Macroeconomics For Today 9th Edition Irvin B. Tucker - Solutions

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Who selects the chairperson of the Federal Reserve System? Describe the relationship between the Board of Governors of the Federal Reserve System and the 12 Federal Reserve Banks. What is the composition and purpose of the Federal Open Market Committee (FOMC)?LO3
How does the purchasing power of the dollar relate to the nation’s price level? LO2
What are the components of the M 1 money supply? What is the largest component? Which of the components of M 1 is legal tender? Why is the face value of a coin greater than its intrinsic value? What near-monies are included in the M 2 money supply? LO1
Which two of the following financial institutions offer checkable deposits included within the M 1 money supply: mutual fund companies; insurance companies; commercial banks; securities firms; thrift institutions? Which of the following is not included in either M 1 or M 2: currency held by the
What do economists mean when they refer to Social Security as a pay-as-you-go plan? What is the Social Security trust fund? What is the nature of the long-run fiscal imbalance in the Social Security retirement system? What are the broad options for fixing the long-run problem? LO5
Why might economists be quite concerned if the annual interest payments on the debt sharply increased as a percentage of GDP? LO4
True or false? If the statement is false, explain why: LO4a. An internally held public debt is like a debt of the left hand owed to the right hand.b. The Federal Reserve and Federal government agencies hold more than half the public debt.c. As a percentage of GDP, the Federal debt held by the
Distinguish between the total U.S. debt and the debt held by the public. Why is the debt as a percentage of GDP more relevant than the total debt? Contrast the effects of paying off an internally held debt and paying off an externally held debt. LO4
Why did the budget deficits rise sharply in 1991 and 1992?What explains the large budget surpluses of the late 1990s and early 2000s? What caused the swing from the budget surpluses to the series of budget deficits beginning in 2002? LO3
In requesting a tax cut in the early 1960s, President Kennedy said, “It is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise tax revenues in the long run is to cut tax rates now.” Relate this quotation to your previous answer in
Use Figure 8.4 . to explain why the deliberate increase of the standardized budget deficit (resulting from the tax cut) will reduce the size of the actual budget deficit if the fiscal policy succeeds in pushing the economy to its full-employment output of GDP
Briefly state and evaluate the problem of time lags in enacting and applying fiscal policy. How might “politics” complicate fiscal policy? How might expectations of a near-term policy reversal weaken fiscal policy based on changes in tax rates? What is the crowding-out effect, and why might it
How would you expect the Economic Stimulus Act of 2008 to affect the actual budget (as a percentage of GDP) and the standardized budget? The main feature of the act was a onetime tax rebate to households. How would the actual and standardized budgets be affected if those rebates became permanent
Define the standardized budget, explain its significance, and state why it may differ from the actual budget. Suppose the full-employment, noninflationary level of real output is GDP 3 (not GDP 2 ) in the economy depicted in Figure 8.3 . If the economy is operating at GDP 2 , instead of GDP 3 ,
What are government’s fiscal policy options for moving the economy out of a recession? Speculate on which of these fiscal options might be favored by (a) a person who wants to preserve the size of government and (b) a person who thinks the public sector is too large. How does the “ratchet
The Federal government establishes its budget to decide what programs to provide and how to pay for them. How does fiscal policy differ from this ordinary fiscal activity of budgeting? LO1
Using the concept of the multiplier, explain why mass layoffs by large companies such as Boeing or General Motors are a concern to the citizens and leaders where those firms are located. LO4
In early 2001 investment spending sharply declined in the United States. In the 2 months following the September 11, 2001, attacks on the United States, consumption also declined. Use AD-AS analysis to show the two impacts on real GDP. LO4
Why does a reduction in aggregate demand tend to reduce real output, rather than the price level? LO4
Other things equal, what effect will each of the following have on the equilibrium price level and level of real output? LO3a. An increase in aggregate demand in the steep portion of the aggregate supply curve.b. An increase in aggregate supply, with no change in aggregate demand (assume that
Other things equal, what effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output. LO1 ,LO2a. A reduction in the economy’s real interest rate.b. A major
Suppose that a hypothetical economy has the following relationship between its real output and the input quantities necessary for producing that output: LO2a. What is productivity in this economy?b. What is the per-unit cost of production if the price of each input unit is $2?c. Assume that the
What factors might cause this change in aggregate demand? What are the new equilibrium price level and level of real output?
