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principles of economics

Questions and Answers of Principles Of Economics

Germany Leads Slowdown in Eurozone The pace of German economic growth has weakened“markedly,” but the reason is the weaker global prospects. Although German policymakers worry about the
After you have studied Reading Between the Lines on pp. 716–717 answer the following questions.a. What are the main features of U.S. inflation and unemployment since 1950 that brought fluctuations
Real Wages Fail to Match a Rise in Productivity For most of the last century, wages and productivity—the key measure of the economy’s efficiency—have risen together, increasing rapidly through
Explain the when-to-work decision when technology advances.
Draw a graph to show the effect of the new technology in the labor market.
Draw a graph to show the effect of the new technology in the market for loanable funds.
Explain how large-scale structural change might influence the short-run and long-run unemployment–inflation tradeoffs. Will the influence come from changes in the expected inflation rate, the
Explain how the Fed’s doubling of the monetary base and government bailouts might influence the short-run and long-run unemployment–inflation tradeoffs. Will the influence come from changes in
Evaluate the claim made in this article that if“inflationary expectations” become strongly “entrenched” an economy will experience “a persistent output gap.”
Evaluate the claim that stagflation is anathema to the Phillips curve.
Draw in the figure the sequence of the economy’s short-run and long-run Phillips curves.
Describe the events that could create this sequence. Has the economy experienced demand-pull inflation, cost-push inflation, expected inflation, or none of these?
Explain how this arrangement might have influenced New Zealand’s short-run Phillips curve.
Draw a graph to illustrate and explain the inflation spiral that the U.S. experienced in the 1970s.
Debate on Causes of Joblessness Grows What is the cause of the high unemployment rate? One side says more government spending can reduce it. The other says its a structural problem—people who
From the Fed’s Minutes The Fed expects the unemployment rate will drop from 9.8 percent today to 9.25 percent by the end of 2010 and to 8 percent by the end of 2011. Private economists predict that
Recession? Maybe. Depression? Get Real.The unemployment rate during the Great Depression peaked at nearly 25 percent in 1933, after an initial spike from 3 percent in 1929 to nearly 8.7 percent in
Iran Postpones Cutting Gasoline Subsidies Inflation is about 10 percent and the unemployment rate is about 14 percent. Earlier this month Iran’s main audit body slammed the government's plan to
Draw a graph to illustrate and explain how“growing inflation expectations may become self-fulfilling.”
Explain how “slowing growth” can reduce inflationary pressure.
a. Explain the two types of inflation described in this news clip.b. Explain why “rising labor productivity” can neutralize the effect on inflation of “higher input costs.”
Draw a graph to illustrate and explain how China might experience an inflation spiral.
Draw a graph to illustrate the initial rise in the price level and the money wage rate response to a one-time rise in the price level.
Is China experiencing demand-pull or cost-push inflation? Explain.
Suppose that people expect deflation (a falling price level), but aggregate demand remains at AD0.a. What happens to the short-run and long-run aggregate supply curves? (Draw some new curves if you
Pakistan: Is It Cost-Push Inflation?With CPI already spiking 11.8 percent for the first ten months of the fiscal year, the average CPI inflation for the same period last year stood at 22.35 percent.
After you have studied Reading Between the Lines on pp. 690–691 answer the following questions.a. If the 2010 changes in inventories were mainly planned changes, what role did they play in shifting
Price Jump Worst Since ’91 The biggest annual jump in the CPI since 1991 has fanned fears about growing pressures on consumers.The Labor Department report confirms what every consumer in America
Obama’s Economic Recovery Plan President Obama's proposal to jolt a listless recovery with $180 billion worth of tax breaks and transportation projects left economists largely unimpressed
Obama’s New Stimulus The Obama recovery plan announced on Monday includes proposed spending of $50 billion to rebuild 150,000 miles of roads, construct and maintain 4,000 miles of rail, and fix or
Wholesale Inventories Decline, Sales Rise The Commerce Department reported that wholesale inventories fell 1.3 percent in August for a record 12th consecutive month, evidence that companies are
Draw a graph of a consumption function and show at what point consumers were actually operating in the first quarter. Explain your answer.
