Questions and Answers of Economics Today The Macro View

LO3. How nations resolve these issues.
LO2. The core economic issues that nations must resolve.
LO1. The role scarcity plays in defining economic choices.
1.3 Graphically show and explain the domestic and feedback effects on Real GDP in the United States as a result of contractionary monetary policy.
1.2 Graphically show and explain the domestic and feedback effects on Real GDP in the United States as a result of contractionary fiscal policy.
1.1 Starting with an exchange rate of $1 114 yen and a price tag of 10,000 yen for a Japanese item, show what happens to the price of the Japanese item if the yen depreciates by 5 percent.
1.10 Explain why contractionary monetary policy lowers Real GDP more in an open economy than in a closed economy.
1.4 In a Thinking Like an Economist feature, we noted,“The discussion of the J-curve points out that economists sometimes think in terms of both the short run and the long run.” Do you agree or
1.2 Give a numerical example to illustrate what depreciation(of a country’s currency) does to the prices of its imports.
1.1. Explain how expansionary monetary policy works in an open economy.
1.2. What is the effect on the U.S. price level of lower real interest rates in Japan than in the United States? Explain your answer.
1.1. How do foreign input prices affect the U.S. SRAS curve?
1.Earlier in the chapter, it stated that a change in the exchange rate could change the AD curve. Now it is said that a change in the exchange rate can change the SRAS curve too. If a change in the
1.• What do interest rates in Japan have to do with Tanya?
1.• What does the effectiveness of monetary policy at changing Real GDP have to do with international effects?
1.• Does the senator understand economics well enough?
1.• What does Janis have to be worried about?
1.2 If the demand for food were elastic, would bad weather be better for farmers than good weather? Use a diagram to explain your answer
1.1 Using Exhibit 1, prove that total revenue at P1 is greater than total revenue at P2.
1.7 Do you think the number of farmers in the United States will increase, decrease, or stay roughly the same during the next 20 years? Why?
1.6 Some people contend that the majority of Americans realize that they subsidize farmers through various government programs, but they don’t mind doing this because they know they are preserving
1.5 How do nonrecourse loans support crop prices?
1.4 How can a farmer protect himself against price variability using a futures contract?
1.3 How can good weather be desirable for an individual farmer but not for farmers as a group?
1.1 What is the connection between inelastic demand and price stability?
1.Can farmers be made worse off as a result of increases in productivity?
1.Under what condition will Hamilton earn greater income if the supply of wheat were lower?
1.Under what condition will Hamilton earn greater income if the supply of wheat were lower?
1.3. What are effects of price supports?
1.2. How do nonrecourse commodity loans work?
1.1. If the target price for a bushel of wheat is $7, what will the per-unit deficiency payment equal?
1.I’ve heard that farmers, on average, have higher incomes than many Americans. Is this true?
1.3. For farmers as a group, when would increased productivity lead to higher total revenue?
1.2. An individual farmer could be in any of the following situations: (a) bad weather for all farmers, including himself; (b) bad weather for all other farmers but good weather for himself;or (c)
1.1. Explain how a farmer can protect herself against adverse price swings.
1.Why don’t farmers simply agree among themselves to be less productive because greater productivity seems to work to their disadvantage?
1.• Can farmers be made worse off as a result of increases in productivity?
1.• Is the average farmer better off than the average American household?
1.• Under what condition will Hamilton earn greater income if the supply of wheat were lower?
1.5 A person buys a bond that matures in 10 years and pays a coupon rate of 10 percent.The face value of the bond is $10,000. How much money will the bondholder receive in the tenth year?
1.4 The face value of a bond is $10,000 and the annual coupon payment is $850.What is the coupon rate?
1.3 The closing price of the stock is $66.40 and the net earnings per share are $2.50.What is the stock’s P-E ratio?
1.2 The closing price of a stock is 90.25 and the dividend is 3.50.What is the yield of the stock?
1.1 You own 1,250 shares of stock X. You read in the newspaper that the dividend for the stock is 3.88.What did you earn in dividends?
1.14 If you thought the share price of a stock was going to fall, would you buy a call option or a put option?
1.13 “The currency speculator who sells futures contracts assumes the risk that someone else doesn’t want to assume.” Do you agree or disagree? Explain your answer.
