from 100 to 120 stocks?

Q: Fortune magazine regularly publishes a list of the “most respected”

Fortune magazine regularly publishes a list of the “most respected” companies. According to the efficient markets hypothesis, if you restrict your stock portfolio to these companies, will you earn a b...

Q: The main policy goal of the unemployment insurance system is to reduce

The main policy goal of the unemployment insurance system is to reduce the a. search effort of the unemployed. b. income uncertainty that workers face. c. role of unions in wage setting. d. amount of...

Q: Why is frictional unemployment inevitable? How might the government reduce the

Why is frictional unemployment inevitable? How might the government reduce the amount of frictional unemployment?

Q: Suppose that this year’s money supply is $500 billion, nominal

Suppose that this year’s money supply is $500 billion, nominal GDP is $10 trillion, and real GDP is $5 trillion. a. What is the price level? What is the velocity of money? b. Suppose that velocity is...

Q: Draw the supply curve and the demand curve for a labor market

Draw the supply curve and the demand curve for a labor market in which the wage is fixed above the equilibrium level. Show the quantity of labor supplied, the quantity demanded, and the amount of unem...

Q: If the reserve ratio is ¼ and the central bank increases the

If the reserve ratio is ¼ and the central bank increases the quantity of reserves in the banking system by $120, the money supply increases by a. $90. b. $150. c. $160. d. $480.

Q: Your uncle repays a $100 loan from Tenth National Bank (

Your uncle repays a $100 loan from Tenth National Bank (TNB) by writing a $100 check from his TNB checking account. Use T accounts to show the effect of this transaction on your uncle and on TNB. Has...

Q: What are demand deposits and why should they be included in the

What are demand deposits and why should they be included in the stock of money?

Q: In what sense is inflation like a tax? How does thinking

In what sense is inflation like a tax? How does thinking about inflation as a tax help explain hyperinflation?

Q: Describe how banks create money.

Describe how banks create money.

Q: According to the quantity theory of money, which variable in the

According to the quantity theory of money, which variable in the quantity equation is most stable over long periods of time? a. money b. velocity c. price level d. output

Q: It is sometimes suggested that the Federal Reserve should try to achieve

It is sometimes suggested that the Federal Reserve should try to achieve zero inflation. If we assume that velocity is constant, does this zero-inflation goal require that the rate of money growth equ...

Q: Explain the difference between nominal and real variables and give two examples

Explain the difference between nominal and real variables and give two examples of each. According to the principle of monetary neutrality, which variables are affected by changes in the quantity of m...

Q: If the value of a nation’s imports exceeds the value of its

If the value of a nation’s imports exceeds the value of its exports, which of the following is NOT true? a. Net exports are negative. b. GDP is less than the sum of consumption, investment, and govern...

Q: Describe the difference between foreign direct investment and foreign portfolio investment.

Describe the difference between foreign direct investment and foreign portfolio investment. Who is more likely to engage in foreign direct investment—a corporation or an individual investor? Who is mo...

Q: The Federal Reserve’s target rate for the federal funds rate a

The Federal Reserve’s target rate for the federal funds rate a. is an extra policy tool for the central bank, in addition to and independent of the money supply. b. commits the Fed to set a particular...

Q: Suppose a computer virus disables the nation’s automatic teller machines, making

Suppose a computer virus disables the nation’s automatic teller machines, making withdrawals from bank accounts less convenient. As a result, people want to keep more cash on hand, increasing the dema...

Q: The government spends $3 billion to buy police cars. Explain

The government spends $3 billion to buy police cars. Explain why aggregate demand might increase by more or less than $3 billion.

Q: Suppose a wave of negative “animal spirits” overruns the economy

Suppose a wave of negative “animal spirits” overruns the economy, and people become pessimistic about the future. What happens to aggregate demand? If the Fed wants to stabilize aggregate demand, how...

Q: If a nation’s currency doubles in value on foreign exchange markets,

If a nation’s currency doubles in value on foreign exchange markets, the currency is said to ________, reflecting a change in the ________ exchange rate. a. appreciate, nominal b. appreciate, real c....

Q: When an adverse supply shock shifts the short-run aggregate-

When an adverse supply shock shifts the short-run aggregate-supply curve to the left, it also a. moves the economy along the short-run Phillips curve to a point with higher inflation and lower unemplo...

Q: Define net exports and net capital outflow. Explain how and why

Define net exports and net capital outflow. Explain how and why they are related.

Q: How would the following transactions affect U.S. net capital

How would the following transactions affect U.S. net capital outflow? Also, state whether each involves direct investment or portfolio investment. a. An American cellular phone company establishes an...

Q: Give an example of a favorable shock to aggregate supply. Use

Give an example of a favorable shock to aggregate supply. Use the model of aggregate demand and aggregate supply to explain the effects of such a shock. How does it affect the Phillips curve?

Q: Describe the economic logic behind the theory of purchasing-power parity

Describe the economic logic behind the theory of purchasing-power parity.

Q: The nation of Ectenia has long banned the export of its highly

The nation of Ectenia has long banned the export of its highly prized puka shells. A newly elected president, however, removes the export ban. This change in policy will cause the nation’s currency to...

Q: An economist discussing trade policy in The New Republic wrote: “

An economist discussing trade policy in The New Republic wrote: “One of the benefits of the United States removing its trade restrictions [is] the gain to U.S. industries that produce goods for export...

Q: What is capital flight? When a country experiences capital flight,

What is capital flight? When a country experiences capital flight, what is the effect on its interest rate and exchange rate?

Q: An increase in the aggregate demand for goods and services has a

An increase in the aggregate demand for goods and services has a larger impact on output ________ and a larger impact on the price level ________. a. in the short run, in the long run b. in the long r...

Q: In 1939, with the U.S. economy not yet

In 1939, with the U.S. economy not yet fully recovered from the Great Depression, President Roosevelt proclaimed that Thanksgiving would fall a week earlier than usual so that the shopping period befo...

Q: Explain why the long-run aggregate-supply curve is vertical

Explain why the long-run aggregate-supply curve is vertical.

Q: Explain why the long-run aggregate-supply curve is vertical

Explain why the long-run aggregate-supply curve is vertical. Explain three theories for why the short-run aggregate-supply curve slopes upward. What variables shift both the long-run and short-run agg...

Q: With the economy in a recession because of inadequate aggregate demand,

With the economy in a recession because of inadequate aggregate demand, the government increases its purchases by $1,200. Suppose the central bank adjusts the money supply to hold the interest rate co...

Q: Define net exports and net capital outflow. Explain how they are

Define net exports and net capital outflow. Explain how they are related.

Q: Advocates for setting monetary policy by rule rather than discretion often argue

Advocates for setting monetary policy by rule rather than discretion often argue that a. central bankers with discretion are tempted to renege on their announced commitments to low inflation. b. centr...

Q: Consider two policies—a tax cut that will last for only

Consider two policies—a tax cut that will last for only one year and a tax cut that is expected to be permanent. Which policy will stimulate greater spending by consumers? Which policy will have the g...

Q: Suppose that survey measures of consumer confidence indicate a wave of pessimism

Suppose that survey measures of consumer confidence indicate a wave of pessimism is sweeping the country. If policymakers do nothing, what will happen to aggregate demand? What should the Fed do if it...

Q: Advocates of the theory of rational expectations believe that a.

Advocates of the theory of rational expectations believe that a. the sacrifice ratio can be much smaller if policymakers make a credible commitment to low inflation. b. if disinflation catches people...

Q: Suppose the economy is in a long-run equilibrium.

Suppose the economy is in a long-run equilibrium. a. Draw the economy’s short-run and long-run Phillips curves. b. Suppose a wave of business pessimism reduces aggregate demand. Show the effect of thi...

Q: Suppose a drought destroys farm crops and drives up the price of

Suppose a drought destroys farm crops and drives up the price of food. What is the effect on the short-run trade-off between inflation and unemployment?

Q: What is the sacrifice ratio? How might the credibility of the

What is the sacrifice ratio? How might the credibility of the Fed’s commitment to reduce inflation affect the sacrifice ratio?

Q: Which of the following is NOT an argument for maintaining a positive

Which of the following is NOT an argument for maintaining a positive rate of inflation? a. It permits real interest rates to be negative. b. It allows real wages to fall without cuts in nominal wages....

Q: Chapter 2 explains the difference between positive analysis and normative analysis.

Chapter 2 explains the difference between positive analysis and normative analysis. In the debate about whether the central bank should aim for zero inflation, which areas of disagreement involve posi...

Q: Explain how credibility might affect the cost of reducing inflation.

Explain how credibility might affect the cost of reducing inflation.

Q: Explain the costs and benefits of reducing inflation to zero. Which

Explain the costs and benefits of reducing inflation to zero. Which are temporary and which are permanent?

Q: The problem of time inconsistency applies to fiscal policy as well as

The problem of time inconsistency applies to fiscal policy as well as to monetary policy. Suppose the government announced a reduction in taxes on income from capital investments, like new factories....

Q: Holding other things constant, an increase in a nation’s interest rate

Holding other things constant, an increase in a nation’s interest rate reduces a. national saving and domestic investment. b. national saving and the net capital outflow. c. domestic investment and th...

Q: If a popular TV show on personal finance convinces Americans to save

If a popular TV show on personal finance convinces Americans to save more for retirement, the ________ curve for loan able funds would shift, driving the equilibrium interest rate ________. a. supply,...

Q: Economists in Funlandia, a closed economy, have collected the following

Economists in Funlandia, a closed economy, have collected the following information about the economy for a particular year: Y = 10,000 C = 6,000 T = 1,50 G = 1,700 The economists also estimate that t...

Q: Describe a change in the tax code that might increase private saving

Describe a change in the tax code that might increase private saving. If this policy were implemented, how would it affect the market for loan able funds?

Q: The benefit of diversification when constructing a portfolio is that it can

The benefit of diversification when constructing a portfolio is that it can eliminate a. speculative bubbles. b. risk aversion. c. firm-specific risk. d. market risk.

Q: For each of the following kinds of insurance, give an example

For each of the following kinds of insurance, give an example of behavior that can be called moral hazard and another example of behavior that can be called adverse selection. a. health insurance b. c...

Q: What factors should a stock analyst think about in determining the value

What factors should a stock analyst think about in determining the value of a share of stock?

Q: Unionized workers are paid about _____ percent more than similar nonunion workers

Unionized workers are paid about _____ percent more than similar nonunion workers. a. 2 b. 5 c. 15 d. 40

Q: Economists use labor-market data to evaluate how well an economy

Economists use labor-market data to evaluate how well an economy is using its most valuable resource— its people. Two closely watched statistics are the unemployment rate and the employment–population...

Q: How do unions affect the natural rate of unemployment?

How do unions affect the natural rate of unemployment?

Q: Comparing the U.S. economy today to that of 1950

Comparing the U.S. economy today to that of 1950, one finds that today, as a percentage of GDP, a. exports and imports are both higher. b. exports and imports are both lower. c. exports are higher, an...

Q: Give four explanations for why firms might find it profitable to pay

Give four explanations for why firms might find it profitable to pay wages above the level that balances quantity of labor supplied and quantity of labor demanded?

Q: Japan generally runs a significant trade surplus. Do you think this

Japan generally runs a significant trade surplus. Do you think this is most related to high foreign demand for Japanese goods, low Japanese demand for foreign goods, a high Japanese saving rate relati...

Q: Which of the following actions by the Fed would reduce the money

Which of the following actions by the Fed would reduce the money supply? a. an open-market purchase of government bonds b. a reduction in banks’ reserve requirements c. an increase in the interest rat...

Q: You take $100 you had kept under your mattress and deposit

You take $100 you had kept under your mattress and deposit it in your bank account. If this $100 stays in the banking system as reserves and if banks hold reserves equal to 10 percent of deposits, by...

Q: If the Fed wants to increase the money supply with open-

If the Fed wants to increase the money supply with open-market operations, what does it do?

Q: According to the quantity theory of money and the Fisher effect,

According to the quantity theory of money and the Fisher effect, if the central bank increases the rate of money growth, a. inflation and the nominal interest rate both increase. b. inflation and the...

Q: Let’s consider the effects of inflation in an economy composed of only

Let’s consider the effects of inflation in an economy composed of only two people: Bob, a bean farmer, and Rita, a rice farmer. Bob and Rita both always consume equal amounts of rice and beans. In 201...

Q: According to the Fisher effect, how does an increase in the

According to the Fisher effect, how does an increase in the inflation rate affect the real interest rate and the nominal interest rate?

Q: If a cup of coffee costs 2 euros in Paris and $

If a cup of coffee costs 2 euros in Paris and $6 in New York and purchasing-power parity holds, what is the exchange rate? a. 1/4 euro per dollar b. 1/3 euro per dollar c. 3 euros per dollar d. 4 euro...

Q: Would each of the following groups be happy or unhappy if the

Would each of the following groups be happy or unhappy if the U.S. dollar appreciated? Explain. a. Dutch pension funds holding U.S. government bonds b. U.S. manufacturing industries c. Australian tour...

Q: What might motivate a central banker to cause a political business cycle

What might motivate a central banker to cause a political business cycle? What does the political business cycle imply for the debate over policy rules?

Q: If the Fed started printing large quantities of U.S.

If the Fed started printing large quantities of U.S. dollars, what would happen to the number of Japanese yen a dollar could buy? Why?

Q: A civil war abroad causes foreign investors to seek a safe haven

A civil war abroad causes foreign investors to seek a safe haven for their funds in the United States, leading to ________ U.S. interest rates and a ________ U.S. dollar. a. higher, weaker b. higher,...

Q: Describe supply and demand in the market for loanable funds and the

Describe supply and demand in the market for loanable funds and the market for foreign-currency exchange. How are these markets linked?

Q: Suppose the French suddenly develop a strong taste for California wines.

Suppose the French suddenly develop a strong taste for California wines. Answer the following questions in words and with a diagram. a. What happens to the demand for dollars in the market for foreign...

Q: Stagflation is caused by a. a leftward shift in the

Stagflation is caused by a. a leftward shift in the aggregate-demand curve. b. a rightward shift in the aggregate-demand curve. c. a leftward shift in the aggregate-supply curve. d. a rightward shift...

Q: Explain why the following statements are false. a. “

Explain why the following statements are false. a. “The aggregate-demand curve slopes downward because it is the horizontal sum of the demand curves for individual goods.” b. “The long-run aggregate-s...

Q: List and explain the three theories for why the short-run

List and explain the three theories for why the short-run aggregate-supply curve slopes upward.

