New Semester
Started
Get
50% OFF
Study Help!
--h --m --s
Claim Now
Question Answers
Textbooks
Find textbooks, questions and answers
Oops, something went wrong!
Change your search query and then try again
S
Books
FREE
Study Help
Expert Questions
Accounting
General Management
Mathematics
Finance
Organizational Behaviour
Law
Physics
Operating System
Management Leadership
Sociology
Programming
Marketing
Database
Computer Network
Economics
Textbooks Solutions
Accounting
Managerial Accounting
Management Leadership
Cost Accounting
Statistics
Business Law
Corporate Finance
Finance
Economics
Auditing
Tutors
Online Tutors
Find a Tutor
Hire a Tutor
Become a Tutor
AI Tutor
AI Study Planner
NEW
Sell Books
Search
Search
Sign In
Register
study help
business
behavioral economics
Principles Of Economics 6th Edition Robert H. Frank, Ben Bernanke Professor, Kate Antonovics, Ori Heffetz - Solutions
From the homepage of the Bureau of Labor Statistics (www.bls.gov), obtain the most recent available data on the unemployment rate for workers aged 16–19 and workers aged 20 or over. How do they differ? What are some of the reasons for the difference? How does this difference relate to the decline
Given below are data on real GDP and potential GDP for the United States for the years 2000–2013, in billions of 2009 dollars. For each year, calculate the output gap as a percentage of potential GDP and state whether the gap is a recessionary gap or an expansionary gap. Also calculate the
From the homepage of the Bureau of Economic Analysis (www.bea.gov) obtain quarterly data for U.S. real GDP from three recessions: 1981–1982, 1990–1991, and 2001. (LO1)a. How many quarters of negative real GDP growth occurred in each recession?b. Which, if any, of the recessions satisfied the
Using Table 21.1, find the average duration, the minimum duration, and the maximum duration of expansions in the United States since 1929. Are expansions getting longer or shorter on average over time? Is there any tendency for long expansions to be followed by long recessions? (LO1)
If the natural rate of unemployment is 5 percent, what is the total rate of unemployment if output is 2 percent below potential output? What if output is 2 percent above potential output?
How is each of the following likely to be affected by a recession: the natural unemployment rate, the cyclical unemployment rate, the inflation rate, the poll ratings of the president? (LO1, LO3)
Define potential output. Is it possible for an economy to produce an amount greater than potential output?Explain. (LO2)
Which firm is likely to see its profits reduced the most in a recession: an automobile producer, a manufacturer of boots and shoes, or a janitorial service? Which is likely to see its profits reduced the least? Explain. (LO1)
Define recession and expansion. What are the beginning and ending points of a recession called? In the postwar United States, which have been longer on average:recessions or expansions? (LO1)
Why did Coca-Cola Co. test a vending machine that “knows” when the weather is hot?According to The New York Times (October 28, 1999, p. C1), Coca-Cola Co. has quietly tested a soda vending machine that includes a temperature sensor. Why would Coca-Cola want a vending machine that “knows”
Why did the Federal Reserve act to slow down the economy in 1999 and 2000?As noted in the chapter Money, Prices, and Financial Intermediaries, monetary policy decisions of the Federal Reserve—actions that change the level of the nation’s money supply—affect the performance of the U.S.
In the first quarter of 2011, the U.S. unemployment rate was 9.8 percent. The Congressional Budget Office estimated that the natural rate of unemployment was 5.2 percent. By what percentage did actual GDP differ from potential GDP in the first quarter of 2011?
Why was the natural rate of unemployment so much lower in the U.S. during the late 2000s than in the late 1970s?According to the Congressional Budget Office, which regularly estimates the natural rate of unemployment in the United States, the natural rate fell steadily from 6.3 percent of the labor
How do we know that a recession began in December 2007?The Business Cycle Dating Committee of the National Bureau of Economic Research determined that a recession began in December 2007. What led the committee to choose that date?
Discuss the basic differences between how the economy operates in the short run versus the long run.