Suppose that the aggregate demand and supply schedules for an economy are as shown to the right: LO3 economics™Amount of Amount of Real GDP Real GDP Demanded, Price Level Supplied, Billions (Price Index) Billions$100 300 $450 200 250 400 300 200 300 400 150 200 500 100 100a. Use these sets of
What is the general relationship between a country’s price level and the quantity of its domestic output (real GDP) demanded? Who are the buyers of U.S. real GDP? LO1
How does unanticipated inflation hurt creditors and help borrowers? How can anticipating the inflation make these effects less severe? LO3
Briefly distinguish between demand-pull inflation and costpush inflation. LO3
If the CPI was 110 last year and is 121 this year, what is this year’s rate of inflation? What is the “rule of 70”? How long would it take for the price level to double if inflation persisted at(a) 2 percent, (b) 5 percent, and (c) 10 percent per year? LO2
What is the Consumer Price Index (CPI), and how is it determined each month? What effect does inflation have on the purchasing power of a dollar? How does it explain differences between nominal and real interest rates? How does deflation differ from inflation? LO2
What are the three types of unemployment? Unemployment is seen by some as undesirable. Are all three types of unemployment undesirable? Explain. LO3
Since the United States has an unemployment compensation program that provides income for those out of work, why should we worry about unemployment? LO3
Use the following data to calculate (a) the size of the labor force and (b) the official unemployment rate: total population, 500; population under 16 years of age or institutionalized, 120; not in labor force, 150; unemployed, 23; part-time workers looking for full-time jobs, 10.LO2
How many recessions has the U.S. experienced since 1950?Which ones were the longest in duration? Which ones were the most severe in terms of declines in real output? LO1
What are the two primary phases of the business cycle?What tends to happen to real GDP, unemployment, and inflation during these phases? LO1
Provide three examples of products or services that can be simultaneously consumed by many people. Explain why labor productivity greatly rises as the firm sells more units of the product or service. Explain why the higher level of sales greatly reduces the per-unit cost of the product. LO6
Relate each of the following to the recent productivity speedup: LO6a. Information technologyb. Increasing returnsc. Network effectsd. Global competition
Explain why there is such a close relationship between changes in a nation’s rate of productivity growth and changes in its average real hourly wage. LO4
True or false? If false, explain why. LO5a. Technological advance, which to date has played a relatively small role in U.S. economic growth, is destined to play a more important role in the future.b. Many public capital goods are complementary to private capital goods.c. Immigration has slowed
To what extent have increases in U.S. real GDP resulted from more labor inputs? From higher labor productivity?Rearrange the following contributors to the growth of real GDP in order of their quantitative importance: economies of scale, quantity of capital, improved resource allocation, education
Suppose that work hours in New Zombie are 200 in year 1 and productivity is $8. What is New Zombie’s real GDP? If work hours increase to 210 in year 2 and productivity rises to$10, what is New Zombie’s rate of economic growth? LO4
What are the four supply factors of economic growth? What is the demand factor? What is the efficiency factor? Illustrate these factors in terms of the production possibilities curve. LO4
Suppose an economy’s real GDP is $30,000 in year 1 and$31,200 in year 2.What is the growth rate of its real GDP?Assume that population is 100 in year 1 and 102 in year 2.What is the growth rate of GDP per capita? LO2
Suppose that in 1984 the total output in a single-good economy was 7000 buckets of chicken. Also suppose that in 1984 each bucket of chicken was priced at $10. Finally, assume that in 2004 the price per bucket of chicken was $16 and that 22,000 buckets were produced. Determine real GDP for 1984 and
Using the following NIPA data, compute GDP. All figures are in billions. LO1
Which of the following are included in this year’s GDP?Explain your answer in each case. LO1a. The services of a commercial painter in painting the family home.b. An auto dealer’s sale of a new car to a nonbusiness customer.c. The money received by Smith when she sells her biology textbook to a
Suppose foreigners spend $7 billion on U.S. exports in a specific year and Americans spend $5 billion on imports from abroad in the same year. What is the amount of the United States’ net exports? Explain how net exports might be a negative amount. LO1
Why are changes in inventories included as part of investment spending? Suppose inventories declined by $1 billion during 2008. How would this affect the size of gross private domestic investment and gross domestic product in 2008? Explain. LO1
What are the three main types of consumption expenditures?Why are purchases of new houses considered to be investment expenditures rather than consumption expenditures? LO1
Why are only final goods counted in measuring GDP for a particular year? Why is the value of used furniture that’s bought and sold not counted? LO1
Suppose in Fiscalville there is no tax on the first $10,000 of income, but a 20 percent tax on earnings between $10,001 and $20,000 and a 30 percent tax on income between$20,001 and $30,000. Any income above $30,000 is taxed at 40 percent. If your income is $50,000, how much will you pay in taxes?