Q: Suppose that the election of a popular presidential candidate suddenly increases people’s

Suppose that the election of a popular presidential candidate suddenly increases people’s confidence in the future. Use the model of aggregate demand and aggregate supply to analyze the effect on the...

Q: If the central bank in the preceding question instead holds the money

If the central bank in the preceding question instead holds the money supply constant and allows the interest rate to adjust, the change in aggregate demand resulting from the increase in government p...

Q: The economy is in a recession with high unemployment and low output

The economy is in a recession with high unemployment and low output. a. Draw a graph of aggregate demand and aggregate supply to illustrate the current situation. Be sure to include the aggregate-dema...

Q: Give an example of a monetary policy rule. Why might your

Give an example of a monetary policy rule. Why might your rule be better than discretionary policy? Why might it be worse?

Q: Give an example of a government policy that acts as an automatic

Give an example of a government policy that acts as an automatic stabilizer. Explain why the policy has this effect.

Q: From one year to the next, inflation falls from 5 to

From one year to the next, inflation falls from 5 to 4 percent, while unemployment rises from 6 to 7 percent. Which of the following events could be responsible for this change? a. The central bank i...

Q: The inflation rate is 10 percent, and the central bank is

The inflation rate is 10 percent, and the central bank is considering slowing the rate of money growth to reduce inflation to 5 percent. Economist Milton believes that expectations of inflation change...

Q: Describe the sources of supply and demand in the market for loanable

Describe the sources of supply and demand in the market for loanable funds and the market for foreign-currency exchange.

Q: The Fed decides to reduce inflation. Use the Phillips curve to

The Fed decides to reduce inflation. Use the Phillips curve to show the short-run and long-run effects of this policy. How might the short-run costs be reduced?

Q: Throughout U.S. history, what has been the most

Throughout U.S. history, what has been the most common cause of substantial increases in government debt? a. recessions b. wars c. financial crises d. tax cuts

Q: Why are the benefits of reducing inflation permanent and the costs temporary

Why are the benefits of reducing inflation permanent and the costs temporary? Why are the costs of increasing inflation permanent and the benefits temporary? Use Phillips-curve diagrams in your answer...

Q: Why are some economists against a target of zero inflation?

Why are some economists against a target of zero inflation?

Q: Explain how reducing a government budget deficit makes future generations better off

Explain how reducing a government budget deficit makes future generations better off. What fiscal policy might improve the lives of future generations better off. What fiscal policy might improve the...

Q: If the business community becomes more optimistic about the profitability of capital

If the business community becomes more optimistic about the profitability of capital, the ________ curve for loan able funds would shift, driving the equilibrium interest rate ________. a. supply, up...

Q: A closed economy has income of $1,000, government

A closed economy has income of $1,000, government spending of $200, taxes of $150, and investment of $250. What is private saving? a. $100 b. $200 c. $300 d. $400

Q: Suppose that Intel is considering building a new chip- making factory

Suppose that Intel is considering building a new chip- making factory. a. Assuming that Intel needs to borrow money in the bond market, why would an increase in interest rates affect Intel’s decision...

Q: What is a government budget deficit? How does it affect interest

What is a government budget deficit? How does it affect interest rates, investment, and economic growth?

Q: According to the efficient markets hypothesis, a. changes in

According to the efficient markets hypothesis, a. changes in stock prices are impossible to predict from public information. b. excessive diversification can reduce an investor’s expected portfolio r...

Q: Which kind of stock would you expect to pay the higher average

Which kind of stock would you expect to pay the higher average return: stock in an industry that is very sensitive to economic conditions (such as an automaker) or stock in an industry that is relativ...

Q: What are the three categories into which the Bureau of Labor Statistics

What are the three categories into which the Bureau of Labor Statistics divides everyone? How does the BLS compute the labor force, the unemployment rate, and the labor-force participation rate?

Q: When the economy goes into a recession, real GDP ________ and

When the economy goes into a recession, real GDP ________ and unemployment ________. a. rises, rises b. rises, falls c. falls, rises d. falls, falls

Q: Describe the efficient markets hypothesis, and give a piece of evidence

Describe the efficient markets hypothesis, and give a piece of evidence consistent with this hypothesis.

Q: According to the theory of efficiency wages, a. firms

According to the theory of efficiency wages, a. firms may find it profitable to pay above- equilibrium wages. b. an excess supply of labor puts downward pressure on wages. c. sectoral shifts are the m...

Q: Are the following workers more likely to experience short-term or

Are the following workers more likely to experience short-term or long-term unemployment? Explain. a. a construction worker who is laid off because of bad weather b. a manufacturing worker who loses h...

Q: What claims do advocates of unions make to argue that unions are

What claims do advocates of unions make to argue that unions are good for the economy?

Q: What distinguishes an unemployed person from one who is not in the

What distinguishes an unemployed person from one who is not in the labour force?

Q: What problems arise from the CPI bias?

What problems arise from the CPI bias?

Q: How do depository institutions balance risk and return?

How do depository institutions balance risk and return?

Q: How do depository institutions create liquidity, pool risks, and lower

How do depository institutions create liquidity, pool risks, and lower the cost of borrowing?

Q: How have depository institutions made innovations that have influenced the composition of

How have depository institutions made innovations that have influenced the composition of money?

Q: What is the central bank in Canada and what functions does it

What is the central bank in Canada and what functions does it perform?

Q: How does an open market operation change the monetary base?

How does an open market operation change the monetary base?

Q: How do banks create money?

How do banks create money?

Q: What are the main influences on the quantity of real money that

What are the main influences on the quantity of real money that people and businesses plan to hold?

Q: Show the effects of a change in the nominal interest rate and

Show the effects of a change in the nominal interest rate and a change in real GDP using the demand for money curve.

Q: How does a change in the supply of money change the interest

How does a change in the supply of money change the interest rate in the short run?

Q: How does a change in the supply of money change the interest

How does a change in the supply of money change the interest rate in the long run?

Q: What are the alternative measures of the price level and how do

What are the alternative measures of the price level and how do they address the problem of bias in the CPI?

Q: In July 2011, currency held by individuals and businesses was $

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 de...

Q: Europe’s Banks Must Be Forced to Recapitalize E.U. banks

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” r...

Q: The Bank of Canada sells $20 million of securities to the

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:

Q: In the economy of Nocoin, bank deposits are $300 billion

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. The...

Q: The spreadsheet provides data about the demand for money in Minland.

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 mo...

Q: In year 1, the economy is at full employment and real

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 incre...

Q: In Problem 5, the banks have no excess reserves. Suppose

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...

Q: Today’s exchange rate between the yuan and the U.S.

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 di...

Q: Yesterday, the current exchange rate was $1.05 Canadian

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 t...

Q: In 2011, the exchange rate changed from 94 yen per U

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...

Q: What is the unemployment rate supposed to measure and why is it

What is the unemployment rate supposed to measure and why is it an imperfect measure?

Q: Canada produces natural resources (coal, natural gas, and others

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 Cana...

Q: Indian Entrepreneur Seeks Opportunities Rahul Reddy, an Indian real estate entrepreneur

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 inv...

Q: Indian Entrepreneur Seeks Opportunities Rahul Reddy, an Indian real estate entrepreneur

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 inv...

Q: The Brazilian real has appreciated 33 percent against 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...

Q: The Brazilian real has appreciated 33 percent against 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...

Q: The Economist magazine uses the price of a Big Mac to determine

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...

Q: In 2007, the U.S. trade deficit with China

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....

Q: In 2007, the U.S. trade deficit with China

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....

Q: In 2007, the U.S. trade deficit with China

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....

Q: The Australian dollar fell against the U.S. dollar to

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What makes the demand for Canadian dollars change?

Q: What makes the supply of Canadian dollars change?

What makes the supply of Canadian dollars change?

Q: What is arbitrage and what are its effects in the foreign exchange

What is arbitrage and what are its effects in the foreign exchange market?

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What is interest rate parity and what happens when this condition doesn’t hold?

Q: What is purchasing power parity and what happens when this condition doesn’t

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Q: What determines the real exchange rate and the nominal exchange rate in

What determines the real exchange rate and the nominal exchange rate in the short run?

Q: What determines the real exchange rate and the nominal exchange rate in

What determines the real exchange rate and the nominal exchange rate in the long run?

Q: What is a fixed exchange rate and how is its value fixed

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Q: Statistics Canada reported the following data for 2013: Labour force

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...

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What is a crawling peg and how does it work?

Q: How has China operated in the foreign exchange market, why,

How has China operated in the foreign exchange market, why, and with what effect?

Q: What are the transactions that the balance of payments accounts record?

What are the transactions that the balance of payments accounts record?

Q: How are net exports and the government sector balance linked?

How are net exports and the government sector balance linked?

Q: On March 30, 2012, the U.S. dollar

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The table gives some information about Canada’s international transactions in 2010. Item……………………………………………………. Billions ofdollars Imports of goods and services……………….………….…….…… 508 Net foreign investme...

Q: In Canada between June and July in 2014, the number of

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Q: Explain for each event whether it changes the quantity of real GDP

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Q: Explain for each event whether it changes the quantity of real GDP

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Q: Real exports of goods and services increased 4.2 percent in

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...

Q: The following events have occurred at times in the history of Canada

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 ex...

Q: The magazine Women of China reported that the percentage of income spent

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Q: The magazine Women of China reported that the percentage of income spent

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Q: Explain why changes in consumer spending and business investment play a large

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Q: Why does the aggregate demand curve slope downward?

Why does the aggregate demand curve slope downward?

Q: How do changes in expectations, fiscal policy and monetary policy,

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Q: Describe three types of short-run macroeconomic equilibrium.

Describe three types of short-run macroeconomic equilibrium.

Q: How do fluctuations in aggregate demand and short-run aggregate supply

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Q: What are the defining features of Keynesian macroeconomics and what policies do

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Q: What are the defining features of monetarist macroeconomics and what policies do

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Q: An exodus of discouraged searchers from the job market kept the unemployment

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Q: Canada trades with the United States. Explain the effect of each

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Q: Initially, the short-run aggregate supply curve is SAS0 and

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 ch...

Q: Initially, the short-run aggregate supply curve is SAS0 and

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Q: You are given the following information about the economy of Australia:

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Q: You are given the following information about the economy of Australia:

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Q: Gains in stock markets and increased house prices boosted Canadians’ wealth in

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Q: The spreadsheet lists real GDP ( Y ) and the components of

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Q: The spreadsheet lists real GDP ( Y ) and the components of

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Q: On January 27, 2009, the government announced a stimulus package

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Q: Matching people with available jobs is always difficult after a recession as

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Q: President Obama’s proposal to jolt a listless economic recovery with $180

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 bill...

Q: Statistics Canada reported that in the second quarter of 2014 Canadian exports

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Q: Compare the multiplier in the short run and the long run and

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Q: Consumer sentiment was up in August, helped by merchant discounts,

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 consu...

Q: Consumer sentiment was up in August, helped by merchant discounts,

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 consu...

Q: Consumer sentiment was up in August, helped by merchant discounts,

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 consu...

Q: In Japan, consumer prices slid at a faster pace in July

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Q: Answer the following questions. a. If the second quarter

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Q: Define and explain how we calculate the marginal propensity to consume and

Define and explain how we calculate the marginal propensity to consume and the marginal propensity to save.

Q: Matching people with available jobs is always difficult after a recession as

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 recove...

Q: How do we calculate the effects of real GDP on consumption expenditure

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Q: How does equilibrium expenditure come about? What adjusts to achieve equilibrium

How does equilibrium expenditure come about? What adjusts to achieve equilibrium?

Q: What is the multiplier? What does it determine? Why does

What is the multiplier? What does it determine? Why does it matter?

Q: How do fluctuations in autonomous expenditure influence real GDP?

How do fluctuations in autonomous expenditure influence real GDP?

Q: If autonomous expenditure increases with no change in the price level,

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Q: How does real GDP change in the long run when autonomous expenditure

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?

Q: In an economy, autonomous consumption expenditure is $50 billion,

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 $2...

Q: In an economy, autonomous consumption expenditure is $50 billion,

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 $2...

Q: In an economy, when income increases from $400 billion to

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Q: The figure illustrates the components of aggregate planned expenditure on Turtle Island

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...

Q: Describe the trends and fluctuations in the Canadian unemployment rate since 1960

Describe the trends and fluctuations in the Canadian unemployment rate since 1960.

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Q: Explain why induced consumption expenditure differs from autonomous consumption expenditure. Why

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Q: An economy has a fixed price level, no imports, and

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Q: An economy has a fixed price level, no imports, and

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Q: Explain the link between equilibrium expenditure and the quantity of real GDP

Explain the link between equilibrium expenditure and the quantity of real GDP demanded.

Q: Suppose that the economy is at full employment, the price level

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...

Q: Suppose that the economy is at full employment, the price level

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Q: Suppose that the economy is at full employment, the price level

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Q: Use the data in the Worked Problem on p. 673 .

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 abo...

Q: What is the price level?

What is the price level?

Q: The people on Coral Island buy only juice and cloth. The

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Q: What is the CPI and how is it calculated?

What is the CPI and how is it calculated?

Q: What is the natural unemployment rate?

What is the natural unemployment rate?

Q: How do we calculate the inflation rate and what is its relationship

How do we calculate the inflation rate and what is its relationship with the CPI?

Q: In July 2011, the Canadian unemployment rate was 7.2

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 l...

Q: What is the output gap? How does it change when the

What is the output gap? How does it change when the economy goes into recession?

Q: How does the unemployment rate fluctuate over the business cycle?

How does the unemployment rate fluctuate over the business cycle?

Q: In July 2011, the Canadian unemployment rate was 7.2

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Q: What is economic growth and how do we calculate its rate?

What is economic growth and how do we calculate its rate?

Q: What is the aggregate production function?

What is the aggregate production function?

Q: What determines potential GDP?

What determines potential GDP?

Q: Economic Conditions at the Cycle Bottom Employment rebounded by 0.1

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 20...

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What are the two broad sources of potential GDP growth?

Q: What are the effects of an increase in the population on potential

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Q: Jobs Report: Hiring Up, Unemployment Down The Labor Department reported

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Q: A high unemployment rate tells us that a large percentage of the

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 l...

Q: With about 1.3 million Canadians looking for work, some

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Q: The IMF World Economic Outlook reports the following unemployment rates:

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?

Q: The IMF World Economic Outlook reports the following unemployment rates:

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?

Q: The IMF World Economic Outlook reports the following unemployment rates:

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-populati...

Q: Economic Conditions at the Cycle Bottom Employment rebounded by 0.1

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 20...

Q: Economic Conditions at the Cycle Bottom Employment rebounded by 0.1

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 20...

