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Macroeconomics
Download more recent data from Google mobility index, update Figure 10.1 and comment on the evolution of the pandemic.Data From Figure 10.1:- 4500 4000 3500 3000 2500 2000 1500 1000 500 0 1-1-20
The 1977 Federal Reserve Act, as amended in 1978, 1988 and 2000, governs the behavior of the Federal Reserve.a. In your opinion, does this excerpt from the Act make the policy goals of the Fed
Problem 10 in Chapter 4 asked you to consider the current stance of monetary policy. Here, you are asked to do so again, but with the additional understanding of monetary policy you have gained.Go to
Understanding the Fed’s actions that are needed to stabilize the interest rate The diagram below shows three different money demand curves and a target interest rate i*.Fill in the table below
This section looks at US recessions over the past 60 years. To work out this problem, first obtain quarterly data on US output growth for the period 1960 to the most recent data from www.bea.gov.
This question asks you to examine the movements of investment and consumption before, during and after the recession of 2001. It also asks you to consider the response of investment and consumption
Consider each table below. Is the data presented consistent with the Phillips curve model of wage determination? Each table has a point \(A\) and a point B. Startyour answer with true/false/
In a 2012 book, The New Geography of Jobs (a book described by Barack Obama as 'a timely and smart discussion of how different cities and regions have made a changing economy work for them', and by
Nature, a leading science magazine, argues (https://www.nature.com/articles/d41586-020-01518-y) that COVID19 will force universities to confront long-standing challenges in higher education, such as
Compute the change in stock market prices by sector in the UK and Ireland up to the current date (that is the day you are studying this chapter). Is the distinction between affected and non-affected
Go to the website of the FRED economic data base and download the quarterly series for real personal disposable income per capita (series name A229RX0Q048SBEA (billions of chained 2012 dollars)), the
A European recession and the US economya. In 2017, European Union spending on US goods accounted for 19\% of US exports (see Table 18.2), and US exports amounted to \(12.3 \%\) of US GDP (see Table
Plot the values of velocity you found in Problem 7, and comment on the volatility (i.e., fluctuations) of velocity.Data from Problem 7Suppose the liquidity preference function is given byFor the data
Nominal and real interest rates around the worlda. There are a few episodes of negative nominal interest rates around the world. Some may or may not be in play as you read this book. The Swiss
Unemployment durations and long-term unemployment According to the data presented in this chapter, about \(44 \%\) of unemployed workers leave unemployment each month.a. Assume that the probability
Political expectations, inflation, and unemployment Consider a country with two political parties, Democrats and Republicans. Democrats care more about unemployment than Republicans, and Republicans
A European recession and the U.S. economya. In 2014, European Union spending on U.S. goods accounted for \(18 \%\) of U.S. exports (see Table 17-2), and U.S. exports amounted to \(15 \%\) of U.S. GDP
Fill in the blanks to make the following statements correct.a. If a wine shop in Alberta buys a case of wine from Chile, the transaction is recorded as a(n) __________ in the account, which is a
Fill in the blanks to make the following statements correct.a. A depreciation of the Canadian dollar means that it takes __________ Canadian dollars to purchase one unit of foreign currency, and
Fill in the blanks to make the following statements correct.a. If the exchange rate is determined by the equality of supply and demand for foreign exchange and the central bank makes no
The table below shows Sophie’s financial details for 2016. Answer the following questions about her “balance of payments.”a. What is Sophie’s “trade balance”? Explain.b. What is
The diagram below shows the demand for foreign currency and the supply of foreign currency. The equilibrium exchange rate is e*. Assume that Canada has a purely flexible exchange rate.a. Show in the
What is the probable effect of each of the following on the exchange rate of a country, other things being equal?a. The quantity of oil imports is greatly decreased, but the expenditure on imported
Many commentators are perplexed when they observe a depreciation of the Canadian dollar but not a reduction in the Canadian trade deficit. Explain why there is not a precise relationship between the
The diagram below shows the demand for foreign currency and the supply of foreign currency. The equilibrium exchange rate is e*.a. Suppose the Bank of Canada decides to fix the exchange rate at e1.
