Microeconomic Principles And Problems A Pluralist Introduction 2nd Edition Geoffrey Schneider - Solutions

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Why is the IS curve a depiction of equilibrium in the product market? What factors cause the IS curve to shift and in what direction (outwards or inwards)?
What is Walras' Law and how does macroeconomics employ it to eliminate the explicit treatment of the bond market?
What is the long-run trade-off between inflation and unemployment?
If unemployment is pushed below its natural rate what will happen to inflation?
Why is there a trade-off between unemployment and inflation in the short run?
What is Okun's Law? Explain how it is possible for an econ-omy to produce an output greater than potential output.
Define four types of unemployment and the causes for the same. Which type of unemployment is least costly for the economy? Why?
Derive the AS curve when workers are subject to mistaken expectations about the price of output.
How is the AS of output curve derived if workers are sub-ject to money illusion?
What does it mean to say that an individual is subject to money illusion?
How does a worker decide how many hours to allocate to the labour market?
What are the other means available to the government for raising seigniorage revenues besides resorting to increas-ing the notes in circulation?
Explain the response of an individual's demand for real money balances when the government increases the rate of monetary expansion in the economy.
Why does the government expand the stock of base money in the economy?
How does an individual decide to allocate their portfolio between bonds and money when the latter yields a risky return?
Why is the demand for money stated in real terms (M/P)rather than in nominal terms?
Derive the two-period budget constraint for an individual whose wealth can be held in money or perpetual bonds.
The cash that you hold earns you no interest. What is the real rate of return to holding cash in your pocket?
How does the demand for money depend on the nominal Interest rate and income?
You own a perpetuity that pays you INR 5,000 as a coupon.You plan to sell the bond to finance a holiday. Can you expect to receive INR 5,000 in the bond market for the bond? Explain why.
Prices were quoted in cowrie shells in medieval India for pay-ments related to trade in food, clothing, and other services.How did cowrie shells fulfil the three functions of money?
Describe the various types of "corner" solutions advocated by the IMF for exchange-rate regimes in the 1990s.
When is an exchange rate considered to be overvalued or undervalued? Suppose the exchange rate is overvalued and the policymakers wish to correct this by changing the domestic interest rate. What should they do?
Can a country run an independent monetary policy to achieve domestic economic policy goals, if it is committed to the maintenance of a fixed exchange rate?
What is absolute and relative purchasing power parity and to what extent are they good explanations for exchange-rate determination?
How does the exchange rate attain equilibrium under uncovered interest parity?
Explain what is uncovered and covered interest parity and in what way are they different from each other.
How does the absorption approach explain the impact of devaluation on the trade balance?
What is the J-curve effect, and how can one explain this phenomenon?
How does the real exchange rate affect the exports and imports of a nation? If the real exchange rate is devalued, will there be an unambiguous impact on the trade balance?
What is the real exchange rate, and why do we focus on it rather than on the nominal exchange rate in macroeconomics?
Calculate the growth rate of GDP and the growth rate of GDCF. Graph the growth rates. Which variable, GDP or GDCF, depicts greater variability? What could be the reason for this?
Calculate the GDCF/GDP ratio and draw a graph of this ratio over time. If GDCF is increasing (or decreasing) as a proportion of GDP, what does this indicate about other components of GDP?
Click on "Table 2: Macro-economic aggregates (at constant prices)". Download data for the last 15 years on Gross Domestic Capital Formation (GDCF) and GDP (at market prices).
(a) Go to the home page of the Reserve Bank of India (URL:www.rbi.org.in/home.aspx).(b) Click on the "Database" icon,(c) Under the classification of annual data, click on "Hand-book of Statistics on Indian Economy".
In a developing economy what factors other than Tobin's marginal Q would you consider as important for the decision making process?
What is the advantage of investing later rather than now? What does uncertainty require of macroeconomic policy?
A firm is contemplating an investment project that requires external finance. As a result of a sudden boom in the economy the internal cash flow of the firm increases. What impact will there be on the desired level of investment?
Why is it that external finance is more costly than the internal finance for investment projects?
What are the various factors that affect Tobin's marginal Q and thereby the investment in the economy.
Suppose the upfront cost of a two-year MBA programme is INR 200,000. You estimate that your salary in the current year if you work would be INR 165,000 and a year from now it would be INR 275,000. The interest rate is 10 per cent per annum. How much income are you forgoing by joining the MBA
Explain the role of adjustment costs in the theory of investment.
