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macroeconomics canada in the global environment
Questions and Answers of
Macroeconomics Canada In The Global Environment
Read Eye on the Multiplier on p. 404. Why do multiplier estimates differ?What conditions would be consistent with a large multiplier?
What determines the increase in aggregate demand resulting from an increase in business investment?
Explain the process by which an increase in planned investment at a constant price level changes equilibrium expenditure and real GDP.
If investment crashes to $0.55 million but nothing else changes, what is equilibrium expenditure and what is the multiplier?
Calculate the marginal propensity to consume and the marginal propensity to import. What is equilibrium expenditure?
Find the value of Q, R, S, T, U, and V.
Calculate the marginal propensity to consume. If wealth increases by $10 trillion, in which direction will the consumption function change?
Calculate consumption expenditure at each level of disposable income. Over what range of disposable income is there dissaving? Estimate the level of disposable income at which saving is zero.
If real GDP is $600 billion, explain the process that moves the economy toward equilibrium expenditure.
If real GDP is $200 billion, explain the process that moves the economy toward equilibrium expenditure.
Calculate equilibrium expenditure.
Calculate aggregate planned expenditure when real GDP is $200 billion and when real GDP is $600 billion.
Russian economy minister says country heading for recession The Russian economy may slide into recession in the second quarter as fear of sanctions harms investment activity. Russia’s economy
NZ immigration at 10-year high New Zealand immigration has risen to a 10-year high. The Reserve Bank said net migration is boosting demand for housing and consumer spending, and is seen as an
Singapore tightens foreign-worker restrictions To reduce reliance on overseas labor in the manufacturing sector, Singapore’s government is tightening its foreign-worker restrictions. With this
Read Eye on the Business Cycle on p. 381. What caused the 2008–2009 recession and how do we know that a decrease in aggregate supply played a role?
Japan economic recovery under way as deflation eases Consumer prices excluding fresh food declined 0.4 percent from a year earlier—the smallest drop since 2009. The unemployment rate unexpectedly
Explain the effect of each of the following events on the quantity of real GDP demanded and aggregate demand in Mexico.• Europe trades with Mexico and goes into a recession.• The price level in
Mexico trades with the United States. Explain the effect of each of the following events on Mexico’s aggregate demand.• The government of Mexico cuts income taxes.• The United States
Explain the influence of each of the events in List 1 on the quantity of real GDP supplied and aggregate supply in India and use a graph to illustrate.
South frica raises interest rates South Africa’s Reserve Bank surprised observers by boosting its main interest rate to 5.5 percent from 5 percent.Source: BBC, 29 January 2014 Think about the
The three countries with the highest inflation The countries that are experiencing the world’s highest inflation rates are Venezuela, Iran and Argentina. Venezuela has a current inflation rate of
ising yields on Chinese government bonds With the lack of demand for Chinese government bonds by the public, China’s benchmark ten-year government bond reached a high yield of 4.72 percent, which
Explain how the Fed uses its government securities to control the nominal interest rate.
As the Fed purchased $300 billion of government securities, did the price of government securities fall or rise? Explain your answer.
If the Fed purchased the government securities on the open market, explain why the purchase of $300 billion of government securities would influence the interest rate.
If government securities make up just 35 percent of the Fed’s assets, calculate the Fed’s total assets. What effect did the Fed’s purchase of $300 billion of government bonds have on the
Read Eye on Inflation on p. 351. Why did inflation increase during the 1970s?In which decades did velocity growth break the link between money growth and inflation?
What is hyperinflation? Compare inflation in Zimbabwe in 2009 with that in Germany in 1923. Why did Germany print money in 1923 and create hyperinflation? Why is Zimbabwe printing less money today?
Was the velocity of circulation constant? (Hint: Use the quantity theory of money.) If velocity of circulation was not constant, how did it change and why might it have changed?
If the quantity of money grows at 10 percent a year, velocity of circulation is constant, and potential GDP grows at 3 percent a year, what is the inflation rate in the long run?
What was the quantity of money in Canada?
Calculate the real interest rate. If the real interest rate remains unchanged when the inflation rate increases to 4 percent a year and then remains constant, explain how the nominal interest rate
If banks increase the interest rate they pay on deposits, how will the demand for money and the nominal interest rate in the money market change?
