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dynamic macroeconomics
Macroeconomics For Today 6th Edition Irvin B. Tucker - Solutions
Gross domestic product data that reflect actual prices as they exist in a given year are expressed in terms ofa. fixed dollars.b. current dollars.c. constant dollars.d. real dollars.
Which of the following statements is true?a. National income is total income earned by households whereas personal income is total income received by households.b. Disposable personal income equals personal income minus personal taxes.c. The expenditure approach and the income approach yield the
Disposable personal incomea. is the income people spend for personal items, such as homes and cars.b. includes transfer payments.c. excludes transfer payments.d. includes personal taxes.
Personal income equals disposable income plusa. personal savings.b. transfer payments.c. dividend payments.d. personal taxes.
Adding all incomes earned by households from the sale of resources yieldsa. intermediate goods.b. indirect business taxes.c. national income.d. personal income.
Subtracting an allowance for depreciation of fixed capital from gross domestic product yieldsa. real GDP.b. nominal GDP.c. personal income.d. national income.
GDP is a less-than-perfect measure of the nation’s economic pulse because ita. excludes nonmarket transactions.b. does not measure the quality of goods and services.c. does not report illegal transactions.d. all of the above.
The expenditure approach measures GDP by adding all the expenditures for final goods made bya. households.b. businesses.c. government.d. foreigners.e. all of the above.
The circular flow model does not include which of the following?a. The quantity of shoes in inventory on January 1b. The total wages paid per monthc. The percentage of profits paid out as dividends each yeard. The total profits earned per year in the U.S.economy
Based on the circular flow model, money flows from businesses to households ina. factor markets.b. product markets.c. neither factor nor product markets.d. both factor and product markets.
The dollar value of all final goods and services produced within the borders of a nation is aa. GNP deflator.b. gross national product.c. net domestic product.d. gross domestic product.
Explain why comparing the GDPs of various nations might not tell you which nations are better off.
Which of the following are counted in this year’s GDP? Explain your answer in each case.a. Flashy Car Company sold a used car.b. Juanita Jones cooked meals for her family.c. IBM paid interest on its bonds.d. José Suarez purchased 100 shares of IBM stock.e. Bob Smith received a welfare payment.f.
Suppose U.S. nominal GDP increases from one year to the next year. Can you conclude that these figures present a misleading measure of economic growth? What alternative method would provide a more accurate measure of the rate of growth?
Again using the data from Exhibit 11, derive personal income (PI) from national income (NI).Then make the required adjustments to PI to obtain disposable personal income (DI).
Using the data in Exhibit 11, compute national income (NI) by making the required subtraction from GDP. Explain why NI might be a better measure of economic performance than GDP.
Suppose the data in Exhibit 11 are for a given year from the annual Economic Report of the President. Calculate GDP, using the expenditure and the income approaches.
Explain how net exports affect the U.S. economy.Describe both positive and negative impacts on GDP. Why do national income accountants use net exports to compute GDP, rather than simply adding exports to the other expenditure components of GDP?
Explain why the government spending (G) component of GDP falls short of actual government expenditures.
Explain why a new forklift sold for use in a warehouse is a final good even though it is fixed investment (capital) used to produce other goods.Is there a double-counting problem if this sale is added to GDP?
An economy produces final goods and services with a market value of $5,000 billion in a given year, but only $4,500 billion worth of goods and services is sold to domestic or foreign buyers. Is this nation’s GDP $5,000 billion or $4,500 billion? Explain your answer.
A small economy produced the following final goods and services during a given month: 3 million pounds of food, 50,000 shirts, 20 houses, 50,000 hours of medical services, 1 automobile plant, and 2 tanks. Calculate the value of this output at the following market prices:• $1 per pound of food•
Using the basic circular flow model, explain why the value of businesses’ output of goods and services equals the income of households.
Which of the following are final goods or services, and which are intermediate goods or services?a. A haircut purchased from a barberb. A new automobilec. An oil filter purchased in a new automobiled. Crude oil
Beginning from an equilibrium at point E1 in Exhibit 11, an increase in demand for good X, other things being equal, would move the equilibrium point toa. E1 (no change).b. E2.c. E3.d. E4.
In Exhibit 11, an increase in supply would cause a move from which equilibrium point to another, other things being equal?a. E1 to E2b. E1 to E3c. E4 to E1d. E3 to E4
In Exhibit 11, which of the following might cause a shift from S1 to S2?a. A decrease in input pricesb. An improvement in technologyc. An increase in input pricesd. An increase in consumer income
A public good may be defined as any good or service thata. allows users to collectively consume benefits.b. must be distributed to all citizens in equal shares.c. is never produced by government.d. is described by answers (a) and (c) above.