According to the news clip, how did consumption expenditure respond in the first quarter of 2008? What factors might explain why consumers’actual response differs from what the consumption function
Explain and draw a graph to illustrate how a decrease in household wealth theoretically impacts the consumption function and saving function.
Calculate consumption at each level of disposable income. Calculate the marginal propensity to consume.
Calculate the marginal propensity to save.
In the Canadian 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
Why is the multiplier only a short-run influence on real GDP?
Explain and draw a graph to illustrate how real GDP will be driven back to potential GDP in the long run.
Explain and draw a graph to illustrate the process by which “cutbacks by the wealthy have a ripple effect.”
Explain and draw a graph to illustrate how this fiscal stimulus will influence aggregate expenditure and aggregate demand in both the short run and the long run.
Will $100 billion of tax rebates to American consumers increase aggregate expenditure by more than, less than, or exactly $100 billion? Explain.
Are the values of the multipliers in the short run and the long run larger or smaller than 2?
What happens to the multiplier if an income tax is introduced?
Calculate the new real GDP and explain why real GDP increases by more than $5 billion. of $2 trillion increases equilibrium expenditure by$8 trillion.
Calculate the multiplier and the change in real GDP.
Recovery?In the second quarter, businesses increased spending on equipment and software by 21.9%, while a category that includes home building grew amid a rush by consumers to take advantage of tax
a. What is aggregate planned expenditure when real GDP is $6 billion?b. If real GDP is $4 billion, what is happening to inventories?
The U.S. and China’s Savings Problems Last year China saved about half of its gross domestic product while the United States saved only 13 percent of its national income. The contrast is even
Calculate the marginal propensity to consume.
After you have studied Reading Between the Lines on pp. 664–665 answer the following questions.a. What are the main features of the U.S. economy in the second quarter of 2010?b. Did the United
Should Congress Pass a New Stimulus Bill? No, Cut Taxes and Curb Spending Instead The first stimulus was not too meager, but it was the wrong policy prescription. Anybody who studies economic history
It’s Pinching Everyone The current inflationary process is a global phenomenon, but emerging and developing countries have been growing significantly faster than the rest of the world. Because
Does Japan have an inflationary gap or a recessionary gap and what is its magnitude?
a. Draw a graph of the aggregate demand curve and the short-run aggregate supply curve.b. What is the short-run equilibrium real GDP and price level?
Explain the combined effects of these events on U.S. real GDP and the price level, starting from a position of long-run equilibrium
Explain the separate effects of each event on U.S.real GDP and the price level, starting from a position of long-run equilibrium.
Does the country have an inflationary gap or a recessionary gap and what is its magnitude?
Calculate the private sector balance.
Explain the long-run effect of China’s current exchange rate policy.
Explain how fixed and crawling peg exchange rates can be used to manipulate trade balances in the short run, but not the long run.
Sara withdraws $1,000 from her savings account at the Lucky S&L, keeps $50 in cash, and deposits the balance in her checking account at the Bank of Illinois. What is the immediate change in M1 and M2?
In Problem 11, the banks have no excess reserves.Suppose that the Bank of Nocoin, the central bank, decreases bank reserves by $0.5 billion.a. Calculate the money multiplier.b. What happens to the
Quantecon is a country in which the quantity theory of money operates. In year 1, the economy is at full employment and real GDP is $400 million, the price level is 200, and the velocity of
The spreadsheet provides information about the demand for money in Minland. Column A is the nominal interest rate, r. Columns B and C show the quantity of money demanded at two values of real GDP: Y0
The FOMC sells $20 million of securities to Wells Fargo. Enter the transactions that take place to show the changes in the following balance sheets.