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Q: The first table describes an economy’s labour market in 2014 and the

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...

Q: The first table describes an economy’s labour market in 2014 and the

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?...

Q: According to former Federal Reserve chairman Alan Greenspan, IT investments in

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Q: What are the effects of an increase in labour productivity on potential

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Q: What are the preconditions for labour productivity growth?

What are the preconditions for labour productivity growth?

Q: What, according to neoclassical growth theory, is the fundamental cause

What, according to neoclassical growth theory, is the fundamental cause of economic growth?

Q: The Asian Development Bank reported that Myanmar’s GDP growth accelerated to 7

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Q: The tables describe an economy’s labour market and its production function in

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Q: The tables describe an economy’s labour market and its production function in

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...

Q: CNN reported that for the first six months of 2008, the

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Q: The tables describe an economy’s labour market and its production function in

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Q: On January 1, 2014, Terry’s Towing Service owned 4 tow

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Q: An economy’s capital stock was $46.3 billion at the

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Q: An economy’s capital stock was $46.3 billion at the

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Q: Annie runs a fitness centre. On December 31, 2014,

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Q: Karrie is a golf pro, and after she paid taxes,

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Q: In 2012, the Lee family had disposable income of $80

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Q: At the start of 2008, India had an annual growth of

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Q: At the start of 2008, India had an annual growth of

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. Economi...

Q: The deficit in the first 10 months of the year from April

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Q: Oregon’s 5.6 percent unemployment rate is close to the national

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Q: What is the distinction between gross investment and net investment?

What is the distinction between gross investment and net investment?

Q: What are the three main types of markets for financial capital?

What are the three main types of markets for financial capital?

Q: What is the loanable funds market?

What is the loanable funds market?

Q: Why is the real interest rate the opportunity cost of loanable funds

Why is the real interest rate the opportunity cost of loanable funds?

Q: How does a government budget surplus or deficit influence the loanable funds

How does a government budget surplus or deficit influence the loanable funds market?

Q: What is the crowding-out effect and how does it work

What is the crowding-out effect and how does it work?

Q: Michael is an Internet service provider. On December 31, 2014

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 $...

Q: The table sets out the data for an economy when the government’s

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Q: Michael is an Internet service provider. On December 31, 2014

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 $...

Q: First Call, Inc., a smartphone company, plans to build

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 inter...

Q: A typical family on Sandy Island consumes only juice and cloth.

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 wa...

Q: The table sets out the data for an economy when the government’s

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Q: The RBC says lines of credit for education are popular and the

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Q: Explain the distinction between a central bank and a chartered bank.

Explain the distinction between a central bank and a chartered bank.

Q: What are the main components of money in Canada today?

What are the main components of money in Canada today?

Q: What are depository institutions?

What are depository institutions?

Q: What are the functions of depository institutions?

What are the functions of depository institutions?

Q: What is the monetary base and how does it relate to the

What is the monetary base and how does it relate to the Bank of Canada’s balance sheet?

Q: What are the Bank of Canada’s two main policy tools?

What are the Bank of Canada’s two main policy tools?

Q: What limits the quantity of money that the banking system can create

What limits the quantity of money that the banking system can create?

Q: A bank manager tells you that she doesn’t create money. She

A bank manager tells you that she doesn’t create money. She just lends the money that people deposit. Explain why she’s wrong.

Q: Amazon.com agreed to pay its workers $20 an hour

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Q: How is money market equilibrium determined in the short run?

How is money market equilibrium determined in the short run?

Q: What is the quantity theory of money?

What is the quantity theory of money?

Q: How is the velocity of circulation calculated?

How is the velocity of circulation calculated?

Q: What is the equation of exchange?

What is the equation of exchange?

Q: Does the quantity theory correctly predict the effects of money growth on

Does the quantity theory correctly predict the effects of money growth on inflation?

Q: Money in Canada today includes which of the following items? Cash

Money in Canada today includes which of the following items? Cash in CIBC’s cash machines; Bank of Canada dollar bills in your wallet; your Visa card; your loan to pay for school fees.

Q: The People’s Bank of China announces it will cut the required reserve

The People’s Bank of China announces it will cut the required reserve ratio. Explain how lowering the required reserve ratio will impact banks’ money creation process.

Q: Suppose that yesterday the Canadian dollar was trading on the foreign exchange

Suppose that yesterday the Canadian dollar was trading on the foreign exchange market at 0.75 euros per Canadian dollar and today the Canadian dollar is trading at 0.80 euros per Canadian dollar. Whic...

Q: Suppose that the exchange rate fell from 80 yen per Canadian dollar

Suppose that the exchange rate fell from 80 yen per Canadian dollar to 70 yen per Canadian dollar. What is the effect of this change on the quantity of Canadian dollars that people plan to buy in the...

Q: Suppose that the exchange rate rose from 80 yen per Canadian dollar

Suppose that the exchange rate rose from 80 yen per Canadian dollar to 90 yen per Canadian dollar. What is the effect of this change on the quantity of Canadian dollars that people plan to sell in the...

Q: Real consumption expenditure in 2002 chained dollars was $814.2

Real consumption expenditure in 2002 chained dollars was $814.2 billion in 2009 and $841.5 billion in 2010. In current dollars, it was $898.2 billion in 2009 and $940.6 billion in 2011. a. Calculate t...

Q: The table gives some data about the U.K. economy

The table gives some data about the U.K. economy: Item…………………………… Billions of U.K. pounds Consumption expenditure………………………..………. 721 Exports of goods and services…………………..……… 277 Government expenditur...

Q: The table gives some data about the U.K. economy

The table gives some data about the U.K. economy: Item…………………………… Billions of U.K. pounds Consumption expenditure………………………..………. 721 Exports of goods and services…………………..……… 277 Government expenditur...

Q: What are the influences on the demand for Canadian dollars in the

What are the influences on the demand for Canadian dollars in the foreign exchange market?

Q: What are the influences on the supply of Canadian dollars in the

What are the influences on the supply of Canadian dollars in the foreign exchange market?

Q: How is the equilibrium exchange rate determined?

How is the equilibrium exchange rate determined?

Q: What makes the Canadian dollar exchange rate fluctuate?

What makes the Canadian dollar exchange rate fluctuate?

Q: What makes an exchange rate hard to predict?

What makes an exchange rate hard to predict?

Q: What is a flexible exchange rate and how does it work?

What is a flexible exchange rate and how does it work?

Q: Is Canada a net borrower or a net lender? Is it

Is Canada a net borrower or a net lender? Is it a debtor or a creditor nation?

Q: The U.S. dollar exchange rate increased from $0

The U.S. dollar exchange rate increased from $0.96 Canadian in June 2011 to $1.03 Canadian in June 2012, and it decreased from 81 Japanese yen in June 2011 to 78 yen in June 2012. Did the U.S. dollar...

Q: Answer the following questions. a. Describe the key differences

Answer the following questions. a. Describe the key differences in performance of the U.S. and Canadian job markets during 2008–2014. b. How do the part-time employment rates of the two countries comp...

Q: The U.S. dollar exchange rate increased from $0

The U.S. dollar exchange rate increased from $0.96 Canadian in June 2011 to $1.03 Canadian in June 2012, and it decreased from 81 Japanese yen in June 2011 to 78 yen in June 2012. What was the value o...

Q: The U.S. dollar exchange rate increased from $0

The U.S. dollar exchange rate increased from $0.96 Canadian in June 2011 to $1.03 Canadian in June 2012, and it decreased from 81 Japanese yen in June 2011 to 78 yen in June 2012. What was the value o...

Q: If a euro deposit in a bank in France earns interest of

If a euro deposit in a bank in France earns interest of 4 percent a year and a yen deposit in Japan earns 0.5 percent a year, other things remaining the same and adjusted for risk, what is the exchang...

Q: When real GDP increased in the second quarter of 2014, consumption

When real GDP increased in the second quarter of 2014, consumption expenditure, exports, and fixed investment increased, but business inventory investment fell from $14.5 billion to $7.0 billion. Expl...

Q: The following events have occurred at times in the history of Canada

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 ex...

Q: The following events have occurred at times in the history of Canada

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 ex...

Q: In Japan, potential GDP is 600 trillion yen. The table

In Japan, potential GDP is 600 trillion yen. The table shows Japan’s aggregate demand and short-run aggregate supply schedules. a. Draw a graph of the aggregate demand curve and the...

Q: In Japan, potential GDP is 600 trillion yen. The table

In Japan, potential GDP is 600 trillion yen. The table shows Japan’s aggregate demand and short-run aggregate supply schedules. Does Japan have an inflationary gap or a recessionary...

Q: Suppose that the E.U. economy goes into an expansion

Suppose that the E.U. economy goes into an expansion. Explain the effect of the expansion on Canadian real GDP and unemployment in the short run.

Q: If the price level and the money wage rate rise by the

If the price level and the money wage rate rise by the same percentage, what happens to the quantity of real GDP supplied? Along which aggregate supply curve does the economy move?

Q: Describe the trends and fluctuations in the Canadian employment-to-

Describe the trends and fluctuations in the Canadian employment-to-population ratio and labour force participation rate since 1960.

Q: Too young to retire, too old to get a new job

Too young to retire, too old to get a new job. That’s how many older workers feel after getting laid off and spending time on the unemployment line. Many lack the skills to craft resumes and search on...

Q: If the price level rises and the money wage rate remains constant

If the price level rises and the money wage rate remains constant, what happens to the quantity of real GDP supplied? Along which aggregate supply curve does the economy move?

Q: If potential GDP increases, what happens to aggregate supply? Does

If potential GDP increases, what happens to aggregate supply? Does the LAS curve shift or is there a movement along the LAS curve? Does the SAS curve shift or is there a movement along the SAS curve?...

Q: If the money wage rate rises and potential GDP remains the same

If the money wage rate rises and potential GDP remains the same, does the LAS curve or the SAS curve shift or is there a movement along the LAS curve or the SAS curve?

Q: Does economic growth result from increases in aggregate demand, short-

Does economic growth result from increases in aggregate demand, short-run aggregate supply, or long-run aggregate supply?

Q: Does inflation result from increases in aggregate demand, short-run

Does inflation result from increases in aggregate demand, short-run aggregate supply, or long run aggregate supply?

Q: What are the defining features of classical macroeconomics and what policies do

What are the defining features of classical macroeconomics and what policies do classical macroeconomists recommend?

Q: The Bank of Canada cuts the quantity of money and all other

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.

Q: The increase in real GDP in the second quarter primarily reflected increases

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, ma...

Q: Initially, the short-run aggregate supply curve is SAS0 and

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...

Q: Gains in stock markets and increased house prices boosted Canadians’ wealth in

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...

Q: Statistics Canada reported the following CPI data: June 2008……...

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 in...

Q: Gains in stock markets and increased house prices boosted Canadians’ wealth in

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...

Q: The U.S. Commerce Department reported that wholesale inventories fell

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...

Q: Statistics Canada reported that in the second quarter of 2014 Canadian exports

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 expe...

Q: Statistics Canada reported that in the second quarter of 2014 Canadian exports

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...

Q: Which components of aggregate expenditure are influenced by real GDP?

Which components of aggregate expenditure are influenced by real GDP?

Q: What is the relationship between aggregate planned expenditure and real GDP at

What is the relationship between aggregate planned expenditure and real GDP at equilibrium expenditure?

Q: If real GDP and aggregate expenditure are less than equilibrium expenditure,

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?

Q: If real GDP and aggregate expenditure are greater than equilibrium expenditure,

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?

Q: How do the marginal propensity to consume, the marginal propensity to

How do the marginal propensity to consume, the marginal propensity to import, and the income tax rate influence the multiplier?

Q: How does a change in the price level influence the AE curve

How does a change in the price level influence the AE curve and the AD curve?

Q: Statistics Canada reported the following CPI data: June 2008……...

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?...

Q: How does an increase in autonomous expenditure change real GDP in the

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.

Q: In an economy, autonomous consumption expenditure is $50 billion,

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 $2...

Q: In an economy, autonomous consumption expenditure is $50 billion,

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 $2...

Q: In an economy, autonomous consumption expenditure is $50 billion,

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 $2...

Q: In an economy, autonomous consumption expenditure is $50 billion,

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 $2...

Q: Suppose that the economy is at full employment, the price level

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...

Q: Suppose that the economy is at full employment, the price level

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 r...

Q: Explain how an increase in business investment at a constant price level

Explain how an increase in business investment at a constant price level changes equilibrium expenditure.

Q: An economy has a fixed price level, no imports, and

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...

Q: In 2014, China’s real GDP is growing at 7 percent 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 wha...

Q: Mexico’s real GDP was 13,405 trillion pesos in 2013 and

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 GD...

Q: South Africa’s real GDP was 1,900 billion rand in 2011

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 rea...

Q: While gross domestic product growth is picking up a bit in emerging

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 g...

Q: The first table describes an economy’s labour market in 2014 and the

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...

Q: Just six months ago, India was looking good. Annual growth

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...

Q: Is faster economic growth always a good thing? Argue the case

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.

Q: Describe the alternative measures of unemployment.

Describe the alternative measures of unemployment.

Q: We are at a tipping point where technology— from software to

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...

Q: Answer the following questions. a. How do South Africa

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 t...

Q: China grows at around 9 percent a year, but its one

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 w...

Q: What is the relationship between the growth rate of real GDP and

What is the relationship between the growth rate of real GDP and the growth rate of real GDP per person?

Q: Use the Rule of 70 to calculate the growth rate that leads

Use the Rule of 70 to calculate the growth rate that leads to a doubling of real GDP per person in 20 years.

Q: What has been the average growth rate of Canadian real GDP per

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?

Q: Describe the gaps between real GDP per person in Canada and in

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?

Q: Compare the growth rates in Hong Kong, Korea, Singapore,

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?

Q: What determines the demand for labour, the supply of labour,

What determines the demand for labour, the supply of labour, and labour market equilibrium?

Q: Explain the influences on the pace of labour productivity growth.

Explain the influences on the pace of labour productivity growth.

Q: Why is the unemployment rate never zero, even at full employment

Why is the unemployment rate never zero, even at full employment?

Q: What is the key idea of classical growth theory that leads to

What is the key idea of classical growth theory that leads to the dismal outcome?

Q: What is the key proposition of new growth theory that makes economic

What is the key proposition of new growth theory that makes economic growth persist?

Q: Brazil’s real GDP was 1,180 trillion reais in 2013 and

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....

Q: The IMF projects that China’s real GDP per person will be 15

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 m...

Q: China was the largest economy for centuries because everyone had the same

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 Revolu...

Q: For three years, there was no technological change in Longland but

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. T...

