MACRO HW III

Surplus/ WillPrice Shortage Rise or Fa!!?

13. (Market Equilibrium)Determine whether each of the following state-

ments is true, false, or uncertain. Then briefly explain each answer'

a. ln equilibrium, all sellers can find buyers.

b. ln equilibrium, there is no pressure on the marketto produce or

consume more than is being sold.

c. At prices above equilibrium, the quantity exchanged exceeds the

quantitY demanded.

d. At prices below equilibrium, the quantity exchanged is equal to

the quantity suPPlied

14. (Changes in Equitibrium)Whalare the effects on the equilibrium price and quantity of steel if the wages of steelworkers rise and,

simultaneously, the price of aluminum rises?

4-7 Describe the result of a government-set price floor or price ceiling on a market

15. (Price Floollhere is considerable interest in whether the minimum

wage rate contributes t0 teenage unemployment Draw a demand

and supply diagram for the unskilled labor market, and discuss the

effects of a minimum wage. Who is helped and who is hurt by the

minimum wage lau/?

GHAPTER 5 5-l Explain what's sPecial about a national economy comPared to regional, state, or local economies

t. (The Nationat Econamy)V"lhy do economists pay more attention to national economies (for example, the U.S. or Canadian econo-

mies) than t0 state or provincial economies (such as California or

0ntario)?

5-2 Describe the phases of the business cycle

z. (Economic Ftuctuafionsl Describe the various components of fluc- tuations in economic activity over time. Because economic activity

fluctuates, how is long-term groMh possible?

5-3 Explain the shapes of the aggregate demand curue and ttre aggregate supPly curye, and how they interact to determine real GDP and the price level for a nation

3. (Aggregate Demand and Suppiyl Review the information on demand and supply curves in Chapter 4. How do the aggregate

demand and aggregate supply curves presented in this chapter

differ from the market curves of Chapter 4?

0uantitY

Price Demanded per (millions

Bushel of bushels)

$1.80 320 2.00 300 2.20 270 2.40 230 2.60 200 2.80 ',180

0uantity Supplied (millions

of bushels)

200

230

270

300

330

350

32A PROBLEMS APPENDIX

4. (Aggregate Demand and Suppiy) Determine whether each of the following would cause a shift of the aggregate demand curve, a

shift of the aggregate supply curve, neither, or both' Which curve

shifts, and in which direction? What happens t0 aggregate output

and the price level in each case?

a. The price level changes.

b. Corlsumer confidence declines.

c. The supply of resources increases.

d. The wage rate increases.

5-4 ldentify the f,ve eras of the U.S. economy, and describe brieflY whatwent on during each 5. (Five Eras of u.S. Economy)ldentify the five eras 0f the LJ S'

economy beginning with the Great Depression and before'

a. (Supply-Side Economics)One fupply-side measure introduced by the Beagan administration was a cut in income tax rates Use an

aggregate demand/aggregate supply diagram to show what effect

was intended. What might happen if such a tax cut also shifted the

aggregate demand curve?

CHAPTER 6 5-1 Describe the two ways of computing GDP and explain why they are equivalent

t. (lncome Apprlach t0 GDP)How does the income approach to measuring GDP differ from the expenditure approach? Explain the

meaning ol vatue added and its importance in the income ap-

proach. Consider the following data for the selling price at each

stage in the production of a S-pound bag of flour sold by your local

grocer. Calculate the final market value of the flour'

Stageol Sale Production Price Farmer $0.30 Miller 0.50 Wholesaler 1.00 Grocer 1.50

2. (Expenditure Approach to GDP)Giuen the following annual informa- tion about a hypothetical country, answer questions a through d'

Personal consumption expenditures

Personal taxes

Exports

Depreciation

Government purchases

Gross private domestic investment

lmports

Government transfer PaYments

a. What is the value of GDP?

b. What is the value of net domestic producf.T

c. What is the value of net investmenP

d. What is the value of net exPorts?

Billions

of Dollars

$200

50

30

10

50

40

40

20

3. (lnvestmenf) Given the following data, answer questions a through c.