Which of the following is the best example of a public good?a. Pencilsb. Educationc. Defensed. Trucks
Pollution from cars is an example ofa. a harmful opportunity cost.b. a negative externality.c. a production dislocation.d. none of the above.
A good that provides external benefits to society hasa. too few resources devoted to its production.b. too many resources devoted to its production.c. the optimal resources devoted to its production.d. not provided profits to producers of the good.
Suppose the equilibrium price set by supply and demand is lower than the price ceiling set by the government. The eventual result will bea. a shortage.b. that quantity demanded is equal to quantity supplied.c. a surplus.d. a black market.
Which of the following is least likely to result from rent controls set below the equilibrium price for rental housing?a. Shortages and black markets will result.b. The existing rental housing will deteriorate.c. The supply of rental housing will increase rapidly.d. People will demand more
If the federal government wants to raise the price of cheese, it willa. take cheese from government storage and sell it.b. encourage farmers to research ways to produce more cheese.c. subsidize purchases of farm equipment.d. encourage farmers to produce less cheese.
An increase in the wage paid to grape pickers will cause thea. demand curve for grapes to shift to the right, resulting in higher prices for grapes.b. demand curve for grapes to shift to the left, resulting in lower prices for grapes.c. supply curve for grapes to shift to the left, resulting in
An increase in consumers’ incomes increases the demand for oranges. As a result of the adjustment to a new equilibrium, there is a (an)a. leftward shift of the supply curve.b. downward movement along the supply curve.c. rightward shift of the supply curve.d. upward movement along the supply curve.
Consider the market for chicken. An increase in the price of beef willa. decrease the demand for chicken, resulting in a lower price and a smaller amount of chicken purchased in the market.b. decrease the supply of chicken, resulting in a higher price and a smaller amount of chicken purchased in
Which of the following statements is true?a. An increase in demand, with no change in supply, will increase the equilibrium price and quantity.b. An increase in supply, with no change in demand, will decrease the equilibrium price and the equilibrium quantity.c. A decrease in supply, with no change
Suppose prices for new homes have risen, yet the number of homes sold has also risen. We can conclude thata. the demand for new homes has risen.b. the law of demand has been violated.c. new firms have entered the construction industry.d. construction firms must be facing higher costs.
Which of the following are public goods?a. Air bagsb. Pencilsc. Cycle helmetsd. City street lightse. Contact lenses
Why are public goods not produced in sufficient quantities by private markets?
Explain the impact of external costs and external benefits on resource allocation.
Suppose coal-burning firms are emitting excessive pollution into the air. Suggest two ways the government can deal with this market failure.
Consider this statement: “Government involvement in markets is inherently inefficient.”Do you agree or disagree? Explain.
Suppose a market is in equilibrium and both demand and supply curves increase.What happens to the equilibrium price if demand increases more than supply?
What are the advantages and disadvantages of the price system?
Using market supply and demand analysis, explain why labor union leaders are strong advocates of raising the minimum wage above the equilibrium wage.
Use a graph to show the impact on the price of Japanese cars sold in the United States if the United States imposes import quotas on Japanese cars. Now draw another graph to show how the change in the price of Japanese cars affects the price of Americanmade cars in the United States. Explain the
Market researchers have studied the market for milk, and their estimates for the supply of and the demand for milk per month are as follows:Price per Gallon Quantity Demanded(millions of gallons)Quantity Supplied(millions of gallons)$10.50 100 500 8.00 200 400 6.50 300 300 4.00 400 200 2.50 500
As shown in Exhibit A-7, assume that the quantity of good X exchanged results in triangle CDE. This would be caused by resources being used by producers to produce good X.A. too manyb. too fewc. an optimal amount ofd. asymmetric
As shown in Exhibit A-7, assume that the quantity of good X exchanged results in triangle EIH. This would be caused by resources being used by producers to produce good X.a. too manyb. too fewc. an optimal amount ofd. asymmetric
Suppose in Exhibit A-7 that exchange in the market for good X yields triangle ABE, this means that which of the following conditions exists in the market?a. Only consumer surplusb. Only producer surplusc. Deadweight lossd. Maximum consumer plus producer surplus
In Exhibit A-7, suppose firms devote resources sufficient to produce 4,000 units of good X per month. The result is a deadweight loss of trianglea. ABE.b. CDE.c. EGE.d. EDE.
