Questions and Answers of Economics Today The Macro View

1.5 Nondurable goods spending $400 million, durable goods spending $300 million, new residential housing spending $200 million, and spending on services $500 million.What does consumption
1.4 In year 1, the prices of goods X,Y, and Z are $2, $4, and$6 per unit, respectively. In year 2, the prices of goods X,Y, and Z are $3, $4, and $7, respectively. In year 2, twice as many units of
1.3 Inventory investment is $62 billion and (total) investment is $1.122 trillion.What does fixed investment equal?
1.2 Consumption spending is $3.708 trillion, spending on nondurable goods is $1.215 trillion, and spending on services is $2.041 trillion.What does spending on durable goods equal?
1.1 Net exports are –$114 billion and exports are $857 billion.What are imports?
1.12 In the first quarter of the year, Real GDP was $400 billion;in the second quarter, it was $398 billion; in the third quarter, it was $399 billion; and in the fourth quarter, it was $395 billion.
1.11 Does the expenditure approach to computing GDP measure U.S. spending on all goods, U.S. spending on only U.S. goods, or U.S. and foreign spending on only U.S. goods? Explain your answer.
1.10 Explain why GDP can be computed either by measuring spending or by measuring income.
1.9 Define each of the following terms:a Contraction b Business cycle c Trough d Disposable income e Net domestic product
1.8 What is the difference between a recovery and an expansion?
1.7 Economists prefer to compare Real GDP figures for different years instead of comparing GDP figures.Why?
1.6 A business firm produces a good this year that it doesn’t sell. As a result, the good is added to the firm’s inventory.How does this inventory good find its way into GDP?
1.5 Why does GDP omit the sales of used goods? of financial transactions? of government transfer payments?
1.4 The manuscript for this book was keyed by the author.Had he hired someone to do the keying, GDP would have been higher than it was.What other activities would increase GDP if they were done
1.3 Discuss the problems you see in comparing the GDPs of two countries, say, the United States and the People’s Republic of China.
1.2 Which of the following are included in the calculation of this year’s GDP? (a) Twelve-year-old Johnny mowing his family’s lawn; (b) Dave Malone buying a used car;(c) Barbara Wilson buying a
1.1 “I just heard on the news that GDP is higher this year than it was last year. This means that we’re better off this year than last year.” Comment.
1.What is the political relevance of the slogan,“It’s the economy, stupid!”?
1.How can a country have one of the highest GDPs in the world and be poor too?
1.Why does the plumber want to be paid in cash?Why does the DEA care that people are demanding cash from banks in Miami?
1.What does the state of the economy have to do with a college graduate’s chances of getting a job?
1.3. Can an economy be faced with endless business cycles and still have its Real GDP grow over time? Explain your answer
1.2. Suppose Real GDP is $5.2 trillion in year 1 and $5.3 trillion in year 2. What has caused the rise in Real GDP?
1.1. Suppose GDP is $6 trillion in year 1 and $6.2 trillion in year 2. What has caused the rise in GDP?
1.How many business cycles have there been in the United States?
1.3. If GDP is $400 billion and the country’s population is 100 million, does it follow that each individual in the country has $40,000 worth of goods and services?
1.2. Will GDP be smaller than the sum of consumption, investment, and government purchases if net exports are negative? Explain your answer.
1.1. Describe the expenditure approach to computing GDP in a real-world economy.
1.Is there such a thing as a World GDP? If so, how much is it?
1.What percentage of GDP was each of the components of GDP in 2005
1.2. Suppose the GDP for a country is $0. Does this mean that there was no productive activity in the country? Explain your answer.
1.1. Identify and explain the three approaches to computing GDP.
1.Is it possible for a country to have a relatively large GDP but a relatively small per capita GDP?
1.You’ve defined GDP and said that there are three different approaches to computing it. No matter which approach we use—expenditure, income, or value-added—we get the same dollar amount. This
1.Could you give another example to illustrate the concept of double counting?
1.• What is the political relevance of the slogan,“It’s the economy, stupid!”?
1.• How can a country have one of the highest GDPs in the world and be poor too?
1.• Why does the DEA care that people are demanding cash from banks in Miami?
1.• Why does the plumber want to be paid in cash?
1.• What does the state of the economy have to do with a college graduate’s chances of getting a job?
1.10 If the CPI is 150 and nominal income is $100,000, what does real income equal?
1.9 Assume the market basket contains 10X, 20Y, and 45Z.The current-year prices for goods X,Y, and Z are $1,$4, and $6, respectively.The base-year prices are $1, $3, and $5, respectively. What is the
1.8 Using Exhibit 3, compute the percentage change in prices between (a) 1966 and 1969, (b) 1976 and 1986, and (c) 1990 and 1999.
1.7 Based on the following data, compute (a) the unemployment rate, (b) the structural unemployment rate, and (c) the cyclical unemployment rate.Frictional unemployment rate 2 percent Natural
1.6 Using the following data, compute (a) the unemployment rate, (b) the employment rate, and (c) the labor force participation rate.Civilian noninstitutional population 200 million Number of
1.5 A house cost $10,000 in 1976. What is this equivalent to in 2001 dollars? (Use Exhibit 3 to find the CPI in the years mentioned.)
1.4 Jim earned an annual salary of $15,000 in 1965.What is this equivalent to in 2005 dollars? (Use Exhibit 3 to find the CPI in the years mentioned.)
1.3 Change the current-year prices in Exhibit 2 to $1 for pens, $28 for shirts, and $32 for a pair of shoes.What is the CPI for the current year based on these prices?
