Principles Of Economics 2nd Edition Steven A. Greenlaw: University Of Mary Washington, David Shapiro: Pennsylvania State University - Solutions

Explain what types of policies the federal government may have implemented to restore aggregate demand and the potential obstacles policymakers may have encountered.
Return to the table from the Economic Report of the President in the earlier Work It Out feature titled “The Phillips Curve for the United States.” How would you expect government spending to have changed over the last six years?
Do you think the Phillips curve is a useful tool for analyzing the economy today? Why or why not?
Suppose the economy is operating at potential GDP when it experiences an increase in export demand. How might the economy increase production of exports to meet this demand, given that the economy is already at full employment?
Does it make sense that wages would be sticky downwards but not upwards? Why or why not?
What may happen if growth in China continues or contracts?
In its recent report, The Conference Board’s Global Economic Outlook 2015, updated November 2014(http://www.conference-board.org/data/globaloutlook.cfm), projects China’s growth between 2015 and 2019 to be about 5.5%. International Business Times
How did the Keynesian perspective address the economic market failure of the Great Depression?
What is the Keynesian prescription for recession?For inflation?
Would you expect to see long-run data trace out a stable downward-sloping Phillips curve?
What tradeoff is shown by a Phillips curve?
Explain what economists mean by “menu costs.”
Why do sticky wages and prices increase the impact of an economic downturn on unemployment and recession?
From a Keynesian point of view, which is more likely to cause a recession: aggregate demand or aggregate supply, and why?
Name some government policies that could cause aggregate demand to shift.
Name some economic events not related to government policy that could cause aggregate demand to shift.
List three practical problems with the Keynesian perspective.
Does Keynesian economics require government to set controls on prices, wages, or interest rates?
How would a decrease in energy prices affect the Phillips curve?
Suppose the U.S. Congress cuts federal government spending in order to balance the Federal budget. Use the AD/AS model to analyze the likely impact on output and employment. Hint: revisit Figure 25.6.
Use the AD/AS model to explain how an inflationary gap occurs, beginning from the initial equilibrium in Figure 25.6.
In a Keynesian framework, using an AD/AS diagram, which of the following government policy choices offer a possible solution to recession? Which offer a possible solution to inflation?a. A tax increase on consumer income.b. A surge in military spending.c. A reduction in taxes for businesses that
In the Keynesian framework, which of the following events might cause a recession? Which might cause inflation? Sketch AD/AS diagrams to illustrate your answers.a. A large increase in the price of the homes people own.b. Rapid growth in the economy of a major trading partner.c. The development of a
Santher is an economy described by Table 24.4a. Plot the AD/AS curves and identify the equilibrium.b. Would you expect unemployment in this economy to be relatively high or low?c. Would you expect prices to be a relatively large or small concern for this economy?d. Imagine that input prices fall
The imaginary country of Harris Island has the aggregate supply and aggregate demand curves as shown in Table 24.3.
Review the problem shown in the Work It Out titled "Interpreting the AD/AS Model." Like the information provided in that feature, Table 24.2 shows information on aggregate supply, aggregate demand, and the price level for the imaginary country of Xurbia.
Are Say’s law and Keynes’ law necessarily mutually exclusive?
In your view, is the economy currently operating in the Keynesian, intermediate or neoclassical portion of the economy’s aggregate supply curve?
Why might it be important for policymakers to know which zone of the SRAS curve the economy is in?
Explain why the short-run aggregate supply curve might be vertical in the neoclassical zone of the SRAS curve. How might we tell if we are in the neoclassical zone of the AS?
Explain why the short-run aggregate supply curve might be fairly flat in the Keynesian zone of the SRAS curve. How might we tell if we are in the Keynesian zone of the AS?
The AD/AS model is static. It shows a snapshot of the economy at a given point in time. Both economic growth and inflation are dynamic phenomena. Suppose economic growth is 3% per year and aggregate demand is growing at the same rate. What does the AD/AS model say the inflation rate should be?
If foreign wealth-holders decide that the United States is the safest place to invest their savings, what would the effect be on the economy here? Show graphically using the AD/AS model.
Suppose the level of structural unemployment increases. How would the increase in structural unemployment be illustrated in the AD/AS model? Hint:How does structural unemployment affect potential GDP?
If Congress cuts taxes at the same time that businesses become more pessimistic about the economy, what is the combined effect on output, the price level, and employment using the AD/AS diagram?
If firms become more optimistic about the future of the economy and, at the same time, innovation in 3-D printing makes most workers more productive, what is the combined effect on output, employment, and the price-level?
If households decide to save a larger portion of their income, what effect would this have on the output, employment, and price level in the short run? What about the long run?
Some politicians have suggested tying the minimum wage to the consumer price index (CPI).Using the AD/AS diagram, what effects would this policy most likely have on output, the price level, and employment?
Hydraulic fracturing (fracking) has the potential to significantly increase the amount of natural gas produced in the United States. If a large percentage of factories and utility companies use natural gas, what will happen to output, the price level, and employment as fracking becomes more widely
During the spring of 2016 the Midwestern United States, which has a large agricultural base, experiences above-average rainfall. Using the AD/AS diagram, what is the effect on output, the price level, and employment?
If new government regulations require firms to use a cleaner technology that is also less efficient than what was previously used, what would the effect be on output, the price level, and employment using the AD/AS diagram?