Apply Okun’s law to analyze the relationship between the output gap and cyclical unemployment.
Define the natural rate of unemployment and show how it is related to cyclical unemployment.
Use potential output and the output gap to analyze an economy’s position in the business cycle.
Identify the four phases of the business cycle and explain the primary characteristics of recessions and expansions.
Consider the following hypothetical data for 2015 and 2016: ( LO4 )a. Find the price level for 2015 and 2016. What is the rate of inflation between the two years?b. What is the rate of inflation between 2015 and 2016 if the money supply in 2016 is 1,100 instead of 1,050?c. What is the rate of
When a central bank increases bank reserves by $1, the money supply rises by more than $1. The amount of extra money created when the central bank increases bank reserves by $1 is called the money multiplier. ( LO3 )a. Explain why the money multiplier is generally greater than 1. In what special
Answer each of the following questions. ( LO3 )a. Bank reserves are 100, the public holds 200 in currency, and the desired reservedeposit ratio is 0.25. Find deposits and the money supply.b. The money supply is 500 and currency held by the public equals bank reserves.The desired reserve-deposit
Redo the example of Gorgonzola in the text (refer to Tables 20.2 to 20.6 ), assuming that (1 ) initially, the Gorgonzolan central bank puts 5,000,000 guilders into circulation (instead of the 1,000,000 guilders used in the example) and (2 ) commercial banks desire to hold reserves of 20 percent of
During World War II, an Allied soldier named Robert Radford spent several years in a large German prisoner-of-war camp. At times more than 50,000 prisoners were held in the camp, with some freedom to move about within the compound. Radford later wrote an account of his experiences. He described how
Use the quantity equation to explain why money growth and inflation tend to be closely linked. ( LO4
The Fed wants to reduce the U.S. money supply using open-market operations. Describe what it would do, and explain how this action would accomplish the Fed’s objective. ( LO4 )
What is money? Why do people hold money even though it pays a lower return than other financial assets? ( LO2 )
Give two ways that the banking system helps to improve the allocation of saving. Illustrate with examples. ( LO1 )
Continuing Example 20.5, suppose that instead of an open-market purchase of 100 shekels, the central bank conducts an open-market sale of 50 shekels’worth of government bonds. What happens to bank reserves, bank deposits, and the money supply?
How do open-market operations affect the money supply?In a particular economy, currency held by the public is 1,000 shekels, bank reserves are 200 shekels, and the desired reserve-deposit ratio is 0.2. What is the money supply? How is the money supply affected if the central bank prints 100 shekels
How does Christmas shopping affect the money supply?During the Christmas season, people choose to hold unusually large amounts of currency for shopping. With no action by the central bank, how would this change in currency holding affect the national money supply?
What is the money supply in Gorgonzola when there is both currency and bank deposits?Suppose that the citizens of Gorgonzola choose to hold a total of 500,000 guilders in the form of currency and to deposit the rest of their money in banks. Banks keep reserves equal to 10 percent of deposits. What
Find deposits and the money supply in Gorgonzola if the banks’ desired reserve- deposit ratio is 5 percent rather than 10 percent. What if the total amount of currency circulated by the central bank is 2,000,000 guilders and the desired reserve-deposit ratio remains at 10 percent?
Determine what the balance sheet of the Gorgonzolan banking system will look like after a third round of lending to farmers and redeposits of guilders into the commercial banking system. What is the money supply at that point?
How did the banking crisis of the 1990s in Japan affect the Japanese economy?During the 1980s, real estate and stock prices soared in Japan. Japanese banks made many loans to real estate developers, and the banks themselves acquired stock in corporations.(Unlike in the United States, in Japan it is
Explain how a central bank controls the money supply and how control of the money supply is related to inflation in the long run
Analyze how the lending behavior of commercial banks affects the money supply.
Discuss the three functions of money and how the money supply is measured.
Describe the role of financial intermediaries such as com mercial banks in the financial system.