Which of the following statements is correct?a. Total surplus is the sum of consumer and producer surplus.b. Deadweight loss is the net loss of both consumer and producer surplus.c. Deadweight loss is a measure of market inefficiency.d. All of the above.
Total surplus equalsa. consumer surplus þ producer surplus deadweight loss.b. consumer surplus producer surplus deadweight loss.c. consumer surplus producer surplus þdeadweight loss.d. consumer surplus þ producer surplus.
Deadweight loss results froma. equilibrium.b. underproduction.c. overproduction.d. none of the above are correct.e. Eitherb. or c.
In an efficient market, deadweight loss isa. maximum.b. minimum.c. constant.d. zero.
Suppose Gizmo Inc. is willing to sell one gizmo for $10, a second gizmo for $12, a third for$14, and a fourth for $20, and the market price is$20. What is Gizmo Inc.’s producer surplus?a. $56b. $24c. $20d. $10
If Bill is willing to pay $10 for one good X, $8 for a second, and $6 for a third, and the market price is $5, then Max’s consumer surplus isa. $24.b. $18.c. $9.d. $6.
Using Exhibit A-6, and assuming the market is in equilibrium at QE, identify areas ACD, DCE, and ACE. Now explain the result of underproduction at Q in terms of areas BCG, GCF, and BCF.
Using Exhibits A-4 and Exhibit A-5 above, calculate the total surplus. Now calculate the effect on consumer surplus, producer surplus, and total surplus of a fall in the equilibrium price of textbooks from $30 to $15 each. Explain the meaning of your calculations.
Consider the market for used textbooks. Use Exhibit A-5 to calculate the total producer surplus.
Consider the market for used textbooks. Use Exhibit A-4 to calculate the total consumer surplus.
In Exhibit 14, if the market price of good X is initially $1.50, a movement toward equilibrium requiresa. no change, because an equilibrium already exists.b. the price to fall below $1.50 and both the quantity supplied and the quantity demanded to fall.c. the price to remain the same, but the
In Exhibit 14, if the market price of good X is initially $0.50, a movement toward equilibrium requiresa. no change, because an equilibrium already exists.b. the price to fall below $0.50 and both the quantity supplied and the quantity demanded to rise.c. the price to remain the same, but the
In Exhibit 14, if the price of good X moves from$1.00 to $2.00, the new market condition will puta. upward pressure on price.b. no pressure on price to change.c. downward pressure on price.d. no pressure on quantity to change.
In Exhibit 14, at a price of $2.00, the market for good X will experience aa. shortage of 150 units.b. surplus of 100 units.c. shortage of 100 units.d. surplus of 200 units.
In the market shown in Exhibit 14 the equilibrium price and quantity of good X area. $0.50, 200.b. $1.50, 300.c. $2.00, 100.d. $1.00, 200.
Assume that the equilibrium price for a good is$10. If the market price is $5, aa. shortage will cause the price to remain at $5.b. surplus will cause the price to remain at $5.c. shortage will cause the price to rise toward$10.d. surplus will cause the price to rise toward$10.
If Qd = quantity demanded and Qs = quantity supplied at a given price, a shortage in the market results whena. Qs is greater than Qd.b. Qs equals Qd.c. Qd is less than or equal to Qs.d. Qd is greater than Qs.
Assuming soybeans and tobacco can be grown on the same land, an increase in the price of tobacco, other things being equal, causes a (an)a. upward movement along the supply curve for soybeans.b. downward movement along the supply curve for soybeans.c. rightward shift in the supply curve for
Suppose autoworkers receive a substantial wage increase. Other things being equal, the price of autos will rise because of a (an)a. increase in the demand for autos.b. rightward shift of the supply curve for autos.c. leftward shift of the supply curve for autos.d. reduction in the demand for autos.
An improvement in technology causes a (an)a. leftward shift of the supply curve.b. upward movement along the supply curve.c. firm to supply a larger quantity at any given price.d. downward movement along the supply curve.
Yesterday, seller A supplied 400 units of good X at $10 per unit. Today, seller A supplies the same quantity of units at $5 per unit. Based on this evidence, seller A has experienced a (an)a. decrease in supply.b. increase in supply.c. increase in the quantity supplied.d. decrease in the quantity
An increase in consumer income, other things being equal, willa. shift the supply curve for a normal good to the right.b. cause an upward movement along the demand curve for an inferior good.c. shift the demand curve for an inferior good to the left.d. cause a downward movement along the supply
Assuming steak is a normal good, a decrease in consumer income, other things being equal, willa. cause a downward movement along the demand curve for steak.b. shift the demand curve for steak to the left.c. cause an upward movement along the demand curve for steak.d. shift the demand curve for
Assuming steak and potatoes are complements, a decrease in the price of steak willa. decrease the demand for steak.b. increase the demand for steak.c. increase the demand for potatoes.d. decrease the demand for potatoes.