If the quantity of money is $4 trillion and the Fed decreases it to $3.9 trillion, how will the price of a bond change? Why?
If the quantity of money is $4 trillion and real GDP increases, how will the interest rate change? Explain the process that changes the interest rate.
If the quantity of money is $4 trillion, what is the supply of money and the nominal interest rate?
Glasgow store to become first in Britain to replace the pound with virtual currency Bitcoin CeX, the high street chain that buys, sells, and exchanges technological and electronic products, is
The BOJ’s target of increasing the monetary base The BOJ has decided to increase the monetary base by 60 trillion yen to 70 trillion yen to meet the target of doubling the monetary base within two
The BOJ’s target of increasing the purchase of government bonds The Bank of Japan (BOJ), the Central Bank of Japan, revised its target of purchasing the Japanese government bonds to approximately 7
If the currency drain ratio in China and the United States is 10 percent of deposits, compare the money multipliers in the two countries.
Compare the required reserve ratio in China on June 15, 2011 and the required reserve ratio on checkable deposits in the United States today.
If there is no currency drain, what is the quantity of loans and the quantity of total deposits when the bank has no excess reserves?
What are the three functions that money performs? Which of the items in List 1 perform some but not all of these functions and which of the items are money?
What happened to the money multiplier between 2008 and 2011? What would the money multiplier have been if the currency drain ratio had increased? What would the money multiplier have been if the
When the Fed increased the monetary base between 2008 and 2011, which component of the monetary base increased most: banks’ reserves or currency? What happened to the reserves that banks borrowed
Read Eye on Creating Money on pp. 326–327. By how much did the monetary base increase and why didn’t M2 increase by the same percentage?
Assuming that the currency drain is zero and that the desired reserve ratio equals the required reserve ratio, calculate the change in the money multiplier that results from the increase in Korea’s
Explain why the higher required reserve ratio means that banks will have to cut the amount of loans they can make.
The quantity of money, and how much of the new money is currency and how much is bank deposits.
The Fed buys $2 million of securities from AIG. If AIG’s bank has a desired reserve ratio of 0.1 and there is no currency drain, calculate the bank’s excess reserves as soon as the open market
What is a bank’s balancing act?
What are the institutions that make up the banking system?
The Center for Economic and Policy Research in Washington, D.C., claims that the IMF didn’t allow developing countries that were looking for loans to expand their deficits sufficiently. Would these
How can the saving rate be negative? Why might a negative saving rate be something to worry about? How might U.S. saving be increased?
The numbers in the second column of Table 1 are the Federal Reserve’s estimates of personal wealth at the end of each year. The numbers in the third column are the Bureau of Economic Analysis’s
Brazil’s high-speed train project Brazil’s bullet-train project is one of the most ambitious parts of the government’s plan to invest $235 billion over the next decade in transportation
With an increase in global tension during 2005 and 2006, many governments increased defense spending, which decreased government budget surpluses.Show, on a graph, the effects of a decrease in
If the government budget deficit is $1 trillion and the Ricardo-Barro effect occurs, what are the real interest rate and the quantity of investment?
China’s growth slows as government changes gears China’s economy grew 7.5 percent in the second quarter of this year. For the past 30 years, China has relied on cheap credit, heavy manufacturing,
China invests almost 50 percent of its annual production in new capital compared to 15 percent in the United States. Capital per hour of labor in China is about 25 percent of that in the United
Table 1 describes labor productivity in an economy. What must have occured in this economy during year 1?
If these growth rates continue, in what year would real GDP per person be twice what it was in 2006?
If these growth rates continue, in what year would real GDP be twice what it was in 2006?
Distinguish between a low and high income and a low and high economic growth rate. What are the key features of an economy that are present when incomes are high or fast growing and absent when
Read Eye on Rich and Poor Nations on p. 271. Which nations are the richest and which are growing the fastest? What are the conditions that lead to higher incomes and faster growing incomes?
Explain why, other things remaining the same, a country with a well educated population has a faster economic growth rate than a country that has a poorly educated population.
What role do property rights play in encouraging economic growth?
Why does much of Africa experience slow economic growth?
What is the driving force of economic growth according to new growth theory? Why does it predict that economic growth will never end?