For each of the following scenarios, use supply and demand analysis to predict the resulting changes in the real interest rate, national saving, and investment. Show all your diagrams. (LO6)a. The legislature passes a 10 percent investment tax credit. Under this program, for every $100 that a firm
You have $1,000 to invest and are considering buying some combination of the shares of two companies, DonkeyInc and ElephantInc. Shares of DonkeyInc will pay a 10 percent return if the Democrats are elected, an event you believe to have a 40 percent probability; otherwise the shares pay a zero
Your financial investments consist of U.S. government bonds maturing in 10 years and shares in a start-up company doing research in pharmaceuticals. How would you expect each of the following news items to affect the value of your assets?Explain your reasoning. (LO5)a. Interest rates of newly
Shares in Brothers Grimm, Inc., manufacturers of gingerbread houses, are expected to pay a dividend of $5 in one year and to sell for $100 per share at that time. How much should you be willing to pay today per share of Grimm: (LO5)a. If the safe rate of interest is 5 percent and you believe that
Simon purchases a bond, newly issued by Amalgamated Corporation, for $1,000.The bond pays $60 to its holder at the end of the first and second years and pays$1,060 upon its maturity at the end of the third year. (LO5)a. What are the principal amount, the term, the coupon rate, and the coupon
The builder of a new movie theater complex is trying to decide how many screens she wants. Below are her estimates of the number of patrons the complex will attract each year, depending on the number of screens available.After paying the movie distributors and meeting all other noninterest
Ellie and Vince are trying to decide whether to purchase a new home. The house they want is priced at $200,000. Annual expenses such as maintenance, taxes, and insurance equal 4 percent of the home’s value. If properly maintained, the house’s real value is not expected to change. The real
Individual retirement accounts (IRAs) were established by the U.S. government to encourage saving. An individual who deposits part of current earnings in an IRA does not have to pay income taxes on the earnings deposited, nor are any income taxes charged on the interest earned by the funds in the
Ellie and Vince are a married couple, both with college degrees and jobs. How would you expect each of the following events to affect the amount they save each month? Explain your answers in terms of the basic motivations for saving. (LO3)a. Ellie learns she is pregnant.b. Vince reads in the paper
In each part that follows, use the economic data given to find national saving, private saving, public saving, and the national saving rate. (LO2)a. Household saving 5 200 Business saving 5 400 Government purchases of goods and services 5 100 Government transfers and interest payments 5 100 Tax
State whether each of the following is a stock or a flow, and explain. (LO1)a. The gross domestic product.b. National saving.c. The value of the U.S. housing stock on January 1, 2015.d. The amount of U.S. currency in circulation as of this morning.e. The government budget deficit.f. The quantity of
a. Corey has a mountain bike worth $300, a credit card debt of $150, $200 in cash, a Harmon Killebrew baseball card worth $400, $1,200 in a checking account, and an electric bill due for $250. Construct Corey’s balance sheet and calculate his net worth. For each remaining part, explain how the
Name one factor that could increase the supply of saving and one that could increase the demand for saving.Show the effects of each on saving, investment, and the real interest rate. (LO6)
Stock prices surge, but the prices of government bonds remain stable. What can you infer from the behavior of bond prices about the possible causes of the increase in stock values? (LO5)
Arjay plans to sell a bond that matures in one year and has a principal value of $1,000. Can he expect to receive$1,000 in the bond market for the bond? Explain. (LO5)
Why do increases in real interest rates reduce the quantity of saving demanded? (Hint: Who are the “demanders” of saving?) (LO4)
Household saving rates in the United States are very low. Is this fact a problem for the U.S. economy? Why or why not? (LO2)
Define national saving, relating your definition to the general concept of saving. Why does the standard U.S.definition of national saving potentially understate the true amount of saving being done in the economy?(LO2)
Explain the relationship between saving and wealth, using the concepts of flows and stocks. Is saving the only means by which wealth can increase? Explain. (LO1)
Suppose the general public becomes more “grasshopper-like” and less “antlike”in their saving decisions, becoming less concerned about saving for the future. How will the change in public attitudes affect the country’s rate of capital formation and economic growth?