1.2 Suppose there are 100 million people in the civilian labor force and 90 million people employed. How many people are unemployed? What is the unemployment rate?
1.1 Suppose there are 60 million people employed, 10 million unemployed, and 30 million not in the labor force.What does the civilian noninstitutional population equal?
1.11 How is a discouraged worker different from an unemployed worker?
1.10 What is the difference between a job leaver and a reentrant?
1.9 What criteria must be met for a person to be characterized as unemployed?
1.8 If the unemployment rate is 4 percent, it does not follow that the employment rate is 96 percent. Explain why.
1.7 What is the difference between the employment rate and the labor force participation rate?
1.6 What is “natural” about natural unemployment?
1.5 What does it mean to say that the country is operating at full employment?
1.4 How does structural unemployment differ from frictional unemployment?
1.3 What does it mean if the expenditure weights of the market basket used to compute the CPI are changed?
1.2 Show that if the percentage rise in prices is equal to the percentage rise in nominal income, then one’s real income does not change.
1.1 What does the CPI in the base year equal? Explain your answer.
1.How does the BLS compute the consumer price index, and what does it matter whether prices are rising or falling?
1.Will Catherine be rich? How does her salary of $50,000 compare to her father’s first salary of $8,000?
1.3. In year 1, your annual income is $45,000 and the CPI is 143.6; in year 2, your annual income is $51,232 and the CPI is 150.7. Has your real income risen, fallen, or remained constant?Explain
1.2. What is a base year?
1.1. Explain how the CPI is calculated.
1.• What’s the best way to compare the gross receipts of two movies?
1.• Will Catherine be rich? How does her salary of $50,000 compare to her father’s first salary of $8,000?
1.• How long will George Krenshaw stay unemployed?
1.• How does the BLS compute the consumer price index, and what does it matter whether prices are rising or falling?
1.• How does the BLS compute the unemployment rate, and does it matter whether the unemployment rate is trending down or up?
1.• What does a report on prices have to do with what Franklin Smithies will do at work?
1.4 Explain and diagrammatically represent why the placement of a tax may be different than the payment of a tax.
1.3 Smith has been trying to sell his house for six months, but so far, there are no buyers. Draw the market for Smith’s house.
1.2 Diagrammatically show and explain why there is a shortage of classroom space for some college classes and a surplus for others.
1.1 The price to drive on a freeway is $0 at all times of the day. This price establishes equilibrium at 3 A.M. but is too low to establish equilibrium at 5 P.M. There is a shortage of freeway space
1.17 How does a grocery store know how much cereal, butter, and candy it should stock on its shelves?
1.16 Consider the theater in which a Broadway play is performed.If tickets for all seats are the same price (say,$70), what economic effect might arise?
1.15 Suppose the equilibrium wage for a college athlete is$40,000, but because of NCAA rules, the university can offer him only $22,000 (full tuition). How might the university administrators,
1.14 Explain and diagrammatically represent how a price floor can bring about a transfer from consumers to producers.
1.13 University A charges more for a class for which there is high demand than for a class for which there is low demand. University B charges the same for all classes.All other things being equal
1.12 Wilson walks into his Economics class ten minutes late because he couldn’t find a place to park. Because of his tardiness, he doesn’t hear the professor tell the class there will be a quiz
1.11 Suppose there exists a costless way to charge drivers on the freeway. Under this costless system, tolls on the freeway would be adjusted according to traffic conditions.For example, when traffic
1.10 If the equilibrium wage for economics professors is higher than the equilibrium wage for history professors, which professors (do you think) are more likely to argue that all professors should
1.8 In the discussion of healthcare and the right to sue your HMO, we state, “Saying a seller’s minimum price for providing a good or service rises is the same as saying the seller’s supply
1.7 Economics has been called the “dismal science” because it sometimes “tells us” that things are true when we would prefer they were false. For example, although there are no free lunches,
1.4 Using supply-and-demand analysis, explain the recording industry’s efforts to reduce the amount of pirated music.
1.3 The minimum wage in year 1 is $1 higher than the equilibrium wage. In year 2, the minimum wage is increased so that it is $2 above the equilibrium wage.We observe that the same number of people
1.2 Suppose the purchase and sale of marijuana are legalized and the price of marijuana falls.What explains the lower price of marijuana?
1.1 Harvard, Yale, and Princeton all charge relatively high tuition. Still, each uses ACT and SAT scores as admission criteria. Are charging a relatively high tuition and using standardized test
1.2. In Application 20, explain why the vertical distance between the two supply curves is the(per-unit) tax.
1.1. Is it necessarily the case that if government places a tax on the seller of a good, the seller of the good will end up paying the full tax?
1.2. How is the analysis of the 10 A.M. class similar to the analysis of a price ceiling in the kidney market?
1.1. Suppose college students are given two options. With option A, the price a student pays for a class is always the equilibrium price. For example, if the equilibrium price to take Economics 101
1.2. Suppose at the price of $1 a day for parking, quantity supplied is equal to quantity demanded. What happens if the demand for parking rises more than the supply of parking and the price of
1.1. If a person pays for something in terms of time, he or she is really paying in terms of money. Do you agree or disagree? Explain your answer.
1.2. If the driving population increases in an area and the supply of freeway space remains constant, what will happen to freeway congestion? Explain your answer
1.1. In Exhibit 8, at what price is there a surplus of freeway space at 8 A.M.?
1.1. University X is a large university with a major football team. A new field house and track were just added to the university. How is this related to the discussion in this application?2.
1.2. Why might producers argue for a price floor if it ends up making society worse off?

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