What is the classical growth theory and why does it predict that economic growth will eventually end?
Calculate labor productivity in 2012 and 2013, and the growth rate of labor productivity in 2013.
Calculate the growth rate of real GDP in 2013.
Use the data in Table 1 to work Problems 1 and 2, TABLE 1 Item 2012 2013 Aggregate labor hours (billions) 25.0 25.6 Real GDP (billions of 2009 dollars) 1,000 1,050
Calculate the change in the number of years it will take for real GDP per person in India to double if the growth rate of real GDP per person increases from 8 percent a year to 10 percent a year.
Minimum wage up to £6.50 an hour A million workers in the U.K. will receive their first real wage rate rise in six years. The national minimum wage will increase by 19p an hour to £6.50, the
Sort the items into four groups: those that change the production function, those that change the demand for labor, those that change the supply of labor, and those that do not change the production
Draw a graph of the demand for and supply of labor in Korea and the United States. Mark a point at the equilibrium quantity of labor per person per week and the real wage rate in each economy.
Figure 1 illustrates the labor market in an economy in which at full employment, 1,000 people a day job search. What is the equilibrium real wage rate and employment? Calculate the natural
Inflation basket drops DVD recorders in latest revision Changes in households' use of digital technology have resulted in several changes to the basket of goods and services used to measure
Negative bank’s deposit rate European banks are currently receiving an interest rate of zero percent on their deposits at the European Central Bank (ECB). The ECB is considering changing this to a
China’s CPI grew slower than expected China’s CPI inflation in December fell to an annual rate of 2.5 percent, down from 3 percent in November. This can be partially explained by lower food price
To maintain these real interest rates in the coming months, how will these nominal rates change if the inflation rate increases to 0.2 percent a year?
Calculate the real interest rate on each of these financial assets.
What was the percentage increase in production from 2009 to 2013, and by what percentage did the cost of living rise from 2009 to 2013?
Calculate nominal GDP in 2009 and in 2013 and the percentage increase in nominal GDP from 2009 to 2013.
Tables 2 and 3 show the quantities of the goods that Harry bought and the prices he paid during two consecutive weeks. Harry’s CPI market basket contains the goods he bought in Week 1. Calculate
The people on Coral Island buy only juice and cloth. The CPI market basket contains the quantities bought in 2010. The average household spent $60 on juice and $30 on cloth in 2010 when the price of
Pete is a student who spends 10 percent of his expenditure on books and supplies, 30 percent on tuition, 30 percent on rent, 10 percent on food and drink, 10 percent on transportation, and the rest
Compare the method used by Box-Office Mojo to calculate real box-office receipts with the method used on p. 216 to calculate the real price of a postage stamp. Compare and contrast the real variables
Read Eye on Box Office Hits on p. 220 and using BLS data for the CPI in 1982 and 1997, determine which movie had the greater real box office revenues, E.T.: The Extra-Terrestrial, which earned $435
Given the changes in the prices of food, clothing, and medical care, by what percentage did the prices of the other items in the CPI basket change?
What percentage change in the CPI during the year to August 2011 is accounted for by the changes in the prices of food, clothing, and medical care?
In 2013, Annie, an 80-year-old, is telling her granddaughter Mary about the good old days. Annie says that in 1933, you could buy a nice house for$15,000 and a jacket for $5. Mary says that in 2013
Table 3 shows the prices that Terry paid for some of his expenditures in June and July 2013. Explain and discuss why these prices might have led to commodity substitution or outlet substitution.
What was the percentage increase in production between 2000 and 2010, and by what percentage did the cost of living rise between 2000 and 2010?
Calculate nominal GDP in 2000 and in 2010 and the percentage increase in nominal GDP between 2000 and 2010.
What percentage of the CPI market basket is gasoline? Calculate the value of Suzie’s CPI in Week 2 and her inflation rate in Week 2.
In Brazil, the reference base period for the CPI is 2000. By 2005, prices had risen by 51 percent since the base period. The inflation rate in Brazil in 2006 was 10 percent, and in 2007, the
In Canada, the reference base period for the CPI is 2002. By 2012, prices had risen by 21.6 percent since the base period. The inflation rate in Canada in 2013 was 1.1 percent. Calculate the CPI in
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