What factors govern a firm's decision to buy a given piece of capital equipment?
Why is the investment-opportunities curve downward sloping? Explain the role of diminishing marginal productivity in determining the slope of the investment-opportunity schedule.
Differentiate between savings, financial investment, and investment in physical capital. For a macroeconomist, is the purchase of shares in the stock market a saving or an investment?
You have calculated the average propensity to consume on the assumption that direct taxes do not vary with income-as it is consumption out of income and not dis-posable income that you have calculated. To what extent would your calculation be incorrect if this assumption were not true?
Find out the average propensity to consume and draw a graph of this. Interpret this graph in terms of what it states about the behaviour of savings in India.
Calculate per capita consumption expenditure and per capita income (net domestic product at factor cost divided by population).
In what way is NDP at factor cost different from Personal Dis-posable Income? See Statement 4 of the National Accounts Statistics which shows this accounting relationship. Unfortu-nately, personal disposable income data are only available in current prices and so cannot be used unless we deflate
Create a spreadsheet of data on NDP at factor cost, Private Final Consumption Expenditure in the domestic market and population (which are in millions unlike the monetary data which are in crores) from 1990-1991 to 2003-2004.
Click on the "Macroeconomic aggregates at constant(1993-1994) prices, 1950-1951 to 2003-2004" icon. This will open up Statement S-1.2. You will be required to login as a new user to access this statement.
Go to the home page of the Central Statistical Organisation, National Accounts Division, Press Release and Statements. This page can only be viewed with the browser Internet explorer(URL: www.mospi.nic.in/mospi_cso_rept_pubn.htm).
Two youngsters A and B have similar qualifications and earn the same income. However, A comes from a family with a longer history of coronary problems and expects to die early.Who will have a higher present consumption and why?
Suppose there are two time periods. In period 1, income is given by INR 200,000 and in period 2, it is INR 110,000. The rate of interest is 10 per cent. If consumption in period 1 is INR 150,000 is the individual consumption smoothing or consumption tilting?
What sort of marginal rate of time preference would you expect a cricketer like Sachin Tendulkar-who is towards the end of his career-to have and why?
If the labour ministry decides to raise the age of retirement by a few years because of an increase in longevity, what would be the impact on the current savings in the economy?
Show how a decline in the Interest rate affects the savings behaviour of a net borrower and a net lender.
Demonstrate how a temporary current positive shock to income and an anticipated negative future shock affect consumption behaviour.
What is permanent income and how can we determine savings behaviour on its basis?
When does an individual use consumption smoothing and when does their consumption tilt?
If current income is INR 100 billion and future income is INR 150 billion and the rate of interest is 20 per cent, draw the Intertemporal budget constraint associated with this stream of income. What is the slope of this constraint? Indicate the point on this constraint that depicts the income
Suppose the consumption function (INR billion) for a closed economy is C = 20 + 0.8Yª. Also suppose that disposable income increases from INR 50 billion to INR 150 billion. By how much would the consumption rise? By how much would the savings rise? What has happened to the savings rate?
Create a graph of the net foreign-exchange assets of the RBI and of broad money over time. Which graph is rising at a faster rate? What does this indicate about how the central bank is offsetting expansions in the money supply?
Now click on "Table 44: Sources of Money Stock" and download data on the net foreign-exchange assets of the RBI. Calculate the fraction of the central bank's monetary base that is sourced from foreign-exchange assets over time. Create a graph of this ratio.
Calculate the money multiplier for this time period and create a graph of the money multiplier for this time period.What does the slope of this graph indicate?
Then from the same Table 43, download data for the same time period for broad money.
(a) Go to the home page of the Reserve Bank of India Internet (URL: www.rbl.org.in/home.aspx).(b) Click on the "Database" icon(c) Then under the classification of Annual data, click on"Handbook of Statistics on Indian Economy".(d) Click on "Table 43: Components of the Money Stock"and create a
Explain how a reduction in the required reserve ratio or an open-market operation of purchasing government securities affects the money supply in the economy.
What are the components of the demand and supply of reserves and how is the inter-bank interest rate determined?
What is the money multiplier and what are the alternative currency holding behavioural ratios that are considered in explaining the magnitude of the multiplier?
Write out the consolidated balance sheet of the banking system in an open economy and then define the money supply on the basis of this.