Q: Explain the processes that will bring the growth of real GDP per

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.

Q: Recent data indicate that Canadians are saving more. Statistics Canada reports

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 Mon...

Q: Draw a graph to illustrate the effect of an increase in the

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...

Q: Draw a graph to illustrate how an increase in the supply of

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 loanab...

Q: Why does unemployment arise and what makes some unemployment unavoidable?

Why does unemployment arise and what makes some unemployment unavoidable?

Q: In 2012, the Lee family had disposable income of $80

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...

Q: A judge in Lamar County, Texas, ruled that TransCanada has

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 so...

Q: The table sets out the data for an economy when the government’s

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 s...

Q: Answer the following questions. a. Why does the news

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 influe...

Q: G20 Vows to Boost World GDP by $2 trillion The centrepiece

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 y...

Q: Distinguish between physical capital and financial capital and give two examples of

Distinguish between physical capital and financial capital and give two examples of each.

Q: Explain the connection between the price of a financial asset and its

Explain the connection between the price of a financial asset and its interest rate.

Q: How do firms make investment decisions?

How do firms make investment decisions?

Q: What determines the demand for loanable funds and what makes it change

What determines the demand for loanable funds and what makes it change?

Q: How do households make saving decisions?

How do households make saving decisions?

Q: Define frictional unemployment, structural unemployment, and cyclical unemployment. Give

Define frictional unemployment, structural unemployment, and cyclical unemployment. Give examples of each type of unemployment.

Q: What determines the supply of loanable funds and what makes it change

What determines the supply of loanable funds and what makes it change?

Q: How do changes in the demand for and supply of loanable funds

How do changes in the demand for and supply of loanable funds change the real interest rate and quantity of loanable funds?

Q: What is the Ricardo-Barro effect and how does it modify

What is the Ricardo-Barro effect and how does it modify the crowding-out effect?

Q: Lori is a student who teaches golf on Saturdays. In a

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 $5,00...

Q: Treasury Yields Fall to Two-Week Low Treasury bond prices rose

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...

Q: First Call, Inc., a smartphone company, plans to build

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 inter...

Q: The table sets out the data for an economy when the government’s

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 s...

Q: The table sets out the data for an economy when the government’s

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...

Q: The table sets out the data for an economy when the government’s

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 inter...

Q: Sara withdraws $1,000 from her savings account at the

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?

Q: How does the natural unemployment rate change and what factors might make

How does the natural unemployment rate change and what factors might make it change?

Q: Rapid inflation in Brazil in the early 1990s caused the cruzeiro to

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...

Q: Starbucks customers can now pay for their coffee using their smartphone.

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 cu...

Q: The RBC says lines of credit for education are popular and the

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...

Q: How does financial regulation in Canada help minimize the cost of bank

How does financial regulation in Canada help minimize the cost of bank failure? Does it bring more stability to the banking system?

Q: If the Bank of Canada makes an open market sale of $

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?

Q: Set out the transactions that the Bank of Canada undertakes to increase

Set out the transactions that the Bank of Canada undertakes to increase the quantity of money.

Q: Describe the Bank of Canada’s assets and liabilities. What is the

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?

Q: The U.S. Federal Reserve discussed “a new largescale

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 mak...

Q: Banks in New Transylvania have a desired reserve ratio of 10 percent

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...

Q: Explain the change in the nominal interest rate in the short run

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.

Q: What are the four main ways in which the CPI is an

What are the four main ways in which the CPI is an upward-biased measure of the price level?

Q: The figure shows an economy’s demand for money curve. /

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 wil...

Q: Use the data in Problem 7 to work this problem. The

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 p...

Q: The table provides some data for the United States in the first

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 wi...

Q: Answer the following questions. a. What changes in the

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...

Q: Financial innovation and the spread of U.S. currency throughout

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 polic...

Q: In the United Kingdom, the currency drain ratio is 38 percent

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...

Q: What makes something money? What functions does money perform? Why

What makes something money? What functions does money perform? Why do you think packs of chewing gum don’t serve as money?

Q: What are the problems that arise when a commodity is used as

What are the problems that arise when a commodity is used as money?

Q: What are the official measures of money? Are all the measures

What are the official measures of money? Are all the measures really money?

Q: Why are cheques and credit cards not money?

Why are cheques and credit cards not money?

Q: How does demand-pull inflation begin?

How does demand-pull inflation begin?

Q: If the natural unemployment rate increases, what happens to the short

If the natural unemployment rate increases, what happens to the short-run Phillips curve and the long-run Phillips curve?

Q: The economy is in a boom and the inflationary gap is large

The economy is in a boom and the inflationary gap is large. a. Describe the discretionary and automatic fiscal policy actions that might occur. b. Describe a discretionary fiscal restraint package tha...

Q: The economy is growing slowly, the inflationary gap is large,

The economy is growing slowly, the inflationary gap is large, and there is a budget deficit. a. Do we know whether the budget deficit is structural or cyclical? Explain your choice and sketch a graph...

Q: China’s economy is slowing from its normal 9 percent or higher economic

China’s economy is slowing from its normal 9 percent or higher economic growth rate to just below 9 percent. The source of the slowdown is the global economic slowdown that is restricting exports grow...

Q: Answer the following questions. a. What was the state

Answer the following questions. a. What was the state of the Japanese economy in 2013? b. Explain the effects of Japan’s high level of government spending and debt on the level of employment and poten...

Q: In The New York Times articles and in blogs, economists Paul

In The New York Times articles and in blogs, economists Paul Krugman and Joseph Stiglitz say that, with slow recovery from recession, there is a need for more fiscal stimulus in both the United States...

Q: U.K. Prime Minister David Cameron on Monday warned that

U.K. Prime Minister David Cameron on Monday warned that “time was short” for Eurozone leaders bidding to solve a debt crisis. Cameron called on Germany to accept the “collective responsibility” of the...

Q: Why are income taxes on capital income more powerful than those on

Why are income taxes on capital income more powerful than those on labour income?

Q: What is the Laffer curve and why is it unlikely that Canada

What is the Laffer curve and why is it unlikely that Canada is on the “wrong” side of it?

Q: How do taxes and transfer payments programs work as automatic fiscal policy

How do taxes and transfer payments programs work as automatic fiscal policy to dampen the business cycle?

Q: How do we tell whether a budget deficit needs discretionary action to

How do we tell whether a budget deficit needs discretionary action to remove it?

Q: Does Canada have a stable short-run Phillips curve? Explain

Does Canada have a stable short-run Phillips curve? Explain why or why not.

Q: At the end of 2011, China’s government debt was ¥4

At the end of 2011, China’s government debt was ¥4,700 billion (¥ is yuan, the currency of China). In 2012, the government spent ¥6,000 billion and ended the year with a debt of ¥5,300 billion. How mu...

Q: The government is considering raising the tax rate on labour income and

The government is considering raising the tax rate on labour income and asks you to report on the supply-side effects of such an action. Use appropriate graphs and report directions of change, not exa...

Q: Suppose that instead of taxing nominal capital income, the government taxed

Suppose that instead of taxing nominal capital income, the government taxed real capital income. Use graphs to explain and illustrate the effect that this change would have on: a. The tax rate on capi...

Q: The economy is in a recession, and the recessionary gap is

The economy is in a recession, and the recessionary gap is large. a. Describe the discretionary and automatic fiscal policy actions that might occur. b. Describe a discretionary fiscal stimulus packag...

Q: The economy is in a recession, the recessionary gap is large

The economy is in a recession, the recessionary gap is large, and there is a budget deficit. a. Do we know whether the budget deficit is structural or cyclical? Explain your answer and use a graph to...

Q: Jim Flaherty tabled a 2011 budget with a deficit for this year

Jim Flaherty tabled a 2011 budget with a deficit for this year gradually falling to a surplus in 2015. Mr. Flaherty said the budget aims to find that balance between helping Canadian families and busi...

Q: The NDP called for immediate action to create jobs by investing in

The NDP called for immediate action to create jobs by investing in infrastructure and green energy programs to give the economy a kickstart. It needs more than corporate tax cuts, the NDP said. Is the...

Q: The NDP called for immediate action to create jobs by investing in

The NDP called for immediate action to create jobs by investing in infrastructure and green energy programs to give the economy a kickstart. It needs more than corporate tax cuts, the NDP said. Explai...

Q: The NDP called for immediate action to create jobs by investing in

The NDP called for immediate action to create jobs by investing in infrastructure and green energy programs to give the economy a kickstart. It needs more than corporate tax cuts, the NDP said. What w...

Q: The Bank of Canada and the Government of Canada have agreed that

The Bank of Canada and the Government of Canada have agreed that the Bank will achieve an inflation rate target. Based on the performance of Canadian inflation and unemployment, has the Bank’s inflati...

Q: Members expected real GDP growth to be moderate over coming quarters and

Members expected real GDP growth to be moderate over coming quarters and then to pick up very gradually, with the unemployment rate declining only slowly. With longer-term inflation expectations stabl...

Q: Suppose Parliament decided to strip the Bank of Canada of its monetary

Suppose Parliament decided to strip the Bank of Canada of its monetary policy powers and decided to legislate interest rate changes. How would you expect the policy choices to change? Which arrangemen...

Q: In the 1980s, it was Argentina, Mexico, and the

In the 1980s, it was Argentina, Mexico, and the Philippines that struggled with unsustainable debt loads. In the 1990s, it was Russia and the go-go economies of East Asia. Today, it is the United Stat...

Q: In the 1980s, it was Argentina, Mexico, and the

In the 1980s, it was Argentina, Mexico, and the Philippines that struggled with unsustainable debt loads. In the 1990s, it was Russia and the go-go economies of East Asia. Today, it is the United Stat...

Q: The U.S. Federal Reserve Act of 2000 instructs the

The U.S. Federal Reserve Act of 2000 instructs the Federal Reserve to pursue its goals by “maintain[ing] long-run growth of the monetary and credit aggregates commensurate with the economy’s long-run...

Q: Looking at the overnight loans rate since 2000, identify periods during

Looking at the overnight loans rate since 2000, identify periods during which, with the benefit of hindsight, the rate might have been kept too low. Identify periods during which it might have been to...

Q: At the end of 2009, the unemployment rate was 8.

At the end of 2009, the unemployment rate was 8.3 percent, the inflation rate was 0.8 percent, and the overnight loans rate target was 0.25 percent. In mid- 2014, the unemployment rate was about 7 per...

Q: At the end of 2009, the unemployment rate was 8.

At the end of 2009, the unemployment rate was 8.3 percent, the inflation rate was 0.8 percent, and the overnight loans rate target was 0.25 percent. In mid- 2014, the unemployment rate was about 7 per...

Q: At the end of 2009, the unemployment rate was 8.

At the end of 2009, the unemployment rate was 8.3 percent, the inflation rate was 0.8 percent, and the overnight loans rate target was 0.25 percent. In mid- 2014, the unemployment rate was about 7 per...

Q: From 2007 to 2009, the long-term real interest rate

From 2007 to 2009, the long-term real interest rate paid by the safest corporations increased from 2.3 percent to 3.8 percent. During that same period, the overnight loans rate fell from 4.5 percent t...

Q: From 2007 to 2009, the long-term real interest rate

From 2007 to 2009, the long-term real interest rate paid by the safest corporations increased from 2.3 percent to 3.8 percent. During that same period, the overnight loans rate fell from 4.5 percent t...

Q: After the first two months of the current fiscal year, Canada’s

After the first two months of the current fiscal year, Canada’s deficit sits at $4.4 billion, compared with $7.5 billion in the same period of 2009 when the economy was still in recession. The governm...

Q: Traders continued to make bets in favour of the yen, sending

Traders continued to make bets in favour of the yen, sending the U.S. dollar to a record low against the Japanese currency. a. How do “bets in favour of the yen” influence the exchange rate? b. How do...

Q: Robert Shiller, Professor of Economics at Yale University, predicted that

Robert Shiller, Professor of Economics at Yale University, predicted that there was a very real possibility that the United States would be plunged into a Japan-style slump, with house prices declinin...

Q: U.S. Federal Reserve’s Plosser Opposes QE3 Federal Reserve Bank

U.S. Federal Reserve’s Plosser Opposes QE3 Federal Reserve Bank of Philadelphia president Charles Plosser does not think that monetary policy can “do much to speed up the slow progress” in the labour...

Q: Suppose that the Reserve Bank of New Zealand is following the Taylor

Suppose that the Reserve Bank of New Zealand is following the Taylor rule. In 2009, it sets the official cash rate (its equivalent of the overnight loans rate) at 4 percent a year. If the inflation ra...

Q: Inflation targeting promotes well-anchored inflation expectations, which facilitates more

Inflation targeting promotes well-anchored inflation expectations, which facilitates more effective stabilization of output and employment. Thus inflation targeting can deliver good results with respe...

Q: Answer the following questions. a. What was the state

Answer the following questions. a. What was the state of the Canadian economy in 2014? b. What was Carolyn Wilkin’s expectation about future real GDP growth and inflation in September 2014? c. How wou...

Q: What is the Bank of Canada’s monetary policy objective?

What is the Bank of Canada’s monetary policy objective?

Q: How does the core inflation rate differ from the overall CPI inflation

How does the core inflation rate differ from the overall CPI inflation rate?

Q: What is the Bank of Canada’s monetary policy instrument?

What is the Bank of Canada’s monetary policy instrument?

Q: Summarize the Bank of Canada’s monetary policy decision-making process.

Summarize the Bank of Canada’s monetary policy decision-making process.

Q: John H. Cochrane, a professor of finance at the University

John H. Cochrane, a professor of finance at the University of Chicago, thinks we face the risk of inflation, and if inflation does break out the Fed will not have the ability to stop it and it will “b...

Q: What is the operating band?

What is the operating band?

Q: What happens when the Bank of Canada buys securities in the open

What happens when the Bank of Canada buys securities in the open market?

Q: Describe the channels by which monetary policy ripples through the economy and

Describe the channels by which monetary policy ripples through the economy and explain how each channel operates.

Q: Do interest rates fluctuate in response to the Bank of Canada’s actions

Do interest rates fluctuate in response to the Bank of Canada’s actions?

Q: How do the Bank of Canada’s actions change the exchange rate?

How do the Bank of Canada’s actions change the exchange rate?

Q: How do the Bank’s actions influence real GDP and how long does

How do the Bank’s actions influence real GDP and how long does it take for real GDP to respond to the Bank’s policy changes?

Q: How do the Bank’s actions influence the inflation rate and how long

How do the Bank’s actions influence the inflation rate and how long does it take for inflation to respond to the Bank’s policy changes?