Contrast the benefits-received and ability-to-pay principles of taxation. Which of the following taxes mainly adhere to the benefits-received principle? Which mainly to the ability-topay principle? LO4a. An admission tax on tickets to sporting events at public stadiums.b. The Federal personal
Explain how marketable emission credits add to overall economic efficiency, compared to across-the-board limitations on maximum discharges of air pollutants by firms. LO3
Explain the following statement, using cost-benefit analysis: “The optimal amount of pollution abatement for some substances, say, water from storm drains, is very low; the optimal amount of abatement for other substances, say, cyanide poison, is close to 100 percent.” LO3
Explain: “Without a market for pollution rights, dumping pollutants into the air or water is costless; in the presence of the right to buy and sell pollution rights, dumping pollutants creates an opportunity cost for the polluter.” What is the significance of this opportunity cost to the search
An apple grower’s orchard provides nectar to a neighbor’s bees, while the beekeeper’s bees help the apple grower by pollinating the apple blossoms. Use Figure 4.1bto explain why this situation of dual positive externalities might lead to an underallocation of resources to apple growing and to
Why are negative externalities and positive externalities also called spillover costs and spillover benefits? Show graphically how a tax can correct for a negative externality and how a subsidy to producers can correct for a positive externality.How does a subsidy to consumers differ from a subsidy
The table below shows the total costs and total benefits in billions for four different antipollution programs of increasing scope. Use cost-benefit analysis to determine which program should be undertaken. Explain. LO2
The accompanying table relating to a public good provides information on the prices Young and Zorn are willing to pay for various quantities of that public good. These two people are the only members of society. Determine the price that society is willing to pay for the public good at each quantity
Contrast the characteristics of public goods with those of private goods. Why won’t private firms produce public goods? LO1
Use the characteristics of private goods to explain why firms can profitably offer them for sale. Why do competitive firms tend to produce private goods at minimum average cost?What do economists mean when they say that private goods tend to be produced in the “right” amounts? LO1
Critically evaluate: “In comparing the two equilibrium positions in Figure 3.7a , I see that a larger amount is actually purchased at a higher price. This refutes the law of demand.” LO4
For each stock in the stock market, the number of shares sold daily equals the number of shares purchased. That is, the quantity of each firm’s shares demanded equals the quantity of its shares supplied. So, if this equality always occurs, why do the prices of stock shares ever change? LO4
How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is, do price and quantity rise, fall, or remain unchanged, or are the answers indeterminate because they depend on the magnitudes of the shifts? Use supply
Suppose the total demand for wheat and the total supply of wheat per month in the Kansas City grain market are as shown below: LO3 Thousands Price Thousands Surplus (ⴙ)of Bushels per of Bushels or Demanded Bushel Supplied Shortage (ⴚ)85 $3.40 72 ________ 80 3.70 73 ________ 75 4.00 75 ________
What is meant by the term “creative destruction”? How does the emergence of iPod technology relate to this idea? LO3
With current technology, suppose a firm is producing 400 loaves of banana bread daily. Also, assume that the least-cost combination of resources in producing those loaves is 5 units of labor, 7 units of land, 2 units of capital, and 1 unit of entrepreneurial ability, selling at prices of $40, $60,
In the 1990s thousands of “dot-com” companies emerged with great fanfare to take advantage of the Internet and new information technologies. A few, like Yahoo, eBay, and Amazon, have generally thrived and prospered, but many others struggled and eventually failed. Explain these varied outcomes
Evaluate and explain the following statements: LO2a. The market system is a profit-and-loss system.b. Competition is the disciplinarian of the market economy.
Why is private property, and the protection of property rights, so critical to the success of the market system? LO2
How does self-interest help achieve society’s economic goals? Why is there such a wide variety of desired goods and services in a market system? In what way are entrepreneurs and businesses at the helm of the economy but commanded by consumers? LO2
Suppose that when the price of gold is $100 an ounce, gold producers find it unprofitable to sell gold. However, when the price is $200 an ounce, 5000 ounces of output (production) is profitable. At $300, a total of 10,000 ounces of output is profitable. Similarly, total production increases by
Construct a table from the data shown on the graph below.Which is the dependent variable and which the independent variable? LO6 Income per Year Saving per Year$15,000 $1,000 0 500 10,000 500 5,000 0 20,000 1,500 28 APPENDIX
The following table contains data on the relationship between saving and income. Rearrange these data into a meaningful order and graph them on the accompanying grid.What is the slope of the line? Interpret the meaning of the slope. What would you predict saving to be at the $12,500 level of
Indicate how each of the following might affect the data shown in the table and graph in Figure 2 of this appendix:LO6a. BTU’s athletic director hires away the coach from a perennial champion.b. An NBA team locates in the city where BTU plays.c. BTU contracts to have all its home games televised.