Assuming coffee and tea are substitutes, a decrease in the price of coffee, other things being equal, results in a (an)a. downward movement along the demand curve for tea.b. leftward shift in the demand curve for tea.c. upward movement along the demand curve for tea.d. rightward shift in the demand
Assuming beef and pork are substitutes, a decrease in the price of pork will cause the demand curve for beef toa. shift to the left as consumers switch from beef to pork.b. shift to the right as consumers switch from beef to pork.c. remain unchanged, because beef and pork are sold in separate
Which of the following will cause a movement along the demand curve for good X?a. A change in the price of a close substituteb. A change in the price of good Xc. A change in consumer tastes and preferences for good Xd. A change in consumer income
Which of the following is the result of a decrease in the price of tea, other things being equal?a. A leftward shift in the demand curve for teab. A downward movement along the demand curve for teac. A rightward shift in the demand curve for tead. An upward movement along the demand curve for tea
The law of demand states that the quantity demanded of a good changes, other things being equal, whena. the price of the good changes.b. consumer income changes.c. the prices of other goods change.d. a change occurs in the quantities of other goods purchased.
If the demand curve for good X is downward sloping, an increase in the price will result ina. an increase in the demand for good X.b. a decrease in the demand for good X.c. no change in the quantity demanded for good X.d. a larger quantity demanded for good X.e. a smaller quantity demanded for good
Explain the statement “People respond to incentives and disincentives” in relation to the demand curve and supply curve for good X.
There is a shortage of college basketball and football tickets for some games, and a surplus occurs for other games. Why do shortages and surpluses exist for different games?
The U.S. Postal Service is facing increased competition from firms providing overnight delivery of packages and letters. Additional competition has emerged because communications can be sent by emails, fax machines, and text messaging. What will be the effect of this competition on the market
If a new breakthrough in manufacturing technology reduces the cost of producing DVD players by half, what will happen to thea. supply of DVD players?b. demand for DVD players?c. equilibrium price and quantity of DVD players?d. demand for DVDs?
Explain why the market price may not be the same as the equilibrium price.
Explain the effect of the following situations:a. Population growth surges rapidly.b. The prices of resources used in the production of good X increase.c. The government is paying a $1-per-unit subsidy for each unit of a good produced.d. The incomes of consumers of normal good X increase.e. The
Predict the direction of change for either supply or demand in the following situations:a. Several new companies enter the home computer industry.b. Consumers suddenly decide SUVs are unfashionable.c. The U.S. Surgeon General issues a report stating that tomatoes prevent colds.d. Frost threatens to
Use supply and demand analysis to explain why the quantity of word processing software exchanged increases from one year to the next.
Draw graphs to illustrate the difference between a decrease in quantity supplied and a decrease in supply for condominiums. Give a possible reason for change in each graph.
Suppose oil prices rise sharply for years as a result of a war in the Persian Gulf region. What happens and why to the demand fora. cars.b. home insulation.c. coal.d. tires.
Draw graphs to illustrate the difference between a decrease in the quantity demanded and a decrease in demand for Mickey Mantle baseball cards. Give a possible reason for change in each graph.
Some people will pay a higher price for brandname goods. For example, some people buy Rolls Royces and Rolex watches to impress others.Does knowingly paying higher prices for certain items just to be a “snob” violate the law of demand?
In Exhibit 6, which of the following points on the production possibilities curve are full-employment production points?a. A, B, C, Db. A, B, C, D, Uc. E, U, Wd. B, C, D, Ue. A, B, C, U
In Exhibit 6, to move from U to B, the opportunity costa. would be 4 units of consumption goods.b. would be 2 units of capital goods.c. would be zero.d. would be 5 units of capital goods.e. cannot be estimated.
In Exhibit 6, which of the following points on the production possibilities curve are efficient production points?a. A, B, C, Ub. A, B, C, D, Uc. E, U, Wd. B, C, D, Ue. A, B, C, D
From the information in Exhibit 6, which of the following points on the production possibilities curve are attainable with the resources and technology currently available?a. A, B, C, E, Ub. A, B, C, D, Wc. E, U, Wd. B, C, D, Ue. A, B, C, E
A nation can accelerate its economic growth bya. reducing the number of immigrants allowed into the country.b. adding to its stock of capital.c. printing more money.d. imposing tariffs and quotas on imported goods.
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