Q: How might inflation targeting improve U.S. monetary policy?

How might inflation targeting improve U.S. monetary policy?

Q: How might using the Taylor rule improve the Fed’s monetary policy?

How might using the Taylor rule improve the Fed’s monetary policy?

Q: Unemployment is a more serious economic problem than inflation and it should

Unemployment is a more serious economic problem than inflation and it should be the focus of the Bank of Canada’s monetary policy.” Evaluate this statement and explain why the Bank’s policy goal is a...

Q: What are the main items of government revenues and outlays?

What are the main items of government revenues and outlays?

Q: Monetary policy is too important to be left to the Bank of

Monetary policy is too important to be left to the Bank of Canada. The government should be responsible for it.” How is responsibility for monetary policy allocated between the Bank of Canada and the...

Q: The 2011 inflation control target agreement between the Government of Canada and

The 2011 inflation control target agreement between the Government of Canada and the Bank of Canada runs to the end of 2016. a. What role does the inflation control agreement say about the Bank’s cont...

Q: What are the possible monetary policy instruments and which one does the

What are the possible monetary policy instruments and which one does the Bank of Canada use? How has its value behaved since 2000?

Q: How does the Bank of Canada hit its overnight loans rate target

How does the Bank of Canada hit its overnight loans rate target?

Q: During 2011, Canada is in an environment of substantial headwinds from

During 2011, Canada is in an environment of substantial headwinds from Europe and the United States, and monetary policy may need to maintain stimulus to achieve the inflation target at full employmen...

Q: During 2011, Canada is in an environment of substantial headwinds from

During 2011, Canada is in an environment of substantial headwinds from Europe and the United States, and monetary policy may need to maintain stimulus to achieve the inflation target at full employmen...

Q: With low interest rates, business investment and trade are expected to

With low interest rates, business investment and trade are expected to bring growth through 2016. Explain the effects of the Bank of Canada’s low interest rates on business investment. Draw a graph to...

Q: On September 15, 2014, the OECD predicted that global growth

On September 15, 2014, the OECD predicted that global growth would continue at a moderate rate and that Canada’s economic growth will strengthen. If the OECD forecasts turn out to be correct, what wou...

Q: William Dudley, president of the New York Fed, raised the

William Dudley, president of the New York Fed, raised the prospect of the Fed becoming more explicit about its inflation goal to “help anchor inflation expectations at the desired rate.” a. What monet...

Q: Suppose that the world price of eggs is $1 a dozen

Suppose that the world price of eggs is $1 a dozen, Canada does not trade internationally, and the equilibrium price of eggs in Canada is $3 a dozen. Canada then begins to trade internationally. a. Ho...

Q: Under what circumstances does the government have a budget surplus?

Under what circumstances does the government have a budget surplus?

Q: Suppose that the world price of steel is $100 a tonne

Suppose that the world price of steel is $100 a tonne, India does not trade internationally, and the equilibrium price of steel in India is $60 a tonne. India then begins to trade internationally. a....

Q: The hunger crisis in poor countries has its roots in Canadian,

The hunger crisis in poor countries has its roots in Canadian, U.S., and European policies of subsidizing the diversion of food crops to produce biofuels like corn-based ethanol. That is, doling out s...

Q: Draw a graph of the market for corn in the poor developing

Draw a graph of the market for corn in the poor developing country in Problem 15(b) to show the changes in the price of corn, the quantity produced, and the quantity consumed by people in that country...

Q: South Korea will reopen its market to most Canadian beef. South

South Korea will reopen its market to most Canadian beef. South Korea banned imports of beef in 2003 amid concerns over a case of mad cow disease. The ban closed what was then the fourth-largest marke...

Q: South Korea will reopen its market to most Canadian beef. South

South Korea will reopen its market to most Canadian beef. South Korea banned imports of beef in 2003 amid concerns over a case of mad cow disease. The ban closed what was then the fourth-largest marke...

Q: Before 1995, trade between Canada and Mexico was subject to tariffs

Before 1995, trade between Canada and Mexico was subject to tariffs. In 1995, Mexico joined NAFTA and all Canadian and Mexican tariffs have gradually been removed. Explain how the price that Canadian...

Q: The cost of protecting jobs in uncompetitive sectors through tariffs is high

The cost of protecting jobs in uncompetitive sectors through tariffs is high: Saving a job in the sugar industry costs American consumers $826,000 in higher prices a year; saving a dairy industry job...

Q: Answer the following questions. a. What is the TPP

Answer the following questions. a. What is the TPP? b. Who in Canada would benefit and who would lose from a successful TPP? c. Illustrate your answer to part (b) with an appropriate graphical analysi...

Q: Italy has dropped its resistance to an E.U. trade

Italy has dropped its resistance to an E.U. trade agreement with South Korea, which will wipe out $2 billion in annual duties on E.U. exports. Italians argued that the agreement, which eliminates E.U....

Q: Describe the situation in the market for a good or service that

Describe the situation in the market for a good or service that Canada imports.

Q: William Watson, an economics professor at McGill University, Montreal,

William Watson, an economics professor at McGill University, Montreal, says there’s nothing magical, mystical, or personal about job creation. It occurs when someone who wants to sell a product or ser...

Q: Describe the situation in the market for a good or service that

Describe the situation in the market for a good or service that Canada exports.

Q: Why is the net gain from international trade positive?

Why is the net gain from international trade positive?

Q: Explain who gains and who loses from a tariff and why the

Explain who gains and who loses from a tariff and why the losses exceed the gains.

Q: Explain who gains and who loses from an import quota and why

Explain who gains and who loses from an import quota and why the losses exceed the gains.

Q: What are the infant industry and dumping arguments for protection? Are

What are the infant industry and dumping arguments for protection? Are they correct?

Q: Can protection save jobs and the environment and prevent workers in developing

Can protection save jobs and the environment and prevent workers in developing countries from being exploited?

Q: What are the main reasons for imposing a tariff?

What are the main reasons for imposing a tariff?

Q: Why don’t the winners from free trade win the political argument?

Why don’t the winners from free trade win the political argument?

Q: Wholesalers buy and sell roses in containers that hold 120 stems.

Wholesalers buy and sell roses in containers that hold 120 stems. The table provides data about the wholesale market for roses in North America. The demand schedule is the wholesalersâ€...

Q: Wholesalers buy and sell roses in containers that hold 120 stems.

Wholesalers buy and sell roses in containers that hold 120 stems. The table provides data about the wholesale market for roses in North America. The demand schedule is the wholesalersâ€...

Q: William Watson, an economics professor at McGill University, Montreal,

William Watson, an economics professor at McGill University, Montreal, says there’s nothing magical, mystical, or personal about job creation. It occurs when someone who wants to sell a product or ser...

Q: Wholesalers buy and sell roses in containers that hold 120 stems.

Wholesalers buy and sell roses in containers that hold 120 stems. The table provides data about the wholesale market for roses in North America. The demand schedule is the wholesalersâ€...

Q: Use the information on the North American wholesale market for roses in

Use the information on the North American wholesale market for roses in Problem 1 to: a. Explain who gains and who loses from free international trade in roses compared to a situation in which North A...

Q: Use the information on the Noth American wholesale market for roses in

Use the information on the Noth American wholesale market for roses in Problem 1. If a tariff of $25 per container is imposed on imports of roses, explain how the price of roses, the quantity of roses...

Q: Use the information on the Noth American wholesale market for roses in

Use the information on the Noth American wholesale market for roses in Problem 1. Draw a graph of the North American market for roses to illustrate the effects of the tariff. On the graph, identify th...

Q: Use the information on the Noth American wholesale market for roses in

Use the information on the Noth American wholesale market for roses in Problem 1. Draw a graph to illustrate the effects of the import quota. On the graph, identify the the importers’...

Q: U.S. regulators ordered the recall of more than 450

U.S. regulators ordered the recall of more than 450,000 faulty tires. The Chinese producer of the tires disputed the allegations and hinted that the recall might be an effort to hamper Chinese exports...

Q: Explain the connection between a government budget deficit and a government debt

Explain the connection between a government budget deficit and a government debt

Q: What is the distinction between deflation and a one-time fall

What is the distinction between deflation and a one-time fall in the price level?

Q: How does a tax on labour income influence the equilibrium quantity of

How does a tax on labour income influence the equilibrium quantity of employment?

Q: China’s economy is slowing from its normal 9 percent or higher economic

China’s economy is slowing from its normal 9 percent or higher economic growth rate to just below 9 percent. The source of the slowdown is the global economic slowdown that is restricting exports grow...

Q: China’s economy is slowing from its normal 9 percent or higher economic

China’s economy is slowing from its normal 9 percent or higher economic growth rate to just below 9 percent. The source of the slowdown is the global economic slowdown that is restricting exports grow...

Q: How does the tax wedge influence potential GDP?

How does the tax wedge influence potential GDP?

Q: Why are consumption taxes relevant for measuring the tax wedge?

Why are consumption taxes relevant for measuring the tax wedge?

Q: What is the distinction between automatic and discretionary fiscal policy?

What is the distinction between automatic and discretionary fiscal policy?

Q: How can the federal government use discretionary fiscal policy to stimulate the

How can the federal government use discretionary fiscal policy to stimulate the economy?

Q: Why might fiscal stimulus crowd out investment?

Why might fiscal stimulus crowd out investment?

Q: What fiscal policy action might increase investment and speed economic growth?

What fiscal policy action might increase investment and speed economic growth? Explain how the policy action would work.

Q: Jim Flaherty tabled a 2011 budget with a deficit for this year

Jim Flaherty tabled a 2011 budget with a deficit for this year gradually falling to a surplus in 2015. Mr. Flaherty said the budget aims to find that balance between helping Canadian families and busi...

Q: According to RBC theory, what is the source of the business

According to RBC theory, what is the source of the business cycle? What is the role of fluctuations in the rate of technological change?

Q: The Bank of Canada and the Government of Canada have agreed that

The Bank of Canada and the Government of Canada have agreed that the Bank will achieve an inflation rate target. Explain how inflation targeting promotes full employment in the long run.

Q: From 2007 to 2009, the long-term real interest rate

From 2007 to 2009, the long-term real interest rate paid by the safest corporations increased from 2.3 percent to 3.8 percent. During that same period, the overnight loans rate fell from 4.5 percent t...

Q: The Bank of Canada and the Government of Canada have agreed that

The Bank of Canada and the Government of Canada have agreed that the Bank will achieve an inflation rate target. Explain the conflict between inflation targeting and unemployment targeting in the shor...

Q: In the 1980s, it was Argentina, Mexico, and the

In the 1980s, it was Argentina, Mexico, and the Philippines that struggled with unsustainable debt loads. In the 1990s, it was Russia and the go-go economies of East Asia. Today, it is the United Stat...

Q: Robert Shiller, Professor of Economics at Yale University, predicted that

Robert Shiller, Professor of Economics at Yale University, predicted that there was a very real possibility that the United States would be plunged into a Japan-style slump, with house prices declinin...

Q: At the end of 2009, the unemployment rate was 8.

At the end of 2009, the unemployment rate was 8.3 percent, the inflation rate was 0.8 percent, and the overnight loans rate target was 0.25 percent. In mid- 2014, the unemployment rate was about 7 per...

Q: At the end of 2009, the unemployment rate was 8.

At the end of 2009, the unemployment rate was 8.3 percent, the inflation rate was 0.8 percent, and the overnight loans rate target was 0.25 percent. In mid- 2014, the unemployment rate was about 7 per...

Q: What are the two parts of the inflation-control target?

What are the two parts of the inflation-control target?

Q: Inflation targeting promotes well-anchored inflation expectations, which facilitates more

Inflation targeting promotes well-anchored inflation expectations, which facilitates more effective stabilization of output and employment. Thus inflation targeting can deliver good results with respe...

Q: What is the Bank of Canada’s record in achieving its inflation-

What is the Bank of Canada’s record in achieving its inflation-control target?

Q: What must happen to create a cost-push inflation spiral?

What must happen to create a cost-push inflation spiral?

Q: How is the overnight rate determined in the market for bank reserves

How is the overnight rate determined in the market for bank reserves?

Q: What are the three ingredients of a financial and banking crisis?

What are the three ingredients of a financial and banking crisis?

Q: What are the policy actions taken by central banks in response to

What are the policy actions taken by central banks in response to the financial crisis?

Q: Why was the U.S. recovery from the 2008–

Why was the U.S. recovery from the 2008–2009 recession so slow?

Q: With low interest rates, business investment and trade are expected to

With low interest rates, business investment and trade are expected to bring growth through 2016. Explain the effects of business investment on aggregate demand. Would you expect it to have a multipli...

Q: With low interest rates, business investment and trade are expected to

With low interest rates, business investment and trade are expected to bring growth through 2016. What actions might the Bank of Canada take to stimulate business investment further?

Q: If the Bank of Canada started to raise the overnight loans rate

If the Bank of Canada started to raise the overnight loans rate in 2015, explain the process by which this policy action would change real GDP.

Q: What does the Bank of Canada do to determine whether the overnight

What does the Bank of Canada do to determine whether the overnight loans rate should be raised, lowered, or left unchanged?

Q: A semiconductor is a key component in your laptop, cellphone,

A semiconductor is a key component in your laptop, cellphone, and iPod. The table provides information about the market for semiconductors in Canada. Producers of semiconductors can get $18 a unit on...

Q: Before 1995, trade between Canada and Mexico was subject to tariffs

Before 1995, trade between Canada and Mexico was subject to tariffs. In 1995, Mexico joined NAFTA and all Canadian and Mexican tariffs have gradually been removed. Explain how the quantity of Canadian...

Q: What is stagflation and why does cost-push inflation cause stagflation

What is stagflation and why does cost-push inflation cause stagflation?

Q: Suppose that in 2014 tomato growers in Ontario lobby the Canadian government

Suppose that in 2014 tomato growers in Ontario lobby the Canadian government to impose an import quota on Mexican tomatoes. Explain who in Canada would gain and who would lose from such an import quot...

Q: Suppose that in response to huge job losses in the Canadian textile

Suppose that in response to huge job losses in the Canadian textile industry, the Canadian government imposes a 100 percent tariff on imports of textiles from China. Explain how the tariff on textiles...

Q: Suppose that in response to huge job losses in the Canadian textile

Suppose that in response to huge job losses in the Canadian textile industry, the Canadian government imposes a 100 percent tariff on imports of textiles from China. Explain how the Canadian and Chine...

Q: With free trade between Australia and Canada, Australia would export beef

With free trade between Australia and Canada, Australia would export beef to Canada. But Canada imposes an import quota on Australian beef. Explain how this quota influences the price that Canadian co...

