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macroeconomics principles

Questions and Answers of Macroeconomics Principles

Suppose the economy is experiencing a recessionary gap.a. Draw a graph showing aggregate demand, short-run aggregate supply, and long-run aggregate supply. Label both axes, all curves, and the
Suppose the economy is experiencing an inflationary gap.a. Draw a graph showing aggregate demand, short-run aggregate supply, and long-run aggregate supply. Label both axes, all curves, and the
Suppose the economy is experiencing a recessionary gap.a. Draw a graph showing aggregate demand, short-run aggregate supply, and long-run aggregate supply. Label both axes, all curves, and the
Suppose the economy develops an inflationary gap. Identify two automatic stabilizers that will help dampen the upswing in the economy.
Which of the following events is most likely to cause or contribute to each of the problems listed below in the context of fiscal policy? Events:a. A decline in interest ratesb. Government
If you were the president of your country and you felt that government spending must be cut, in which specific category of spending would you recommend the largest cuts be made? Discuss the costs and
For which of the ideal characteristics of money are coins clearly superior to bills? Explain your answer.
True or false: A barter system would be as convenient as a money system if you happened to produce something easy to carry such as pencils. Explain your answer.
True or false: Modern U.S. currency can be exchanged for a set amount of silver or gold.
Write “M1” next to each of the following items that is part of the M1 money supply; write “M2” next to the items that are part of the M2 money supply.a. Currency in circulationb. Currency
Suppose the Federal Reserve buys $4,000 worth of Treasury bonds from River Bank. Calculate the largest total increase in the money supply that could result if the reserve requirement is:a. 25%b. 20%
Indicate whether an increase in each of the following would increase or decrease the total amount of money created when the Federal Reserve adds money into the economy by purchasing Treasury bonds
True or false: Banks and thrifts started out as very similar financial institutions, but over time they became increasingly specialized. Explain your answer.
Suppose the highest return you can receive on your money is a 6 percent rate of interest from your bank. That interest is paid in one lump sum at the end of each year for amounts deposited for the
Do you think that digital alternatives to cash will completely replace cash in the next decade? Why or why not?
Which of the following is not among the primary responsibilities of the Fed?a. Conducting the nation’s monetary policy with the goal of maintaining full employment, price stability, and economic
Explain how open market operations can lead to an increase in aggregate demand.
Which of the following constitutes easy money policy and is carried out directly by the Fed?a. The sale of Treasury securitiesb. A decrease in the federal funds ratec. A decrease in the discount
Suppose the reserve requirement is 10 percent.a. If the Fed buys $10 billion worth of bonds from commercial banks, what is the largest possible increase in the money supply that could result from
True or false: During the Great Recession, the Fed increased the availability of loans by opening a facility that loaned money directly to individual consumers. Explain your answer.
Suppose the money supply increases by 8 percent.a. Given what monetarists believe about the equation of exchange, what do they predict will be the result of the increase?b. If prices and the velocity
Explain two reasons why a person might hold money other than for day-to-day purchases.
Which of the following would not shift the money demand curve to the right?a. A decrease in the interest rateb. An increase in the price levelc. An increase in real GDPd. A computer glitch that
Use the graph to answer each of the following questions:a. What is Italy’s opportunity cost of producing one computer?b. What is Japan’s opportunity cost of producing one computer?c. Which
Draw a graph showing the supply and demand curves for money and label the curves and axes. Show what would happen to the equilibrium interest rate and the equilibrium quantity of money if the
Suppose you are the Federal Reserve chairperson and you see the economy slipping into a recession. Which of the Federal Reserve’s tools would you use first in efforts to stabilize the economy? Why
A graph illustrating the general relationship between the wealth of a country and the size of the Gini coefficient would look like which of the following?a. A smileb. A frownc. A horizontal lined. A
By reducing its unemployment rate, Sierra Leone was able to produce more diamonds and more dried fish without making less of anything. Use a PPF graph to illustrate the change that occurred in this
After investing in new mining equipment and roads, Jamaica was able to increase its production of coffee and bauxite. Use a PPF graph to illustrate the change that occurred in this scenario.
Research at Abdou Moumouni University (AMU) in Niger has been hampered by a lack of adequate computer systems. Suppose Mondelez International, Inc., the maker of Oreo cookies and Ritz crackers, wants
Suppose that a country’s HDI value increased and its real GDP per capita decreased in the same year. What could cause the HDI to increase despite a decrease in real GDP per capita? Is it common to
True or false: An increase in the money supply is among the most effective ways to promote economic growth. Explain your answer.
Which of the following is an example of foreign direct investment?a. You buy bonds sold by the government of Belize.b. You buy stock in BP, a British company.c. You buy a cheese factory in
Give two reasons why microcredit is often the only hope for entrepreneurs in developing nations who need loans.