How does an increase in the government budget deficit affect saving, investment, and the real interest rate?Suppose the government increases its spending without raising taxes, thereby increasing its budget deficit (or reducing its budget surplus). How will this decision affect national saving,
How does the introduction of new technologies affect saving, investment, and the real interest rate?Exciting new technologies have been introduced in recent years, ranging from the Internet to new applications of genetics. A number of these technologies appear to have great commercial potential.
What are the benefits of diversification?Vikram has $200 to invest and is considering two stocks, Smith Umbrella Co. and Jones Suntan Lotion Co. Suppose the price of one share of each stock is $100. The umbrella company will turn out to be the better investment if the weather is rainy, but the
What is the relationship between stock prices and risk?Let’s build on our previous examples by introducing risk. Suppose that FortuneCookie.com is expected to pay a $1.00 dividend and have a market price of $80.00 per share in one year.The interest rate on government bonds is 6 percent per year.
Continuing with Example 19.11, you expect a share of FortuneCookie.com to be worth $80.00 per share in one year, and also to pay a dividend of $1.00 in one year. What should you be willing to pay for the stock today if the prevailing interest rate, equal to your required rate of return, is 4
Three-year government bonds are issued with a principal amount of $1,000 and an annual coupon rate of 7 percent. Thus, the owner will receive three coupon payments of (0.07)($1,000) 5 $70 at the end of each year. One year prior to the maturation date of these bonds, a newspaper headline reads,
What is the relationship between bond prices and interest rates?On January 1, 2015, Tanya purchases a newly issued, two-year government bond with a principal amount of $1,000 for a price of $1,000. The coupon rate on the bond is 5 percent, paid annually, reflecting the prevailing interest rates on
Repeat Example 19.9, but assume that, over the course of the year, wear and tear reduces the resale value of the lawn mower from $4,000 to $3,800. Should Larry buy the mower?
Should Larry buy a riding lawn mower?Larry is thinking of going into the lawn care business. He can buy a $4,000 riding mower by taking out a loan at 6 percent annual interest. With this mower and his own labor, Larry can net $6,000 per summer, after deduction of costs such as gasoline and
Why is the U.S. household saving rate so low?U.S. households decreased their saving rates from roughly 10 percent around 1970 to a low around 2 percent in 2005.
By how much does a high saving rate enhance a family’s future living standard?The Spends and the Thrifts are similar families, except that the Spends save 5 percent of their income each year and the Thrifts save 20 percent. The two families began to save in 1980 and plan to continue to save until
Why did Japanese saving rates rise until 1990 and then decline since then?After World War II Japanese households increased their saving rates to 15–25 percent of their income, an unusually high rate. Although cultural factors often were cited as a reason for the high Japanese propensity to save,
How do we calculate government saving?Following are data on U.S. government revenues and expenditures for 2000, in billions of dollars.Government saving consists of the budget surpluses of all levels of government: federal, state, and local. In 2000, the federal government ran a budget surplus of
How did American households increase their wealth in the 1990s while saving very little?On the whole, Americans felt very prosperous during the 1990s: Measures of household wealth during this period showed enormous gains. Yet saving by U.S. households was quite low throughout those years. How did
How would each of the following actions or events affect Consuelo’s saving and her wealth?a. Consuelo deposits $20 in the bank at the end of the week as usual. She also charges $50 on her credit card, raising her credit card balance to $300.b. Consuelo uses $300 from her checking account to pay
Continuing the example of the bathtub: If there are 40 gallons of water in the tub at 7:15 p.m. and water is being drained at the rate of 3 gallons per minute (and no more water is added to the tub), what will be the stock and flow at 7:16 p.m.? At 7:17 p.m.? Does the flow still equal the rate of
Refer back to Example 19.1. What would Consuelo’s net worth be if her student loan were for $6,500 rather than $3,000? Construct a new balance sheet for her.
What is Consuelo’s wealth on January 1, 2015?To answer this question, Consuelo must assemble her assets and liabilities as of January 1, 2015, in a balance sheet. The result is shown in Table 19.1.