Risky Assets: Counting to a Trillion Prior to the financial crisis, the Fed held less than$1 trillion in assets and most were in safe U.S.government securities. By mid-December 2008, the Fed’s
Calculate U.S. depreciation and net investment during 2009.
Calculate U. S. net investment and gross investment during 2008.
IMF Says It Battled Crisis Well The International Monetary Fund (IMF)reported that it acted effectively in combating the global recession. Since September 2008, the IMF made $163 billion available to
First Call expects its profit from the sale of cellular phones to double next year. If other things remain the same, explain how this increase in expected profit influences First Call’s demand for
Draw a graph of First Call’s demand for loanable funds curve.
Make Way for India—The Next China 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,
After you have studied Reading Between the Lines on pp. 558–559 answer the following questions.a. On what criterion is China the second largest economy in the world?b. What is the distinction
India’s Economy Hits the Wall 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
What are labor productivity and potential GDP in 2010?
If a severe drought decreases labor productivity, explain what happens toa. Potential GDP.b. Employment.c. The real wage rate.
If a large increase in investment increases labor productivity, explain what happens toa. Potential GDP.b. Employment.c. The real wage rate.
The New World Order While gross domestic product growth is cooling a bit in emerging market economies, the results are still tremendous compared with the United States and much of Western Europe. The
Venezuela’s real GDP was 57,049 trillion bolivares in 2009 and 56,764 trillion bolivares in 2010. Venezuela’s population was 28.6 million in 2009 and 29.2 million in 2010. Calculatea. The
Mexico’s real GDP was 8,600 trillion pesos in 2009 and 8,688 trillion pesos in 2010. Mexico’s population was 107 million in 2009 and 108 million in 2010. Calculatea. The economic growth rate.b.
What is the difference between productivity in this news clip and real GDP per person?
Explain what will happen in the countries to which the immigrants return to potential GDP, employment, and the real wage rate.
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
News release In June 2010, real personal consumption expenditure(PCE) was $9,283.4 billion and the PCE deflator was 110.8. In July 2010, real personal consumption expenditure was $9,301.3 billion and
Do these numbers tell us anything about the relative size of the labor force participation rates and employment-to-population ratios in the three regions?
Dress for Less Since 1998, the price of the Louis Vuitton“Speedy” handbag has more than doubled, to$685, while the price of Joe Boxer’s “licky face”underwear has dropped by nearly half, to
Why might the unemployment rate tend to actually underestimate the unemployment problem, especially during a recession?
How does the unemployment rate in May compare to the unemployment rate during the earlier recessions?
Shrinking U.S. Labor Force Keeps Unemployment Rate From Rising An exodus of discouraged workers from the job market kept the unemployment rate from climbing above 10 percent. Had the labor force not
The labor force between March 2007 and August 2008, assuming that unemployment was constant.
Unemployment between March 2007 and August 2008, assuming that the labor force was constant.
In July 2009, in the economy of Sandy Island, 10,000 people were employed, 1,000 were unemployed, and 5,000 were not in the labor force. During August 2009, 80 people lost their jobs and didn’t
The Bureau of Labor Statistics reported the following data for 2008:Labor force: 154,287,000 Employment: 145,362,000 Working-age population: 233,788,000 Calculate thea. Unemployment rate.b. Labor
Use the information in Problem 29 to calculate the chained-dollar real GDP in 2010 expressed in 2009 dollars.
Totally Gross 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
After you have studied Reading Between the Lines on pp. 502–503 answer the following questions.a. Which measure of GDP would you use to describe the shape of the recovery from recession:real GDP or
Poor India Makes Millionaires at Fastest Pace 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
Use the news clip in Problem 31.a. Why might China’s recent GDP growth rates overstate the actual increase in the level of production taking place in China?b. Explain the complications involved
U.K. Living Standards Outstrip U.S.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

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