According to Robert Lucas, how can your roommate’s investment in human capital make you more productive?
Volcanic activity is slowly forming new islands in the Pacific Ocean. Suppose you will become the president of one such island, Loihi. When above water, Loihi will have a small population of people
True or false: When one country has an absolute advantage over another country, there are definitely opportunities for mutually beneficial trade. Explain your answer.
Calzonia and Pizzaland both make calzones and pizza, but Pizzaland chefs are less proficient than Calzonian chefs in the doughfolding process that converts pizza ingredients into calzones. Workers in
Answer the following questions on the basis of the information provided in problem 3:a. Which country has a comparative advantage in pizza production?b. Which country has a comparative advantage in
Explain one pro and one con of U.S. trade deficits.
Which of the following equalities must hold for a country?a. Imports = exportsb. Incoming gifts and donations = outgoing gifts and donationsc. Foreign investments in real estate = domestic
Which of the following scenarios would cause the peso to depreciate relative to the dollar?a. The government of Mexico buys pesos with its reserve of dollars.b. Inflation strikes the United States
Although trade can be mutually beneficial to the participating countries overall, how might trade create both winners and losers within each country?
Suppose you learn that firms in a particular country mistreat workers or cause excessive environmental damage. Would you avoid buying products made in that country? If so, provide an example of one
Use the concept of diminishing marginal utility to explain why customers eventually stop drinking coffee, even at a café that provides free coffee refills.
Draw a smooth, downward-sloping market demand curve for tea. Then show the effect of each of the indicated changes. Be sure to label the axes. Label the original demand curve Demand1. If the demand
Draw a smooth, downward-sloping market demand curve for tea. Then show the effect of each of the indicated changes. Be sure to label the axes. Label the original demand curve Demand1. If the demand
Draw a smooth, downward-sloping market demand curve for tea. Then show the effect of each of the indicated changes. Be sure to label the axes. Label the original demand curve Demand1. If the demand
Draw a smooth, downward-sloping market demand curve for tea. Then show the effect of each of the indicated changes. Be sure to label the axes. Label the original demand curve Demand1. If the demand
Draw a smooth, downward-sloping market demand curve for tea. Then show the effect of each of the indicated changes. Be sure to label the axes. Label the original demand curve Demand1. If the demand
Draw a smooth, downward-sloping market demand curve for tea. Then show the effect of each of the indicated changes. Be sure to label the axes. Label the original demand curve Demand1. If the demand
Draw Brian’s original demand curve for lattes, as you did in problem 2b.a. Use horizontal stripes to shade the area that represents Brian’s consumer surplus when the price of lattes is $4 each.b.
Many public pools charge a single daily admission fee for an unlimited number of visits. Why do most people visit a pool only once in a day anyway? What does that indicate about consumers’ daily
From which of your recent purchases did you receive the most consumer surplus? Many public pools charge a single daily admission fee for an unlimited number of visits. Why do most people visit a pool
Demand curves generally slope downward due to which of the following?a. Lower prices for complements in consumptionb. Increases in personal incomec. Diminishing marginal utilityd. Diminishing
The chapter mentions that, “other things being equal,” the person who places the highest value on a good will be the one willing and able to pay the most for it. What types of things might not be
Choose one of the types of graphs described in this appendix to illustrate the most you would be willing to pay for your first, second, and third cup of coffee in one day.
Suppose that after a successful advertising campaign, the quantity of lattes Brian would demand at each price (up to $7) increases by 1.a. Brian’s pre-advertising demand schedule is provided in the
Suppose an economy produces televisions and turkeys. The accompanying table shows several of the economy’s efficient output combinations. Draw the production possibilities frontier for this economy
Suppose an economy in a cold climate makes sweatshirts and pizzas. The accompanying table shows several of the economy’s efficient output combinations. Draw the production possibilities frontier
Assume that there is no difference in the resources used to make hats and belts, except that two belts can be made with the same amount of resources needed to make one hat. Fill in the accompanying
Consider the following statement: “Economics is all about money and banks.” What part of the statement is true? What part is false? Provide a better explanation of what economics is about.
Which of the following items are typically scarce? Do particular people specialize in producing the scarce items? Explain how specialization helps reduce the problem of scarcity.a. Paintingsb.
What is one thing that could cause the production possibilities frontier in your economy to shift inward?
Some people end their formal education with a high school degree, some finish with a college degree, and some go on to obtain a graduate degree. Beyond the ability to pay tuition, what are some
What is the opportunity cost (not the dollar value, but the foregone activity) of you going to economics class?
Explain how incentives influenced something you did this week, how you did it, or for whom you did it.