New residential construction

Purchases of existing homes

Sales value of newly issued stocks and bonds

New physical capital

Depreciation

Household purchases 0f new furniture

Net change in firms' inventories

Production of new intermediate goods

a. What is the value of gross private domestic investmenP

b. What is the value of net investmenfl

c. Are any intermediate goods counted in gross investment?

6-2 Trace through the circular flow model, explaining each of the 10 steps along the way t. (Circular Flow Model) First describe in general terms the point of

the circularflow model. Next describe the 10 steps along the way.

s. (Leakages and lnjections)What are the leakages from and injec- tions into the circular flow? How are leakages and injections related

in the circular flow?

6-3 ldentify the limitations of the national income accounfing system 6. (Natilnal lncome Accounts) What relevant aspects of the economy

are not reflected in the national income accounting system.

7. (Limitatilns of National lncome Accounting)Explain why each of the following should be taken into account when GDP data are used to

compare the "level of well-being" in different countries:

a, Population levels

b. The distribution of income

c. The amount of production that takes place outside of markets

d. The length of the average workweek

e, The level of environmental pollution

6-4 Define a price index and explain why is it useful 8. (Clnsumer Price lndex)Calculate a new consumer price index for

the data in the following exhibit. Assume that current-year prices of

Twinkies, fuel oil, and cable W are $0.9S/package, $1.25lgallon, and $1 5.0O/month, respectively. Calculate the current year's cost

of the market basket and the value of the current year's price

index. What is this year's percentage change in the price level

compared to the base year?

Billions

of Dollars

$500

250

600

800

200

50

100

700

Twinkiea 365pael€g€s. $0;8S&aol€ge-.r $321.85,

Fusl oil 5000ail0ns I :l.ougdllon 50q,00 CAbldTV . 12 mffiE. 30.004n0nth.r,. . . 360p0

$fi;s5

9. (Consumer Pice /ndexl Given the following data, what was the value of the consumer price index in the base yeaf Calculate the annual rate of consumer price inflation in 201 3 in each of the following situations:

a. The CPI equals 200 in 201 2 and 240 in 2013.

b. The CPI equals 1 50 in 201 2 and 1 75 in 201 3.

c. The CPlequals 325 in2012and 340 in 2013.

d. The CPI equals 325 in 201 2 and 31 5 in 201 3.

GHAPTER 7

7-1 Describe what the unemployment rate measures, and summarize four sources of unemployment t. (Measuring Unemployment)Determine the impact on each 0f the

following if 2 million formerly unemployed workers decide to return

to school full time and stop looking for work:

a. The labor force participation rate

b. The size of the labor fdrce

c. The unemployment rate z. (Measuring Unemployment)Suppose that the U.S. noninstitutional

adult population is 230 million and the labor force participation rate

is 67 percent,

a. What would be the size of the U,S, labor force?

b. lf 85 million adults are not working, what is the unemployment rale?

3. (fypes of Unemploymentl Determine whether each of the following would be considered frictional, structural, seasonal, or cyclical

unemployment:

a. A UPS employee who was hired for the Christmas season is laid off after Christmas.

b. A worker is laid off due to reduced aggregate demand in the

ec0n0my.

c. A worker in a DVD rental store becomes unemployed as video- on-demand cable service becomes more popular.

d. A new college graduate is looking for employment.

7-2 Outline the pros and cons of unemPloyment insurance t. (Unemployment lnsurance) What are the pros and cons of

unemployment insurance?

s. (The Meaning of Full Employmentl When the economy is at full employment, is the unemployment rate at zero percenfl Why or

why not? How would a more generous unemployment insurance

system affect the full employment figure?

7-3 Define inflation and describe the nvo sources of inflation 6. (Twl Sources of lnflation)Using aggregate supply and aggregate

demand, demonstrate two sources of inflation.

7. (lnflatiln)Here are some recent data on the U,S. consumer price index: Year CPI 1992 I40.3 1993 144.5 1994 148.2 1995 152.4 1996 156 I 1997 160.5 1998 163.0

Year CPI 1999 166.6 2000 172.2 2001 177.1 2002 179.9 2003 184,0 2004 188 I 2005 195.3

Year CPI 2006 201.6 2007 207.3 2008 215.3 2009 214.5 2010 218j 2011 224.9 2012 229.6

PROBLEMS APPENDIX 329