Analyze financial markets using the tools of supply and demand.
Differentiate between bonds and stocks and show how the financial market improves the allocation of saving to productive uses.
Discuss the reasons why firms choose to invest in capital rather than in financial assets.
Identify and apply the components of national saving.
Explain the relationship between saving and wealth.
Write a short essay evaluating the U.S. economy in terms of each of the six determinants of average labor productivity discussed in the text. Are there any areas in which the United States is exceptionally strong, relative to other countries? Areas where the United States is less strong than some
Discuss the following statement, using concrete examples where possible to illustrate your arguments: For advances in basic science to translate into improvements in standards of living, they must be supported by favorable economic conditions.(LO3, LO4)
Hester’s Hatchery raises fish. At the end of the current season Hester has 1,000 fish in the hatchery. She can harvest any number of fish that she wishes, selling them to restaurants for $5 apiece. Because big fish make little fish, for every fish that she leaves in the hatchery this year, she
Harrison, Carla, and Fred are housepainters. Harrison and Carla can paint 100 square feet per hour using a standard paintbrush, and Fred can paint 80 square feet per hour.Any of the three can paint 200 square feet per hour using a roller. (LO3)a. Assume Harrison, Carla, and Fred have only
The Good’n’Fresh Grocery Store has two checkout lanes and four employees.Employees are equally skilled, and all are able to either operate a register (checkers)or bag groceries (baggers). The store owner assigns one checker and one bagger to each lane. A lane with a checker and a bagger can
Joanne has just completed high school and is trying to determine whether to go to junior college for two years or go directly to work. Her objective is to maximize the savings she will have in the bank five years from now. If she goes directly to work, she will earn $20,000 per year for each of the
Consider the table below containing data for Germany and Japan on the ratio of employment to population in 1980 and 2010.Using data from Table 18.1, find average labor productivity for each country in 1980 and 2010. How much of the increase in output per person in each country over the 1980 to 2010
The “graying of America” will substantially increase the fraction of the population that is retired in the decades to come. To illustrate the implications for U.S. living standards, suppose that over the 53 years following 2013 the share of the population that is working returns to its 1960
Calculate how much higher U.S. labor productivity will be in the year 2035 (relative to 2015) if: (LO1)a. Productivity continues to grow by 2.6 percent per year.b. Productivity growth falls to 2 percent per year, its average rate during the period 1970–2009. (Note: You do not need to know the
Richland’s real GDP per person is $10,000, and Poorland’s real GDP per person is$5,000. However, Richland’s real GDP per person is growing at 1 percent per year and Poorland’s is growing at 3 percent per year. Compare real GDP per person in the two countries after 10 years and after 20
Discuss the following statement: “Because the environment is fragile and natural resources are finite, ultimately economic growth must come to an end.” (LO5)
What major contributions can the government make to the goal of increasing average labor productivity? (LO4)
What was the cause of the resurgence in U.S. labor productivity growth since 1995? How do we know? (LO3)
You have employed five workers of varying physical strength to dig a ditch. Workers without shovels have zero productivity in ditchdigging. How should you assign shovels to workers if you don’t have enough shovels to go around? How should you assign any additional shovels that you obtain? Using
Why do economists consider growth in average labor productivity to be the key factor in determining longrun living standards? (LO2)
What has happened to real GDP per person over the past century? What implications does this have for the average person? Are the implications different for countries in different regions (e.g., Japan versus Ghana)? (LO1)
Why is the air quality so poor in Mexico City?Developing countries like Mexico, which are neither fully industrialized nor desperately poor, often have severe environmental problems. Why?
Why did communism fail?For more than 70 years, from the Russian revolution in 1917 until the collapse of the Soviet Union in 1991, communism was believed by many to pose a major challenge to market-based economic systems. Yet, by the time of the Soviet Union’s breakup, the poor economic record of
Showing 100 - 200
of 2466
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Last
Step by Step Answers
Get 50% OFF
Claim Now