1.12 Why might a person buy a call option?
1.11 Why might a person buy a futures contract?
1.10 “If you can predict interest rates, then you can earn a fortune buying and selling bonds.” Do you agree or disagree?Explain your answer.
1.9 Why might a person purchase an inflation-indexed Treasury bond?
1.8 If the face value of a bond is $10,900 and the annual coupon payment is $600, then what is the coupon rate?
1.7 “An issuer of a bond is a borrower.” Do you agree or disagree? Explain your answer.
1.6 Which of the two stocks has a bigger gap between its closing price and net earnings per share: Stock A with a P-E ratio of 15 or Stock B with a P-E ratio of 44?Explain your answer.
1.5 Suppose the share price of each of 500 stocks rises on Monday. Does everyone in the stock market believe that stocks are headed even higher, since no one would buy a stock if he or she thought
1.4 What does it mean if someone invests in a mutual fund? in a stock market fund?
1.3 What does it mean to “buy the market”?
1.2 What does it mean if the Dow Jones Industrial Average rises by, say, 100 points in a day?
1.1 What is the purpose of financial markets?
1.3. What is a put option?
1.2. There is a stock that you think will rise in the next few months, but you do not have enough money to buy many shares of the stock. What can you do instead?
1.1. What is a futures contract?
1.I’ve heard about some people working today who get part of their pay in the form of stock options. What are these?
1.In the example, the price of corn went down. It could have gone up, though.In this case, would Wilson, the farmer, have lost money?
1.4. What is the difference between a municipal bond and a Treasury bond?
1.3. If the annual coupon payment for a bond is $1,000 and the price paid for the bond was$9,500, then what is the yield or interest rate?
1.2. If the coupon payment on a bond is $400 a year and the coupon rate is 7 percent, then what is the face value of the bond?
1.1. What is a bond?
1.Can a bond issuer set the coupon rate at anything he or she wants? If so, why wouldn’t the bond issuer always set the coupon rate at something like 1 percent?
1.Suppose I want to buy a bond issued by some corporation.Would I buy the bond from the corporation itself or from someone else (e.g., from a person who had purchased a bond from the corporation at
1.I don’t quite understand how a person that buys something (like a bond) can be called a lender. I thought when you lend money, you just turn over money to the borrower and he or she pays you back
1.Is it a good idea to buy stock?
1.Suppose I buy 100 shares of stock at a price of $40 a share. The stock goes down in price to $32. Shouldn’t I wait until the share price rises to $40 or higher before I sell it?
1.If the DJIA goes up or down, does this affect me if I do not own any of the stocks that make up the DJIA?
1.If I buy shares of stock, do I have to hold on to them for any set period of time? Also, where can I buy shares of stock?
1.• What does “the market”refer to?
1.• Does timing matter?
1.• Is there any way that Jack can protect himself from a drop in the price of wheat?
1.• What is the Dow?
1.10 How do tariff rates in the United States today compare with 1946?
1.9 Will globalization lead to some people losing jobs?Explain your answer.
1.8 David Friedman said that free (international) trade is a technology. Explain what he means.
1.7 What is Thomas Friedman’s “Golden Arches theory of conflict prevention”?
1.6 Some have argued that the end of the Cold War acted as a catalyst toward greater globalization. How so?
1.5 What effect might advancing technology have on globalization?
1.4 Identify and explain two of the benefits and two of the costs of globalization.
1.3 How might governments impact globalization?
1.2 If globalization continues over the next few decades, how might your life be different?
1.1 Why might it be easier to recognize the costs of globalization than the benefits?
1.Why does Elizabeth’s customer service call connect to a person in India?
1.Does everyone agree as to what the benefits and costs of globalization are?
1.Will globalization lead to some people losing jobs?
1.What is globalization and does it hurt the poor?
1.2. Identify some of the costs of globalization.
1.1. Identify some of the benefits of globalization.
1.How do we know that the benefits you say are a result of globalization are, in fact, caused by globalization? Couldn’t they be caused by something else?
1.Isn’t it the case that prices can fall even if they are not traded between countries? If so, how do we identify whether a good’s price has fallen because of, say, technology or because it is a
1.3. How might advancing technology lead to increased globalization?
1.2. What is globalization?
1.1. Some have said that the end of the Cold War has led to greater globalization. Explain the reasoning here.
1.What specifically is the difference between a national economy and a global economy?

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