Suppose that Canadian real GDP is equal to potential output, the price level is stable, and the exchange rate is equal to e0, its market-clearing value. There is then an upturn in the world demand
Every few months, The Economist publishes its “Big Mac Index.” Using the current exchange rates, it compares the U.S.-dollar price of Big Macs in several countries. It then concludes that
A former Canadian prime minister once suggested that Canada should try to have balanced trade, industry by industry.a. Do you think this makes sense? Explain.b. How about the idea of balanced trade,
In 2015, a letter to a Canadian national newspaper argued that “the economy of this once wonderful country is in the sewer and the politicians keep on tinkering, not knowing how to fix it.” The
Fill in the blanks to make the following statements correct.a. Economists have designed____________ to better explain and predict the behaviour we observe in the world around us.b. A variable, such
Suppose you want to create a price index for the price of a personal pizza across several Canadian university campuses, as of March 1 , 201 6. The data are as follows:a. Using Calgary as the "base
According to Statistics Canada, Canada's exports and imports of energy (combined totals of fossil fuels, hydro, and nuclear, all measured in petajoules) over a five-year period were as follows:a.
The following questions will provide practice working with simple linear functions. All questions refer to a coordinate graph with the variable \(X\) on the horizontal axis and the variable \(Y\) on
Fill in the blanks to make the following statements correct.a. Ceteris paribus, the price of a product and the quantity demanded are related ________b. Ceteris paribus, the price of a product and the
The following supply and demand schedules describe a hypothetical Canadian market for potash.a. What is the equilibrium price of potash?b. How much potash would actually be purchased if the price was
The following diagram describes the hypothetical demand and supply for canned tuna in Canada in 201 6.a. Suppose the price of a can of tuna is \(\$ 4 .00\). What is the quantity demanded? What is the
Assume you have the following information for the global market for agricultural commodity \(X\). For each scenario, use demand and supply analysis to provide a likely explanation for the change in
Fill in the blanks to make the following statements correct.a. The value of total production of goods and services in Canada is called its _______ National _______ and national _______ are equal
Fill in the blanks to make the following statements correct.a. The labour force includes people who are__________ and people who are _________ The unemployment rate is expressed as the number of
Consider the macroeconomic data shown below for a hypothetical country's economy.a. Compute the output gap for each year.b. Explain how GDP can exceed potential GDP.c. Does real GDP ever fall in the
As explained in the text, the unemployment rate is defined as:a. Explain why people may decide to join the labour force during booms.b. From part (a), explain why the unemployment rate might rise
With the information provided, determine the unemployment rate for each of these hypothetical economies.a. Labour force \(=20\) million; number of people unemployed \(=1.5\) million; population
Consider an imaginary 10 -year period over which output per worker falls, but GDP increases. How can this happen? Do you think this is likely to be good for the economy?
Consider the data shown below for the Canadian Consumer Price Index (CPI), drawn from the Bank of Canada's website.a. Compute the missing data in the table.b. Do average prices ever fall in the time
The data below show the nominal interest rate and the inflation rate for several developed economies as reported in The Economist in February 201 5.a. Compute the real interest rate for each country,
Consider the following data drawn from The Economist. Recall that the Canadian exchange rate is the number of Canadian dollars needed to purchase one unit of some foreign currency.a. Which currencies
When the Canadian dollar depreciates in foreign exchange markets, many people view this as "good" for the Canadian economy. Who is likely to be harmed by and who is likely to benefit from a
Fill in the blanks to make the following statements correct.a. If, when measuring Canada's national output, we add the market values of all firms' outputs in Canada, then we are committing the error
Fill in the blanks to make the following statements correct.a. If nominal GDP increases by 35 percent over a 10 -year period, then it is unclear how much of this increase is due to increases in
In measuring GDP from the expenditure side ( \(\left.\mathrm{GDP}=C_{a}+I_{a}+G_{a}+N X_{a}ight)\), which of the following expenditures are included and within which of the four categories?a.