What are the components of the monetary base of the central bank in terms of its sources and applications?
What is the role of foreign-exchange reserves in the determi-nation of the balance of payments?
Which actions by agents result in the demand and supply of foreign exchange in the economy? Explain how this influ-ences the determination of exchange rates when they are freely floating.
Why should a nation's overall balance of payments always equal its foreign-exchange reserves?
Explain how aggregate Investment in the economy is sup-ported from savings by (a) the private sector, (b) by the government, and (c) by foreigners.
Why is it that despite an individual saving (spending less than his/her income), the aggregate income equals expenditure?
Plot the data on GDP at constant prices and GDP at cur-rent prices over time. Observe whether these curves cross one another. Why do you think that occurs? What do you observe In the graph you have plotted about the relation-ship between real GDP and nominal GDP?
Plot the three series of Inflation rates over time. Which price index results In higher average Inflation rates over time? Why do you think this Is so?
Calculate the Inflation rate based on the wholesale price Index and the consumer price Index for Industrial workers.
(a) Click on "Table 39: Wholesale Price Index-Annual Average". Access the data on this price Index for the perlod from 1993-1994 to 2005-2006 with base 1993-1994 = 100.(b) Again click on "Table 40: Consumer Price Index-Annual Average". Access the data on this price Index for the perlod from
Inflation Is the percentage change in the price index. Calcu-late the Inflation based on the GDP deflator by taking the percentage change In the GDP deflator price that you have calculated.
(a) Click on "Table 2: Macroeconomic Aggregates (at Con-stant Prices)" and access data for GDP at constant prices for the same time period.(b) Calculate the GDP deflator for this time period using the formula from the text.
(a) Go to the Web site of the Reserve Bank of India(URL: www.rbl.org.In/home.aspx).(b) Click on the "Database" Icon.(c) Then, under the classification of annual data, click on"Handbook of Statistics on Indian Economy".(d) Click on "Table 1: Macroeconomic Aggregates (at Cur-rent Prices)" and create
Why is the wholesale price Index used more widely than the consumer price index as a measure of Inflation?
How can we measure Inflation when the prices of different goods change at different rates?
Why may the GDP deflator overstate the average annual Inflation rate for the economy?
Why Is the output of the private sector measured In market prices and that of the government measured at cost?
Is the balance of merchandise trade a good indicator of a nation's trade position, if the nation has a comparatively large service sector?
GDP only counts the production of goods In their final form during a given period of time. What are the various compo-nents of the final demand for goods?
Explain how cutting down trees to make furniture may Increase a country's GDP but cause economic welfare to decline at the same time.
Why does GDP, as reported in the national accounts, not correctly measure total output?
Economics Is the study of choices. In macroeconomics, which markets are studied in relation to these choices?
Suppose the European Central Bank decides to sell euros and buy dollars with them. What efect will this have on the value of the euro relative to the U.S. dollar? Explain using a graph of the foreign exchange market for euros.
Suppose that U.S. interest rates rise relative to those in Europe. What efect will this have on the value of the U.S. dollar relative to the euro?
For each question below, draw a graph of the foreign exchange market for U.S. dollars in British pounds, and show how each of the following events will afect the price of the dollar and the quantity of dollars exchanged for British pounds. Explain your answer briefy.a. Incomes in the United Kingdom
In 2018, the Trump administration imposed 25% tarifs on imports of steel into the United States. Using a graph, show how that tarif would afect the equilibrium price and quantity of imported steel. Assume that the initial price of steel is $2000 per ton. What impact would these tarifs have on U.S.
The graphs in Figure 24.9 show production possibilities curves for the United States and Japan, using an identical amount of resources for one day. Determine which country has a comparative advantage in beef, and which in automobiles, using the PPCs. Show your work. Copy the graphs onto a sheet of
The theory of comparative advantage demonstrates that, in theory, ALL countries can beneft through specialization and trade.a. The graphs in Figure 24.8 show production possibilities curves for the United States and Kuwait, using an identical amount of resources for one month. Copy the graphs onto
a. Explain the theory of comparative advantage, and why most mainstream economists believe that unregulated trade increases joint production and joint consumption of trading partners.b. List and briefy explain the main problems with the theory of comparative advantage.

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Microeconomic Principles And Problems A Pluralist Introduction 2nd Edition Geoffrey Schneider - Solutions

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