The rectangle in the accompanying graph represents tax revenue. Calculate the area of the rectangle. Price $6 4 Tax revenue Supply + tax 0 3 Anderson, Survey of Economics, © 2019
How do incentives influence your study habits? Why do students often ask, “Is this going to be on the test?” Why would it be unwise for an education-maximizing instructor to answer, “No, it
Can you tell when a salesclerk works on a commission basis (meaning that the clerk’s earnings are based on the volume of sales)? Do people who work for tips behave differently from those who do not?
The triangle in the accompanying graph represents the net gain to consumers from purchasing a good. Calculate the area of the triangle. Price $9 4 Net gain Market price Demand Quantity 0 6 Anderson,
Suppose tickets to a basketball game with broad appeal are inexpensive, but you can only obtain them by standing in line for many hours. The tickets may not be transferred from one person to another.
Suppose the members of your family are fighting over a slice of pizza. Identify three ways to determine who gets the slice. Would any of these ways help assure that the person who most wants the
Which of the following are positive economic statements?a. The unemployment rate is 5.4 percent.b. The price of bottled water is too high.c. The average college tuition last year was $35,000.d. The
The following table lists the percentage of the population between the ages of 15 and 24 and the annual population growth rate in four countries. Illustrate this information on a scatter diagram with
Classify each of the following as a topic of either microeconomics or macroeconomics.a. Your family’s decision to buy a house.b. The Kellogg company’s hiring decisions.c. The economy’s supply
Draw the points (3, 6) and (2, 7) on a graph. Label the origin, the x-axis, and the y-axis.
Calculate the slope of a line going from (3, 6) to (2, 7).
On a new graph, draw a line that begins with a positive slope, ends with a negative slope, and always has a decreasing slope.
Identify the independent variable in each of the following pairs of variables.a. Years of work experience and current incomeb. Hours of lost sleep at night and coffee consumption the evening beforec.
For each pair of variables in I, II, III, and IV, indicate the shape of the curve that correctly depicts the relationship between the two variables. Choose from the following shapes:a.
Draw a bar chart showing the number of hours you spent studying during each of the last seven days.
Printed versions of textbooks are manufactured using printing presses, workers, and paper. Identify the category of factors of production in which each of these inputs belongs.
Draw a simple circular flow diagram (without government) and use the relationships shown in the diagram to explain how producers’ optimism about future sales can lead to an increase in future sales.
Explain two ways in which your own activities are part of the economy’s circular flow. Which part of the circular-flow diagram in Figure 2.2 represents these activities? Goods and
Pair each type of firm on the left with one advantage on the right. Nonprofit organization Partnership LLC Owners control decision making Owners protected from creditors Is tax-exempt
Wonka chocolate bars are actually sold by the Nestlé corporation, but in the story of Charlie and the Chocolate Factory, Willy Wonka’s company was a sole proprietorship. Discuss the advantages and
Suggest an improvement in each of the following situations that could lead to efficiency.a. A college allocates its football tickets by lottery.b. A country with millions of unemployed workers
Suppose all income in an economy with 100 workers is shared equally. Explain one advantage and one disadvantage of this system relative to a capitalist system.
If all income in an economy with 100 workers is shared equally, the rewards for extra effort are equivalent to the rewards for working under a tax on output of what percent?
Explain how the decision of how much chocolate to produce is made in communist, socialist, and capitalist systems.
The GDP of any country can be divided into two kinds of goods: capital goods and consumption goods. The proportion of national output devoted to capital goods determines, to some extent, the
For a developing country to grow, it needs capital. The major source of capital in most countries is domestic saving, but the goal of stimulating domestic saving usually is in conflict with
In July 2015, the euro was trading at $1.09. Check the Internet or any daily newspaper to see what the “price” of a euro is today. What explanations can you give for the change? Make sure you
A cornerstone of new classical economics is the notion that expectations are “rational.” What do you think will happen to the prices of single-family homes in your community over the next several
Education is an area in which it has been hard to create productivity gains that reduce costs. Collect data on the tuition rates of your own college in the last 20 years and compare that increase to
Go to a recent issue of The Economist magazine. In the back of each issue is a section called “economic indicators.” That section lists the most recent growth data for a substantial number of
In January 2015, the Congressional Budget Office (CBO) issued a report estimating that the federal budget def icit for 2015 was expected to fall slightly to $468 billion, or 2.6 percent of GDP.
Since the year 2000, several countries have defaulted on their sovereign bonds. Do some research to find information on three countries that have defaulted since 2000.For each of the three countries
Obtain monthly data on the unemployment rate and the inflation rate for the last 2 years. (This data can be found at www.bls.gov or in a recent issue of the Survey of Current Business or in the

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