The list below provides some national income figures for the country of Econoland. All figures are in millions of dollars.a. Using the expenditure approach, what is the value of GDP for Econoland?b.
As we saw in the text, the expenditure approach to measuring GDP shows thata. Is this equation a causal relationship, suggesting that an increase in any one of the right-hand-side terms causes an
A company's wages and salaries are part of its value added. Suppose, however, that the cleaning and machinery maintenance that its own employees used to do are now contracted out to specialist firms
For each of the following events, describe the likely effect on real GDP in Canada.a. A major ice storm in Quebec damages homes and thus increases the demand for building materials.b. A flood on the
The table below shows data for real and nominal GDP for a hypothetical economy over several years.a. Compute the GDP deflator for each year.b. Compute the total percentage change in nominal GDP from
Would inflation, as measured by the rate of change in the GDP deflator, ever be different from inflation as measured by the rate of change in the Consumer Price Index? Would it ever be the same?
Consider the following data for a hypothetical economy that produces two goods, milk and honey.a. Compute nominal GDP for each year in this economy.b. Using year 1 as the base year, compute real GDP
In 201 4, the United Nations ranked Norway first on the Human Development Index-a ranking of the "quality of life" in many countries. Yet Norway was not ranked first in terms of real per capita GDP.
Fill in the blanks to make the following statements correct.a. The equation for actual national income from the expenditure side is written as GDP = __________ .b. The equation for desired aggregate
Fill in the blanks to make the following statements correct.a. If actual national income is $200 billion and desired aggregate expenditure is $180 billion, inventories may begin to ________ , firms
Consider the following table showing aggregate consumption expenditures and disposable income. All values are expressed in billions of constant dollars.a. Compute the average propensity to consume
This question relates to desired saving, and is based on the table in Question 3 .a. Compute desired saving at each level of disposable income. Plot the saving function on a scale diagram. What is
Relate the following newspaper headlines to shifts in the \(C, S, I\), and \(A E\) functions and to changes in equilibrium national income.a. "Revival of consumer confidence leads to increased
In the chapter we explained the difference between desired expenditures and actual expenditures.a. Is national income accounting based on desired or actual expenditures? Explain.b. Suppose there were
Consider the following diagram of the \(A E\) function and the \(45^{\circ}\) line.a. Suppose the level of actual national income is \(Y_{1}\). What is the level of desired aggregate expenditure? Is
Consider a simple model like the one developed in this chapter. The following equations show the levels of desired consumption and investment:a. Complete the table above.b. What is the equilibrium
Suppose you are given the following information for an economy without government spending, exports, or imports. \(C\) is desired consumption, \(I\) is desired investment, and \(Y\) is income. \(C\)
For each of the following aggregate expenditure \((A E)\) functions, identify the marginal propensity to spend (z) and calculate the simple multiplier.a. \(A E=150+0.4 Y\)b. \(A E=900+0.62 Y\)c. \(A
Consider an economy characterized by the following equations:where \(C\) is desired consumption, \(I\) is desired investment, \(W\) is household wealth, and \(Y\) is national income.a. Suppose wealth
The "Paradox of Thrift" is a famous idea in macroeconomics-one that we will discuss in later chapters. The basic idea is that if every household in the economy tries to increase its level of desired
In the simple model of this chapter, aggregate investment was assumed to be autonomous with respect to national income. The simple multiplier was \(1 /(1-z)\), where \(z\) was the marginal propensity
Fill in the blanks to make the following statements correct.a. In our macro model, government purchases ( G ), is __________ with respect to national income.b. G does not include ____________ . Net
Fill in the blanks to make the following statements correct.a. In our macro model exports ( X ) are _________ with respect to domestic national income, but the X function will shift in response to
Fill in the blanks to make the following statements correct.a. Our simple macro model in Chapters 21 and 22 has made an important assumption that the price level is ___________ . We say that output,
Consider the following table showing national income and government net tax revenues in billions of dollars. Assume that the level of government purchases is \(\$ 155 \) billion.a. Compute the
Consider the following table showing national income and imports in billions of dollars. Assume that the level of exports is \(\$ 300 \) billion.a. Compute the level of net exports for each level of
Each of the following headlines describes an event that will have an effect on desired aggregate expenditure. What will be the effect on equilibrium national income? In each case, describe how the
The following diagram shows desired aggregate expenditure for the economy of Sunset Island. The \(A E\) curve assumes a net tax rate \((t)\) of 10 percent, autonomous exports of \(\$ 25 \) billion,
The economy of Sunrise Island has the following features:- fixed price level- no foreign trade- autonomous desired investment \((I)\) of \(\$ 20 \) billion- autonomous government purchases \((G)\) of
The following table shows alternative hypothetical economies and the relevant values for the marginal propensity to consume out of disposable income (MPC), the net tax rate \((t)\), and the marginal
This question requires you to solve a macro model algebraically. Reading the appendix to this chapter will help you to answer this question. But, just in case, we lead you through it step by step.