Q: With free trade between Australia and Canada, Australia would export beef

With free trade between Australia and Canada, Australia would export beef to Canada. But Canada imposes an import quota on Australian beef. Explain who in Canada gains from the quota on beef imports a...

Q: How is the gain from imports distributed between consumers and domestic producers

How is the gain from imports distributed between consumers and domestic producers?

Q: How is the gain from exports distributed between consumers and domestic producers

How is the gain from exports distributed between consumers and domestic producers?

Q: What are the tools that a country can use to restrict international

What are the tools that a country can use to restrict international trade?

Q: Explain the effects of a tariff on domestic production, the quantity

Explain the effects of a tariff on domestic production, the quantity bought, and the price.

Q: Explain the effects of an import quota on domestic production, consumption

Explain the effects of an import quota on domestic production, consumption, and price.

Q: How does cost-push inflation begin?

How does cost-push inflation begin?

Q: What is offshore outsourcing? Who benefits from it and who loses

What is offshore outsourcing? Who benefits from it and who loses?

Q: Use the information on the Noth American wholesale market for roses in

Use the information on the Noth American wholesale market for roses in Problem 1. Who gains and who loses from this tariff? Information from Problem 1 is as follows: Wholesalers buy and sell roses in...

Q: Use the information on the Noth American wholesale market for roses in

Use the information on the Noth American wholesale market for roses in Problem 1 If an import quota of 5 million containers is imposed on roses, what happens to the North American price of roses, the...

Q: Use the information on the Noth American wholesale market for roses in

Use the information on the Noth American wholesale market for roses in Problem 1. Who gains and who loses from this import quota? Information from Problem 1 is as follows: Wholesalers buy and sell r...

Q: Explain the mainstream theory of the business cycle.

Explain the mainstream theory of the business cycle.

Q: What are the four special forms of the mainstream theory of the

What are the four special forms of the mainstream theory of the business cycle and how do they differ?

Q: What must happen to create a demand-pull inflation spiral?

What must happen to create a demand-pull inflation spiral?

Q: According to RBC theory, how does a fall in productivity growth

According to RBC theory, how does a fall in productivity growth influence investment demand, the market for loanable funds, the real interest rate, the demand for labour, the supply of labour, employm...

Q: What are the main criticisms of RBC theory and how do its

What are the main criticisms of RBC theory and how do its supporters defend it?

Q: How does expected inflation occur?

How does expected inflation occur?

Q: What is deflation?

What is deflation?

Q: How do real GDP and the price level change if the forecast

How do real GDP and the price level change if the forecast of inflation is incorrect?

Q: How does the quantity theory of money help us to understand the

How does the quantity theory of money help us to understand the process of deflation?

Q: Suppose that the Canadian business cycle is best described by RBC theory

Suppose that the Canadian business cycle is best described by RBC theory and that a new technology increases productivity. Draw a graph to show the effect of the new technology in the market for loana...

Q: Suppose that the Canadian business cycle is best described by RBC theory

Suppose that the Canadian business cycle is best described by RBC theory and that a new technology increases productivity. Draw a graph to show the effect of the new technology in the labour market.

Q: Suppose that the Canadian business cycle is best described by RBC theory

Suppose that the Canadian business cycle is best described by RBC theory and that a new technology increases productivity. Explain the when-to-work decision when technology advances.

Q: For most of the last century, wages and productivity— the

For most of the last century, wages and productivity— the key measure of the economy’s efficiency— have risen together, increasing rapidly through the 1950s and ’60s and far more slowly in the 1970s a...

Q: John H. Cochrane, a professor of finance at the University

John H. Cochrane, a professor of finance at the University of Chicago, thinks we face the risk of inflation, and if inflation does break out the Fed will not have the ability to stop it and it will “b...

Q: What are the consequences of deflation?

What are the consequences of deflation?

Q: The United States is planning to push Europe towards new and more

The United States is planning to push Europe towards new and more aggressive efforts to boost aggregate demand given a renewed risk of deflation in the Eurozone. a. Explain the process by which deflat...

Q: An economy has an unemployment rate of 4 percent and an inflation

An economy has an unemployment rate of 4 percent and an inflation rate of 5 percent a year at point A in the figure. Then some events occur that move the economy from A to B to D to C and back to A....

Q: What causes deflation?

What causes deflation?

Q: An economy has an unemployment rate of 4 percent and an inflation

An economy has an unemployment rate of 4 percent and an inflation rate of 5 percent a year at point A in the figure. Then some events occur that move the economy from A to B to D to C and back to A....

Q: The Reserve Bank of New Zealand signed an agreement with the New

The Reserve Bank of New Zealand signed an agreement with the New Zealand government in which the Bank agreed to maintain inflation inside a low target range. Failure to achieve the target would result...

Q: The Reserve Bank of New Zealand signed an agreement with the New

The Reserve Bank of New Zealand signed an agreement with the New Zealand government in which the Bank agreed to maintain inflation inside a low target range. Failure to achieve the target would result...

Q: The indication is that inflationary expectations have become entrenched and strongly rooted

The indication is that inflationary expectations have become entrenched and strongly rooted in world markets. As a result, the risk of global stagflation has become significant. A drawn-out inflationa...

Q: Despite higher-than-forecast inflation, Bank of Canada Governor

Despite higher-than-forecast inflation, Bank of Canada Governor Mark Carney said he may keep interest rates low beyond when full output is restored as the domestic recovery is hobbled by a weak econom...

Q: Answer the following questions. a. What are the macroeconomic

Answer the following questions. a. What are the macroeconomic problems in the Eurozone economy that the ECB is seeking to address? b. Is the European unemployment problem structural, cyclical, or both...

Q: The pace of German economic growth has weakened “markedly,” but

The pace of German economic growth has weakened “markedly,” but the reason is the weaker global prospects. Although German policymakers worry about the country’s exposure to a fall in demand for its e...

Q: How would you use the Phillips curve to illustrate an unexpected change

How would you use the Phillips curve to illustrate an unexpected change in inflation?

Q: If the expected inflation rate increases by 10 percentage points, how

If the expected inflation rate increases by 10 percentage points, how do the short-run Phillips curve and the long-run Phillips curve change?

Q: What is the cause of the high unemployment rate? One side

What is the cause of the high unemployment rate? One side says there is not enough government spending. The other says it’s a structural problem—people who can’t move to take new jobs because they are...

Q: How can deflation be ended?

How can deflation be ended?

Q: On top of rising energy prices, a severe drought, bad

On top of rising energy prices, a severe drought, bad harvests, and a poor monsoon season in Asia have sent grain prices soaring. Globally, this is the third major food price shock in five years. Expl...

Q: The economy starts out on the curves labelled AD0 and SAS0.

The economy starts out on the curves labelled AD0 and SAS0. Some events occur and the economy experiences a demand-pull inflation. What might those events have been? Describe their initial effects an...

Q: The economy starts out on the curves labelled AD0 and SAS0.

The economy starts out on the curves labelled AD0 and SAS0. Some events occur and the economy experiences a cost-push inflation. What might those events have been? Describe their initial effects and...

Q: The economy starts out on the curves labelled AD0 and SAS0

The economy starts out on the curves labelled AD0 and SAS0 Some events occur and the economy is expected to experience inflation.What might those events have been? Describe their initial effects and...

Q: Suppose that the velocity of circulation of money is constant and real

Suppose that the velocity of circulation of money is constant and real GDP is growing at 3 percent a year. a. To achieve an inflation target of 2 percent a year, at what rate would the central bank gr...

Q: Eurozone unemployment rose to 10.7 percent. At the same

Eurozone unemployment rose to 10.7 percent. At the same time, Eurozone inflation unexpectedly rose to 2.7 percent a year, up from the previous month’s 2.6 percent a year. a. How does the Phillips curv...

Q: Suppose that investment is $160 billion, saving is $140

Suppose that investment is $160 billion, saving is $140 billion, government expenditure on goods and services is $150 billion, exports are $200 billion, and imports are $250 billion. What is the amoun...

Q: Suppose that investment is $160 billion, saving is $140

Suppose that investment is $160 billion, saving is $140 billion, government expenditure on goods and services is $150 billion, exports are $200 billion, and imports are $250 billion. a. Is the governm...

Q: Suppose that capital income taxes are based (as they are in

Suppose that capital income taxes are based (as they are in Canada and most countries) on nominal interest rates. If the inflation rate increases by 5 percent a year, explain and use appropriate graph...

Q: Canada weathered the global financial crisis and recession better than many of

Canada weathered the global financial crisis and recession better than many of its peers, principally as a result of the better policies and regulations already in place. Canada was in a much stronger...

Q: Eminem will hit the road with Rihanna offering an awesome deal—

Eminem will hit the road with Rihanna offering an awesome deal—buy one and get one free! When Eminem gave away tickets, what was free and what was scarce? Explain your answer.

Q: / Calculate the slope of the relationship in Problem 4

Calculate the slope of the relationship in Problem 4 between 3,775 and 2,253 theatres. Problem 4: Draw a graph of the relationship between the revenue per theatre on the y -axis and the number of the...

Q: / Calculate the slope of the relationship in Problem 4

Calculate the slope of the relationship in Problem 4 between 2,253 and 3,372 theatres Problem 4: Draw a graph of the relationship between the revenue per theatre on the y -axis and the number of thea...

Q: Which of the following statements is positive, which is normative,

Which of the following statements is positive, which is normative, and which can be tested? a. Canada should cut its imports. b. China is Canada’s largest trading partner. c. The federal government sh...

Q: How does the production possibilities frontier show that every choice involves a

How does the production possibilities frontier show that every choice involves a tradeoff?

Q: / Calculate the slope across the arc AB .

Calculate the slope across the arc AB .

Q: How does the production possibilities frontier illustrate opportunity cost?

How does the production possibilities frontier illustrate opportunity cost?

Q: How does the marginal benefit from a good change as the quantity

How does the marginal benefit from a good change as the quantity produced of that good increases?

Q: What generates economic growth?

What generates economic growth?

Q: How does economic growth influence the production possibilities frontier?

How does economic growth influence the production possibilities frontier?

Q: Explain why Hong Kong has experienced faster economic growth than Canada.

Explain why Hong Kong has experienced faster economic growth than Canada.

Q: Does economic growth overcome scarcity?

Does economic growth overcome scarcity?

Q: In response to the Gates Malaria Forum in October 2007, countries

In response to the Gates Malaria Forum in October 2007, countries are debating the pros and cons of eradication. Dr. Arata Kochi of the World Health Organization believes that with enough money malari...

Q: What are the main functions of markets?

What are the main functions of markets?

Q: Capital accumulation and technological change bring economic growth: Production that was

Capital accumulation and technological change bring economic growth: Production that was unattainable yesterday becomes attainable today; production that is unattainable today will become attainable t...

Q: What is the source of the gains from trade?

What is the source of the gains from trade?

Q: What features of the world market for crude oil make it a

What features of the world market for crude oil make it a competitive market?

Q: Explain why a relative price is an opportunity cost.

Explain why a relative price is an opportunity cost.

Q: In Problem 20, if a virus destroys potato crops and the

In Problem 20, if a virus destroys potato crops and the quantity of potato chips produced decreases by 40 million bags a week at each price, how does the supply of chips change? Problem 20: The deman...

Q: If the virus in Problem 22 hits just as the new dip

If the virus in Problem 22 hits just as the new dip in Problem 21 comes onto the market, how do the equilibrium price and equilibrium quantity of chips change? Problem 22: In Problem 20, if a virus d...

Q: Think of examples of goods whose relative price has risen or fallen

Think of examples of goods whose relative price has risen or fallen by a large amount.

Q: Music retailing is changing: Sony Music and Amazon are selling online

Music retailing is changing: Sony Music and Amazon are selling online, discount stores are selling at low prices, and downtown music retailers are all struggling. a. Draw the PPF curves for downtown m...

Q: Define the quantity demanded of a good or service.

Define the quantity demanded of a good or service.

Q: Why does demand not change when the price of a good changes

Why does demand not change when the price of a good changes with no change in the other influences on buying plans?

Q: Define the quantity supplied of a good or service.

Define the quantity supplied of a good or service.

Q: What does the supply curve tell us about the producer’s minimum supply

What does the supply curve tell us about the producer’s minimum supply price?

Q: What happens to the quantity of cellphones supplied and the supply of

What happens to the quantity of cellphones supplied and the supply of cellphones if the price of a cellphone falls?

Q: What is the equilibrium price of a good or service?

What is the equilibrium price of a good or service?

Q: Over what range of prices does a shortage arise? What happens

Over what range of prices does a shortage arise? What happens to the price when there is a shortage?

Q: Over what range of prices does a surplus arise? What happens

Over what range of prices does a surplus arise? What happens to the price when there is a surplus?

Q: Why is the price at which the quantity demanded equals the quantity

Why is the price at which the quantity demanded equals the quantity supplied the equilibrium price?

Q: Tim Hortons has exploded to become a dominant player among quick-

Tim Hortons has exploded to become a dominant player among quick-serve restaurants. In 2001, it took the risk by switching to centralized production of baked goods, which lowered its labour costs and...

Q: How does the production possibilities frontier illustrate scarcity?

How does the production possibilities frontier illustrate scarcity?

Q: As the average income in China continues to increase, explain how

As the average income in China continues to increase, explain how the following would change: a. The demand for beef b. The demand for rice

Q: The components and robots for Toyota’s auto assembly lines in Canada are

The components and robots for Toyota’s auto assembly lines in Canada are built in Japan. Toyota assembles cars for the Canadian market in Ontario. Explain where these activities appear in Japan’s Nati...

Q: The table lists some data for Xanadu in 2014. Item

The table lists some data for Xanadu in 2014. Item………………………………………….. Billions of dollars Wages paid to labour…………….…………….…………. 800 Consumption expenditure…………….……………… 1,000 Profit, interest, and rents...

Q: The table lists some data for Xanadu in 2014. Item

The table lists some data for Xanadu in 2014. Item………………………………………….. Billions of dollars Wages paid to labour…………….…………….…………. 800 Consumption expenditure…………….……………… 1,000 Profit, interest, and rents...

Q: China’s gross domestic product grew 11.4 percent last year and

China’s gross domestic product grew 11.4 percent last year and marked a fifth year of double-digit growth. The increase was especially remarkable given that the United States is experiencing a slowdow...

Q: What are the distinctions between domestic and national, and gross and

What are the distinctions between domestic and national, and gross and net?

Q: What is the expenditure approach to measuring GDP?

What is the expenditure approach to measuring GDP?

Q: What is the income approach to measuring GDP?

What is the income approach to measuring GDP?