Briefly explain the use of graphs as a way to represent economic relationships. What is an inverse relationship? How does it graph? What is a direct relationship? How does it graph? Graph and explain the relationships (other things equal) you would expect to find between (a) the number of inches of
Why isn’t money considered a capital resource in economics? Why is entrepreneurial ability considered a category of economic resource, distinct from labor? What are the major functions of the entrepreneur? LO4a. Show these data graphically. Upon what specific assumptions is this production
Suppose you won $15 on a lotto ticket at the local 7-Eleven and decided to spend all the winnings on candy bars and bags of peanuts. The price of candy bars is $.75 and the price of peanuts is $1.50. LO4a. Construct a table showing the alternative combinations of the two products that are
Indicate whether each of the following statements applies to microeconomics or macroeconomics: LO3a. The unemployment rate in the United States was 5.0%in April 2008.b. A U.S. software firm discharged 15 workers last month and transferred the work to India.c. An unexpected freeze in central Florida
In order for Ethiopia to increase its future economic growth, it must choose a point that isa. below its production possibilities curve.b. further along on its production possibilities curve toward the capital goods axis.c. further along on its production possibilities curve toward the consumption
Which of the following makes long-term lowinterest loans to less-developed countries (LDCs)?a. The Agency for International Development(AID).b. New International Economic Order (NIEO).c. International Monetary Fund (IMF).d. The World Bank.
Which of the following makes short-term conditional low-interest loans to developing countries?a. Agency for International Development (AID).b. World Bank.c. International Monetary Fund (IMF).d. New International Economic Order (NIEO).
Economic growth and development in LDCs are low because many of them lacka. capital investment.b. technological progress.c. a favorable political environment.d. All of the answers above are correct.e. None of the answers above are correct.
Which of the following is infrastructure?a. International Harvester tractor plant.b. Waste and water system provided by government.c. Airplane.d. Service of postal workers.
Which of the following best defines the vicious circle of poverty?a. The GDP per capita must rise before people can save and invest.b. People cannot save while capital accumulates.c. Increased GDP per capita relates to lower population growth.d. Poverty, saving, and investment are related like a
Which of the following problems do LDCs face?a. Low per capita income and high GDP growth rate.b. Low population growth and low per capita income.c. Rapid population growth and low human capital.d. Low per capita income and high saving rate.
An outward shift of the production possibilities curve representsa. economic growth.b. a decline in economic development.c. a decrease in human capital.d. a decrease in resources.
Which of the following statements is true?a. An LDC is a country with a low GDP per capita, low levels of capital, and uneducated workers.b. The vicious circle of poverty exists because GDP must rise before people can save and invest.c. LDCs are characterized by rapid population growth and low
When the government fixes the exchange rate above market exchange rates,a. international trade falls.b. the infrastructure improves.c. real GDP per capita rises.d. the vicious circle of poverty is broken.
According to the classification in the text, which of the following is not an IAC?a. United Arab Emiratesb. Israel.c. Hong Kong.d. Greece.
LDCs are characterized bya. high life expectancy.b. high adult literacy.c. high infant mortality.d. All of the answers above are correct.e. None of the answers above are correct.
Which of the following is true when making GDPs per capita comparisons between nations?a. The GDP per capita is subject to greater measurement errors for LDCs compared to IACs.b. The GDP per capita does not measure income distribution.c. The GDP per capita is subject to fluctuations from changes in
According to the definition given in the text, which of the following is not an LDC?a. India.b. Egypt.c. China.d. Ireland.
An LDC is defined as a countrya. without large stocks of advanced capital.b. without well-educated labor.c. with a low GDP per capita.d. that is described by all of the above.
Which of the following is an example of foreign private investment?a. Elite government leaders in a less-developed country develop a domestic logging monopoly that proceeds to deforest lands recently cleared of residents by the military.b. The U.S. government provides $10 million in financial
Which of the following represents a problem with using per capita GDP to compare standard of living between less-developed and industrially advanced countries?a. GDP per capita does not take into account differences in population between countries.b. GDP is particularly difficult to measure in
generally results in increases in per-capita GDP.a. Civil warb. High levels of inequality in the distribution of land ownershipc. Investment in human capitald. A stock of natural resources
There is a significant positive relationship between and .a. natural resource commodity exports; high levels of per capita GDPb. investment in capital; high levels of per capita GDPc. high levels of illiteracy; high levels of per capita GDPd. limited government recognition of land tenure and
Which of the following distinguishes industrially advanced countries from less-developed countries?a. GDP per capita.b. Educational attainment of the workforce.c. Extent to which capital is technologically advanced.d. All of the answers above are correct.
Explain the differences among the Agency for International Development (AID), the World Bank, and the International Monetary Fund(IMF).
Why would an LDC argue for “trade, not aid”?

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Macroeconomics For Today 9th Edition Irvin B. Tucker - Solutions

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