This question repeats the exercise of Question 10 , but for specific numerical values. The equations of the model area. Compute the \(A E\) function and plot it in a diagram. What is total autonomous
For the 200 9 and 201 0 Canadian federal budgets, during a major global recession, the minister of finance presented a plan to stimulate the economy.a. Describe the basic fiscal tools at his
Classify each of the following government activities as either government purchases or transfers.a. Welfare payments for the poorb. Payments to teachers in public schoolsc. Payments to teachers at a
In Chapter 20 we examined how national income was measured. By using the expenditure approach, we showed that GDP is always equal to the sum of consumption, investment, government purchases, and net
Fill in the blanks to make the following statements correct.a. In the simple macro model of the previous two chapters, the price level was _______ to the model. In the macro model of this chapter,
Fill in the blanks to make the following statements correct.a. The __________ curve relates the price level to the quantity of output that firms would like to produce and sell.b. Each aggregate
Fill in the blanks to make the following statements correct.a. Macroeconomic equilibrium occurs at the intersection of and rium levels of _______and _______ and determines equilibrium levels of
Consider the effects of an exogenous increase in the domestic price level. For each of the assets listed, explain how the change in the price level would affect the wealth of the asset holder. Then
Consider the following simplified \(A E\) function:where \(A E\) is desired aggregate expenditure, \(Y\) is real GDP, \(M\) is the private sector's nominal wealth, and \(P\) is the price level.
Consider the following diagram showing the \(A D\) curves in two different economies. One economy is Autarkland - it does not trade with the rest of the world (autarky is a situation in which a
The economy of Neverland has the following \(A D\) and \(A S\) schedules. Denote \(\mathrm{Y}_{A D}\) as the level of real GDP along the \(A D\) curve; let \(\mathrm{Y}_{A S}\) be the level of real
Each of the following events caused a shift in the \(A D\) or \(A S\) curve in Canada. Identify which curve was affected and describe the effect on equilibrium real GDP and the price level.a. OPEC's
The following diagrams show the \(A D\) and \(A S\) curves in two different economies.a. Explain what aspect of firms' behaviour might give rise to the horizontal \(A S\) curve in Economy \(A\).b.
This question involves algebraically solving the system of two equations given by the \(A D\) and \(A S\) curves. The equations for the curves are given bya. Explain the various terms in the \(A D\)
Fill in the blanks to make the following statements correct.a. In our short-run macro model, it is assumed that factor prices are ________ and the level of potential output is ________ Changes in
Fill in the blanks to make the following statements correct.a. When actual GDP is higher than potential GDP, we say that there is \(a(n)\)________ gap. When actual GDP is less than potential GDP we
Fill in the blanks to make the following statements correct.a. Beginning with output equal to potential, suppose there is a sudden increase in demand for Canadian exports. This is a(n) __________
Fill in the blanks to make the following statements correct.a. In the long run, total output is determined only by __________. In the long run, aggregate demanddetermines the __________ .b.
The following diagram shows two economies, \(A\) and \(B\). Each are in short-run equilibrium at point \(E\), where the \(A D\) and \(A S\) curves intersect.a. Explain why in Economy \(A\) wages and
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