Q: What adjustments must be made to total income to make it equal

What adjustments must be made to total income to make it equal GDP?

Q: What is the distinction between nominal GDP and real GDP?

What is the distinction between nominal GDP and real GDP?

Q: In response to the Gates Malaria Forum in October 2007, countries

In response to the Gates Malaria Forum in October 2007, countries are debating the pros and cons of eradication. Dr. Arata Kochi of the World Health Organization believes that with enough money malari...

Q: How is real GDP calculated?

How is real GDP calculated?

Q: How does the growth rate of real GDP contribute to an improved

How does the growth rate of real GDP contribute to an improved standard of living?

Q: The table lists some data for Canada in 2008. Item

The table lists some data for Canada in 2008. Item…………………………………………….. Billions of dollars Wages paid to labour……..……..……..……..……..……… 815 Consumption expenditure……..……..……..…………... 885 Net domestic in...

Q: The table lists some data for Canada in 2008. Item

The table lists some data for Canada in 2008. Item…………………………………………….. Billions of dollars Wages paid to labour……..……..……..……..……..……… 815 Consumption expenditure……..……..……..…………... 885 Net domestic in...

Q: Explain in which of the years Canada’s standard of living (i

Explain in which of the years Canada’s standard of living (i) increased and (ii) decreased.

Q: The table gives the price of a balloon ride, the temperature

The table gives the price of a balloon ride, the temperature, and the number of rides a day. What happens in the graph in Problem 10 if the temperature rises to 30°C? Problem 10: Draw a g...

Q: The spreadsheet provides the economic data: Column A is the

The spreadsheet provides the economic data: Column A is the year, column B is the inflation rate, column C is the interest rate, column D is the growth rate, and column E is the unemployment rate. Dra...

Q: The spreadsheet provides the economic data: Column A is the

The spreadsheet provides the economic data: Column A is the year, column B is the inflation rate, column C is the interest rate, column D is the growth rate, and column E is the unemployment rate. Dra...

Q: The spreadsheet provides the economic data: Column A is the

The spreadsheet provides the economic data: Column A is the year, column B is the inflation rate, column C is the interest rate, column D is the growth rate, and column E is the unemployment rate. Dra...

Q: Calculate the slope of the following relationship. /

Calculate the slope of the following relationship.

Q: How does the production possibilities frontier illustrate production efficiency?

How does the production possibilities frontier illustrate production efficiency?

Q: / Calculate the slope of the relationship at point A

Calculate the slope of the relationship at point A and at point B.

Q: The table gives the price of a balloon ride, the temperature

The table gives the price of a balloon ride, the temperature, and the number of rides a day. Draw a graph to show the relationship between the price and the number of rides when the temperature is 20...

Q: The Russian government spent $6.7 billion on Olympic facilities

The Russian government spent $6.7 billion on Olympic facilities and $16.7 billion upgrading Sochi area infrastructure. Sponsors spent $27.6 billion on hotels and facilities hoping to turn Sochi into a...

Q: Describe the broad facts about what, how, and for whom

Describe the broad facts about what, how, and for whom goods and services are produced.

Q: Find examples of scarcity in today’s headlines.

Find examples of scarcity in today’s headlines.

Q: Find an example of the distinction between microeconomics and macroeconomics in today’s

Find an example of the distinction between microeconomics and macroeconomics in today’s headlines.

Q: Use headlines from the recent news to illustrate the potential for conflict

Use headlines from the recent news to illustrate the potential for conflict between self-interest and the social interest.

Q: Distinguish between a positive statement and a normative statement and provide examples

Distinguish between a positive statement and a normative statement and provide examples.

Q: What is a model? Can you think of a model that

What is a model? Can you think of a model that you might use in your everyday life?

Q: How do economists try to disentangle cause and effect?

How do economists try to disentangle cause and effect?

Q: Toyota will continue to produce 3 million cars per year and will

Toyota will continue to produce 3 million cars per year and will use the balance of its resources to upgrade its workers’ skills and create new technology. In three years’ time, Toyota plans to produc...

Q: How is economics used as a policy tool?

How is economics used as a policy tool?

Q: Explain how the following news headlines concern self-interest and the

Explain how the following news headlines concern self-interest and the social interest. a. Starbucks Expands in China b. McDonald’s Moves into Gourmet Coffee c. Food Must Be Labelled with Nutrition Da...

Q: The night before an economics test, you decide to go to

The night before an economics test, you decide to go to the movies instead of staying home and working your MyEconLab Study Plan. You get 50 percent on your test compared with the 70 percent that you...

Q: Explain what scatter diagrams show and why we use them.

Explain what scatter diagrams show and why we use them.

Q: Draw a graph to show the relationship between two variables that move

Draw a graph to show the relationship between two variables that move in the same direction.

Q: Draw a graph to show the relationship between two variables that move

Draw a graph to show the relationship between two variables that move in opposite directions.

Q: Which of the relationships in Questions 4 and 5 is a positive

Which of the relationships in Questions 4 and 5 is a positive relationship and which is a negative relationship? Questions 4: Draw a graph to show the relationship between two variables that move in...

Q: How do we graph a relationship among more than two variables?

How do we graph a relationship among more than two variables?

Q: Explain what change will bring a movement along a curve.

Explain what change will bring a movement along a curve.

Q: Explain what change will bring a shift of a curve.

Explain what change will bring a shift of a curve.

Q: Kim can produce 40 pies or 400 cakes an hour. Liam

Kim can produce 40 pies or 400 cakes an hour. Liam can produce 100 pies or 200 cakes an hour. a. Calculate Kim’s opportunity cost of a pie and Liam’s opportunity cost of a pie. b. If each spends 30 mi...

Q: How does the creation of a successful movie influence what, how

How does the creation of a successful movie influence what, how, and for whom goods and services are produced?

Q: How does a successful movie illustrate self-interested choices that are

How does a successful movie illustrate self-interested choices that are also in the social interest?

Q: When Costco opened a gas bar just off Highway 401, the

When Costco opened a gas bar just off Highway 401, the neighbourhood was swamped with cars as drivers lined up to get the discount of 10 cents a litre. a. What is the opportunity cost of a litre of ga...

Q: What might be an incentive for you to take a class in

What might be an incentive for you to take a class in summer school? List some of the benefits and costs involved in your decision. Would your choice be rational?

Q: Look at today’s National Post. What is the leading economic news

Look at today’s National Post. What is the leading economic news story? With which of the big economic questions does it deal and what tradeoffs does it discuss or imply?

Q: Provide two microeconomic statements and two macroeconomic statements. Classify your statements

Provide two microeconomic statements and two macroeconomic statements. Classify your statements as positive or normative. Explain why.

Q: What are the two ways of calculating the slope of a curved

What are the two ways of calculating the slope of a curved line?

Q: Explain how we “read” the three graphs in Figs.

Explain how we “read” the three graphs in Figs. A1.1 and A1.2.

Q: Explain how we “read” the three scatter diagrams in Figs

Explain how we “read” the three scatter diagrams in Figs. A1.3 and A1.4.

Q: Draw a graph of two variables whose relationship shows (i

Draw a graph of two variables whose relationship shows (i) a maximum and (ii) a minimum.

Q: Kim can produce 40 pies or 400 cakes an hour. Liam

Kim can produce 40 pies or 400 cakes an hour. Liam can produce 100 pies or 200 cakes an hour. a. Draw a graph of Kim’s PPF and Liam’s PPF and show the point at which each produces when they spend 30 m...

Q: The table gives data about umbrellas: price, the number purchased

The table gives data about umbrellas: price, the number purchased, and rainfall in millimetres (mm). Draw a graph to show the relationship between the price and the number of umbrellas purchased, hol...

Q: Draw a graph that shows the relationship between the two variables x

Draw a graph that shows the relationship between the two variables x and y: a. Is the relationship positive or negative? b. Does the slope of the relationship become steeper or flatter as the value o...

Q: Draw a graph that shows the relationship between the two variables x

Draw a graph that shows the relationship between the two variables x and y: Calculate the slope of the relationship between x and y when x equals 3.

Q: Draw a graph that shows the relationship between the two variables x

Draw a graph that shows the relationship between the two variables x and y: Calculate the slope of the relationship across the arc as x increases from 4 to 5.

Q: Calculate the slope of the curve in the figure in the next

Calculate the slope of the curve in the figure in the next column at point A.

Q: / Calculate the slope at point A and at point

Calculate the slope at point A and at point B.

Q: The spreadsheet provides data on oil and gasoline: Column A

The spreadsheet provides data on oil and gasoline: Column A is the year, column B is the price of oil (dollars per barrel), column C is the price of gasoline (cents per litre), column D is oil product...

Q: The spreadsheet provides data on oil and gasoline: Column A

The spreadsheet provides data on oil and gasoline: Column A is the year, column B is the price of oil (dollars per barrel), column C is the price of gasoline (cents per litre), column D is oil product...

Q: The spreadsheet provides data on oil and gasoline: Column A

The spreadsheet provides data on oil and gasoline: Column A is the year, column B is the price of oil (dollars per barrel), column C is the price of gasoline (cents per litre), column D is oil product...

Q: / Calculate the slope across the arc AB.

Calculate the slope across the arc AB.

Q: Tony and Patty produce skis and snowboards. The tables show their

Tony and Patty produce skis and snowboards. The tables show their production possibilities. Tony produces 5 snowboards and 40 skis a week; Patty produces 10 snowboards and 5 skis a week. a. Who has a...

Q: The table gives data about umbrellas: price, the number purchased

The table gives data about umbrellas: price, the number purchased, and rainfall in millimetres (mm). What happens in the graph in Problem 21 if the price rises and rainfall is constant? Problem 21:...

Q: The table gives data about umbrellas: price, the number purchased

The table gives data about umbrellas: price, the number purchased, and rainfall in millimetres (mm). What happens in the graph in Problem 21 if the rainfall increases from 200 mm to 400 mm? Problem...

Q: Brazil produces ethanol from sugar, and the land used to grow

Brazil produces ethanol from sugar, and the land used to grow sugar can be used to grow food crops. The table sets out Brazil’s production possibilities for ethanol and food crops:...

Q: Brazil produces ethanol from sugar, and the land used to grow

Brazil produces ethanol from sugar, and the land used to grow sugar can be used to grow food crops. The table sets out Brazil’s production possibilities for ethanol and food crops:...

Q: Brazil produces ethanol from sugar, and the land used to grow

Brazil produces ethanol from sugar, and the land used to grow sugar can be used to grow food crops. The table sets out Brazil’s production possibilities for ethanol and food crops:...

Q: Brazil produces ethanol from sugar, and the land used to grow

Brazil produces ethanol from sugar, and the land used to grow sugar can be used to grow food crops. The table sets out Brazil’s production possibilities for ethanol and food crops:...

Q: Brazil produces ethanol from sugar, and the land used to grow

Brazil produces ethanol from sugar, and the land used to grow sugar can be used to grow food crops. The table sets out Brazil’s production possibilities for ethanol and food crops:...

Q: Distinguish between production efficiency and allocative efficiency. Explain why many production

Distinguish between production efficiency and allocative efficiency. Explain why many production possibilities achieve production efficiency but only one achieves allocative efficiency.

Q: A farm grows wheat and produces pork. The marginal cost of

A farm grows wheat and produces pork. The marginal cost of producing each of these products increases as more of it is produced. a. Make a graph that illustrates the farm’s PPF. b. The farm adopts a n...

Q: In an hour, Sue can produce 40 caps or 4 jackets

In an hour, Sue can produce 40 caps or 4 jackets and Tessa can produce 80 caps or 4 jackets. a. Calculate Sue’s opportunity cost of producing a cap. b. Calculate Tessa’s opportunity cost of producing...

Q: On a graph of the circular flows in the market economy indicate

On a graph of the circular flows in the market economy indicate the real and money flows in which the following items belong: a. You buy an iPad from the Apple Store. b. Apple Inc. pays the designers...

Q: Suppose that Tessa buys a new machine that enables her to make

Suppose that Tessa buys a new machine that enables her to make 20 jackets an hour. (She can still make only 80 caps per hour.) a. Who now has a comparative advantage in producing jackets? b. Can Sue a...

Q: For 50 years, Cuba has had a centrally planned economy in

For 50 years, Cuba has had a centrally planned economy in which the government makes the big decisions on how resources will be allocated. a. Why would you expect Cuba’s production possibilities (per...

Q: Suppose that Yucatan’s production possibilities are: / a

Suppose that Yucatan’s production possibilities are: a. Draw a graph of Yucatan’s PPF and explain how your graph illustrates a tradeoff. b. If Yucatan produces 150...

Q: Suppose that Yucatan’s production possibilities are: / What

Suppose that Yucatan’s production possibilities are: What feature of a PPF illustrates increasing opportunity cost? Explain why Yucatan’s opportunity cost does or...

Q: In Problem 11, what is the marginal cost of 1 kilogram

In Problem 11, what is the marginal cost of 1 kilogram of food in Yucatan when the quantity produced is 150 kilograms per day? What is special about the marginal cost of food in Yucatan? Problem 11:...

Q: The table describes the preferences in Yucatan. /

The table describes the preferences in Yucatan. a. What is the marginal benefit from sunscreen and how is it measured? b. Use the table in Problem 11. What does Yucatan produce to achieve allocative...

Q: Answer the following questions. a. How does the discovery

Answer the following questions. a. How does the discovery of new oil and gas reserves change Canada’s PPF? b. How do technological advances in the production of other goods and services change Canada’...

Q: Inexpensive broadband access has created a generation of television producers for whom

Inexpensive broadband access has created a generation of television producers for whom the Internet is their native medium. As they redirect the focus from TV to computers, cellphones, and iPods, the...

Q: Why is opportunity cost a ratio?

Why is opportunity cost a ratio?

Q: Why does the PPF bow outward and what does that imply about

Why does the PPF bow outward and what does that imply about the relationship between opportunity cost and the quantity produced?

Q: What is marginal cost? How is it measured?

What is marginal cost? How is it measured?

Q: What is marginal benefit? How is it measured?

What is marginal benefit? How is it measured?

Q: What is allocative efficiency and how does it relate to the production

What is allocative efficiency and how does it relate to the production possibilities frontier?

Q: What conditions must be satisfied if resources are used efficiently?

What conditions must be satisfied if resources are used efficiently?

Q: What is the opportunity cost of economic growth?

What is the opportunity cost of economic growth?

Q: Why are social institutions such as firms, markets, property rights

Why are social institutions such as firms, markets, property rights, and money necessary?

Q: What are the flows in the market economy that go from firms

What are the flows in the market economy that go from firms to households and the flows from households to firms?

Q: What gives a person a comparative advantage?

What gives a person a comparative advantage?

Q: Distinguish between comparative advantage and absolute advantage.

Distinguish between comparative advantage and absolute advantage.

Q: Why do people specialize and trade?

Why do people specialize and trade?

Q: What are the gains from specialization and trade?

What are the gains from specialization and trade?

Q: The money price of a textbook is $90 and the money

The money price of a textbook is $90 and the money price of the Wii game Super Mario Galaxy is $45. a. What is the opportunity cost of a textbook in terms of the Wii game? b. What is the relative pric...

Q: The price of gasoline has increased during the past year.

The price of gasoline has increased during the past year. a. Explain why the law of demand applies to gasoline just as it does to all other goods and services. b. Explain how the substitution effect i...

Q: Think about the demand for the three game consoles: Xbox One

Think about the demand for the three game consoles: Xbox One, PlayStation 4, and Wii U. Explain the effect of each of the following events on the demand for Xbox One games and the quantity of Xbox One...

Q: Classify the following pairs of goods and services as substitutes in production

Classify the following pairs of goods and services as substitutes in production, complements in production, or neither. a. Bottled water and health club memberships b. French fries and baked potatoes...

Q: When a timber mill makes logs from trees it also produces sawdust

When a timber mill makes logs from trees it also produces sawdust, which is used to make plywood. a. Explain how a rise in the price of sawdust influences the supply of logs. b. Explain how a rise in...

Q: With the new way to tap maple trees, farmers could produce

With the new way to tap maple trees, farmers could produce 10 times as much maple syrup per acre. Will the new method change the supply of maple syrup or the quantity supplied of maple syrup, other th...

Q: / a. Label the curves. Which curve shows

a. Label the curves. Which curve shows the willingness to pay for a pizza? b. If the price of a pizza is $16, is there a shortage or a surplus and does the price rise or fall? c. Sellers want to recei...

Q: / a. If the price of a pizza is

a. If the price of a pizza is $12, is there a shortage or a surplus and does the price rise or fall? b. Buyers want to pay the lowest possible price, so why would they be willing to pay more than $12...

Q: The demand and supply schedules for potato chips are: /

The demand and supply schedules for potato chips are: a. Draw a graph of the potato chip market and mark in the equilibrium price and quantity. b. If the price is 60¢ a bag, is there a sh...

Q: In Problem 20, a new dip increases the quantity of potato

In Problem 20, a new dip increases the quantity of potato chips that people want to buy by 30 million bags per week at each price. a. Does the demand for chips change? Does the supply of chips change?...

Q: Shoppers bought strawberries in March for $1.25 a pound

Shoppers bought strawberries in March for $1.25 a pound rather than the $3.49 a pound they paid last year. With the price so low, some growers removed their strawberry plants to make way for spring me...

Q: Cinemas are raising the price of popcorn. Demand for field corn

Cinemas are raising the price of popcorn. Demand for field corn, which is used for animal feed, corn syrup, and ethanol, has increased and its price has exploded. That’s caused some farmers to shift f...

Q: In the past year, the price of dry-cleaning solvent

In the past year, the price of dry-cleaning solvent doubled. More than 4,000 dry cleaners across the United States disappeared as budget-conscious consumers cut back. This year the price of hangers us...

Q: Answer the following questions. a. What would happen to

Answer the following questions. a. What would happen to the price of bananas if TR4 spread to Central America? b. What are some of the substitutes for bananas and what would happen to demand, supply,...

Q: What is the distinction between a money price and a relative price

What is the distinction between a money price and a relative price?

Q: What is the law of demand and how do we illustrate it

What is the law of demand and how do we illustrate it?

Q: What does the demand curve tell us about the price that consumers

What does the demand curve tell us about the price that consumers are willing to pay?

Q: List all the influences on buying plans that change demand, and

List all the influences on buying plans that change demand, and for each influence, say whether it increases or decreases demand.

Q: What is the law of supply and how do we illustrate it

What is the law of supply and how do we illustrate it?

Q: List all the influences on selling plans, and for each influence

List all the influences on selling plans, and for each influence, say whether it changes supply.

Q: Why is the equilibrium price the best deal available for both buyers

Why is the equilibrium price the best deal available for both buyers and sellers?

Q: What is the effect on the price and quantity of MP3 players

What is the effect on the price and quantity of MP3 players (such as the iPod) if: The price of a PC falls or the price of an MP3 download rises? (Draw the diagrams!).

Q: What is the effect on the price and quantity of MP3 players

What is the effect on the price and quantity of MP3 players (such as the iPod) if: More firms produce MP3 players or electronics workers’ wages rise? (Draw the diagrams!).

Q: What is the effect on the price and quantity of MP3 players

What is the effect on the price and quantity of MP3 players (such as the iPod) if: Any two of the events in questions 1 and 2 occur together? (Draw the diagrams!).

Q: In April 2014, the money price of a litre of milk

In April 2014, the money price of a litre of milk was $2.01 and the money price of a litre of gasoline was $1.30. Calculate the real price of a litre of gasoline in terms of milk.

Q: The price of food increased during the past year. a

The price of food increased during the past year. a. Explain why the law of demand applies to food just as it does to other goods and services. b. Explain how the substitution effect influences food p...

Q: Which of the following goods are likely substitutes and which are likely

Which of the following goods are likely substitutes and which are likely complements? (You may use an item more than once.) coal, oil, natural gas, wheat, corn, pasta, pizza, sausage, skateboard, roll...

Q: In 2013, the price of corn fell and some corn farmers

In 2013, the price of corn fell and some corn farmers switched from growing corn in 2014 to growing soybeans. a. Does this fact illustrate the law of demand or the law of supply? Explain your answer....

Q: Dairies make low-fat milk from full-cream milk,

Dairies make low-fat milk from full-cream milk, and in the process they produce cream, which is made into ice cream. The following events occur one at a time: (i) The wage rate of dairy workers rises....

Q: The demand and supply schedules for gum are: /

The demand and supply schedules for gum are: a. Suppose that the price of gum is 70¢ a pack. Describe the situation in the gum market and explain how the price adjusts. b. Suppose that th...

Q: The following events occur one at a time: (i

The following events occur one at a time: (i) The price of crude oil rises. (ii) The price of a car rises. (iii) All speed limits on highways are abolished. (iv) Robots cut car production costs. Expla...

Q: In Problem 7, a fire destroys some factories that produce gum

In Problem 7, a fire destroys some factories that produce gum and the quantity of gum supplied decreases by 40 million packs a week at each price. a. Explain what happens in the market for gum and dra...

Q: Classify each of the following items as a final good or service

Classify each of the following items as a final good or service or an intermediate good or service and identify which is a component of consumption expenditure, investment, or government expenditure o...

Q: / In 2013, flow A was $1,

In 2013, flow A was $1,000 billion, flow C was $250 billion, flow B was $650 billion, and flow E was $50 billion. Calculate investment.

Q: / In 2014, flow D was $2 trillion

In 2014, flow D was $2 trillion, flow E was –$1 trillion, flow A was $10 trillion, and flow C was $4 trillion. Calculate consumption expenditure.

Q: The components and robots for Toyota’s auto assembly lines in Canada are

The components and robots for Toyota’s auto assembly lines in Canada are built in Japan. Toyota assembles cars for the Canadian market in Ontario. Explain where these activities appear in Canada’s Nat...

Q: Boeing is producing some components of its new 787 Dreamliner in Japan

Boeing is producing some components of its new 787 Dreamliner in Japan and is assembling it in the United States. Much of the first year’s production will be sold to ANA (All Nippon Airways), a Japane...

Q: Boeing is producing some components of its new 787 Dreamliner in Japan

Boeing is producing some components of its new 787 Dreamliner in Japan and is assembling it in the United States. Much of the first year’s production will be sold to ANA (All Nippon Airways), a Japane...

Q: An economy produces only apples and oranges. The base year is

An economy produces only apples and oranges. The base year is 2013, and the table gives the quantities produced and the prices. Calculate nominal GDP in 2013 and 2014.

Q: An economy produces only apples and oranges. The base year is

An economy produces only apples and oranges. The base year is 2013, and the table gives the quantities produced and the prices. Calculate real GDP in 2013 and 2014 expressed in base-year prices.

Q: The United Nations’ Human Development Index (HDI) is based on

The United Nations’ Human Development Index (HDI) is based on real GDP per person, life expectancy at birth, and indicators of the quality and quantity of education. a. Explain why the HDI might be be...

Q: Oxford analysts report that living standards in Britain are set to rise

Oxford analysts report that living standards in Britain are set to rise above those in America for the first time since the nineteenth century. Real GDP per person in Britain will be £23,500 this year...

Q: News clip in Problem 22 is as follows: China’s gross

News clip in Problem 22 is as follows: China’s gross domestic product grew 11.4 percent last year and marked a fifth year of double-digit growth. The increase was especially remarkable given that the...

Q: India, with the world’s largest population of poor people, created

India, with the world’s largest population of poor people, created millionaires at the fastest pace in the world in 2007. India added another 23,000 millionaires in 2007 to its 2006 tally of 100,000 m...

Q: Answer the following questions. a. Which economy—the

Answer the following questions. a. Which economy—the Canadian or the U.S.—had the longer and deeper recession in 2008–2009? b. Which economy—the Canadian or the U.S.—had the lower estimated growth rat...

Q: GDP has proved useful in tracking both shortterm fluctuations and long-

GDP has proved useful in tracking both shortterm fluctuations and long-run growth. Which isn’t to say GDP doesn’t miss some things. Amartya Sen, at Harvard, helped create the United Nations’ Human Dev...

Q: Use the information in Problem 20 to calculate the chained-dollar

Use the information in Problem 20 to calculate the chained-dollar real GDP in 2014 expressed in 2013 dollars. Problem 20: An economy produces only apples and oranges. The base year is 2013, and the t...

Q: Define GDP and distinguish between a final good and an intermediate good

Define GDP and distinguish between a final good and an intermediate good. Provide examples

Q: Why does GDP equal aggregate income and also equal aggregate expenditure?

Why does GDP equal aggregate income and also equal aggregate expenditure?

Q: Distinguish between real GDP and potential GDP and describe how each grows

Distinguish between real GDP and potential GDP and describe how each grows over time.

Q: What is a business cycle and what are its phases and turning

What is a business cycle and what are its phases and turning points?

Q: What is PPP and how does it help us to make valid

What is PPP and how does it help us to make valid international comparisons of real GDP

Q: Explain why real GDP might be an unreliable indicator of the standard

Explain why real GDP might be an unreliable indicator of the standard of living.

Q: Classify each of the following items as a final good or service

Classify each of the following items as a final good or service or an intermediate good or service and identify each item as a component of consumption expenditure, investment, or government expenditu...

Q: Use the following figure, which illustrates the circular flow model.

Use the following figure, which illustrates the circular flow model. During 2014, flow A was $13.0 billion, flow B was $9.1 billion, flow D was $3.3 billion, and flow E was –$0.8 bi...

Q: Use the following data to calculate aggregate expenditure and imports of goods

Use the following data to calculate aggregate expenditure and imports of goods and services: ■ Government expenditure: $20 billion ■ Aggregate income: $100 billion ■ Consumption expenditure: $67 billi...

Q: Real GDP grew 1 percent in 2013. Business investment increased 3

Real GDP grew 1 percent in 2013. Business investment increased 3.2 percent, exports grew 1.6 percent, and imports rose by 2.2 percent. Use the flows in the figure below to identify each flow in the...

Q: Tropical Republic produces only bananas and coconuts. The base year is

Tropical Republic produces only bananas and coconuts. The base year is 2013. Calculate nominal GDP in 2013 and 2014.

Q: Tropical Republic produces only bananas and coconuts. The base year is

Tropical Republic produces only bananas and coconuts. The base year is 2013. Calculate real GDP in 2014 in base-year prices.

Q: An island economy produces only fish and crabs. /

An island economy produces only fish and crabs. Calculate the island’s chained-dollar real GDP in 2014 expressed in 2013 dollars.

Q: List some examples of the scarcity that you face.

List some examples of the scarcity that you face.

Q: Which of the following pairs does not match? a.

Which of the following pairs does not match? a. Labour and wages b. Land and rent c. Entrepreneurship and profit d. Capital and profit

Q: Apple Inc. decides to make iTunes freely available in unlimited quantities

Apple Inc. decides to make iTunes freely available in unlimited quantities. a. Does Apple’s decision change the incentives that people face? b. Is Apple’s decision an example of a microeconomic or a m...

Q: / Draw a graph of the relationship between the revenue

Draw a graph of the relationship between the revenue per theatre on the y -axis and the number of theatres on the x -axis. Describe the relationship.

Q: According to the News on page 109, do per capita GDP

According to the News on page 109, do per capita GDP data (A) overstate or (B) understate the rise in the U.S. well-being since 1990?

Q: Where do growing companies like Google and Facebook get their employees?

Where do growing companies like Google and Facebook get their employees? What were those workers doing before?

Q: Why would anyone object to President Obama’s proposed infrastructure spending?

Why would anyone object to President Obama’s proposed infrastructure spending?

Q: In what specific ways (if any) does a college education

In what specific ways (if any) does a college education increase a worker's productivity?

Q: How did output per U.S. worker increase so much

How did output per U.S. worker increase so much in 10 years (World View, p. 375)? Why did Italian productivity decline?

Q: Why don't we consume all of our current output instead of sacrificing

Why don't we consume all of our current output instead of sacrificing some present consumption for investment?

Q: Should we grant immigration rights based on potential contributions to economic growth

Should we grant immigration rights based on potential contributions to economic growth as Canada does?

Q: How might economic growth be impeded by (a) high levels

How might economic growth be impeded by (a) high levels of national debt and/or (b) fiscal restraint designed to reduce that national debt?

Q: Should fiscal policy encourage more consumption or more saving? Does it

Should fiscal policy encourage more consumption or more saving? Does it matter?

Q: In 1866 Stanley Jevons predicted that economic growth would come to a

In 1866 Stanley Jevons predicted that economic growth would come to a halt when England ran out of coal, a doomsday that he reckoned would occur in the mid-1970s. How did we avert that projection? W...

Q: Fertility rates in the United States have dropped so low that we

Fertility rates in the United States have dropped so low that we are approaching zero population growth, a condition that France has maintained for decades. How will this affect our economic growth?...

Q: Is limitless growth really possible? What forces do you think will

Is limitless growth really possible? What forces do you think will be most important in slowing or halting economic growth?

Q: Why are incomes so much more unequal in poor nations than in

Why are incomes so much more unequal in poor nations than in rich ones?