Economists expect that as the labor market continues to tighten going into the latter part of 2015 that workers should begin to expect wage increases in 2015 and 2016. Assuming this occurs and it was the only development in the labor market that year, how would this affect the AS curve? What if it
On a microeconomic demand curve, a decrease in price causes an increase in quantity demanded because the product in question is now relatively less expensive than substitute products. Explain why aggregate demand does not increase for the same reason in response to a decrease in the aggregate price
Why would an economist choose either the neoclassical perspective or the Keynesian perspective, but not both?
What is the intermediate zone of the SRAS curve?Will a rise in output be accompanied by a rise or a fall in the price level in this zone?
What is the neoclassical zone of the SRAS curve?How much is the output level likely to change in the neoclassical zone?
What is the Keynesian zone of the SRAS curve?How much is the price level likely to change in the Keynesian zone?
What are some of the ways in which exports and imports can affect the AD/AS model?
How is pressure for inflationary price increases shown in an AD/AS model?
How is the natural rate of unemployment illustrated in an AD/AS model?
How is cyclical unemployment illustrated in an AD/AS model?
How is recession illustrated in an AD/AS model?
How is long-term growth illustrated in an AD/AS model?
Would a shift of AD to the right tend to make the equilibrium quantity and price level higher or lower?What about a shift of AD to the left?
Name some factors that could cause AD to shift, and say whether they would shift AD to the right or to the left.
What is stagflation?
Will the shift of SRAS to the right tend to make the equilibrium quantity and price level higher or lower?What about a shift of SRAS to the left?
Name some factors that could cause the SRAS curve to shift, and say whether they would shift SRAS to the right or to the left.
What is potential GDP?
Briefly explain the reason for the near-vertical shape of the SRAS curve on its far right.
Briefly explain the reason for the near-horizontal shape of the SRAS curve on its far left.
What are the economic reasons why the AD curve slopes down?
What are the components of the aggregate demand(AD) curve?
What is the economic reason why the SRAS curve slopes up?
What is on the horizontal axis of the AD/AS diagram? What is on the vertical axis?
Does Say’s law apply more accurately in the long run or the short run? What about Keynes’ law?
Do neoclassical economists believe in Keynes’ law or Say’s law?
What is Keynes’ law?
What is Say’s law?
If the economy is operating in the Keynesian zone of the SRAS curve and aggregate demand falls, what is likely to happen to real GDP?
If the economy is operating in the neoclassical zone of the SRAS curve and aggregate demand falls, what is likely to happen to real GDP?
Suppose the Federal Reserve begins to increase the supply of money at an increasing rate. What impact would that have on GDP, unemployment, and inflation?
Suppose, after five years of sluggish growth, the economy of the European Union picks up speed. What would be the likely impact on the U.S. trade balance, GDP, and employment?
What impact would a decrease in the size of the labor force have on GDP and the price level according to the AD/AS model?
Many financial analysts and economists eagerly await the press releases for the reports on the home price index and consumer confidence index. What would be the effects of a negative report on both of these? What about a positive report?
A policymaker claims that tax cuts led the economy out of a recession. Can we use the AD/AS diagram to show this?
Suppose Mexico, one of our largest trading partners and purchaser of a large quantity of our exports, goes into a recession. Use the AD/AS model to determine the likely impact on our equilibrium GDP and price level.
How would a dramatic increase in the value of the stock market shift the AD curve? What effect would the shift have on the equilibrium level of GDP and the price level?
Suppose concerns about the size of the federal budget deficit lead the U.S. Congress to cut all funding for research and development for ten years. Assuming this has an impact on technology growth, what does the AD/AS model predict would be the likely effect on equilibrium GDP and the price level?
Suppose the U.S. Congress passes significant immigration reform that makes it easier for foreigners to come to the United States to work. Use the AD/AS model to explain how this would affect the equilibrium level of GDP and the price level.
In the AD/AS model, what prevents the economy from achieving equilibrium at potential output?
The short run aggregate supply curve was constructed assuming that as the price of outputs increases, the price of inputs stays the same. How would an increase in the prices of important inputs, like energy, affect aggregate supply?
Describe the mechanism by which demand creates its own supply.
Describe the mechanism by which supply creates its own demand.
Imagine that the economy of Germany finds itself in the following situation: the government budget has a surplus of 1% of Germany’s GDP; private savings is 20% of GDP; and physical investment is 18% of GDP.a. Based on the national saving and investment identity, what is the current account
Table 23.7 provides some hypothetical data on macroeconomic accounts for three countries represented by A, B, and C and measured in billions of currency units. In Table 23.7, private household saving is SH, tax revenue is T, government spending is G, and investment spending is I.a. Calculate the
Imagine that the U.S. economy finds itself in the following situation: a government budget deficit of $100 billion, total domestic savings of $1,500 billion, and total domestic physical capital investment of $1,600 billion. According to the national saving and investment identity, what will be the
In 2001, the economy of the United Kingdom exported goods worth £192 billion and services worth another £77 billion. It imported goods worth £225 billion and services worth £66 billion. Receipts of income from abroad were £140 billion while income payments going abroad were £131 billion.
Some economists warn that the persistent trade deficits and a negative current account balance that the United States has run will be a problem in the long run.Do you agree or not? Explain your answer.
Will nations that are more involved in foreign trade tend to have higher trade imbalances, lower trade imbalances, or is the pattern unpredictable?
What is more important, a country’s current account balance or the growth of GDP? Why?
From time to time, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Is this possible?
If you observed a country with a rapidly growing trade surplus over a period of a year or so, would you be more likely to believe that the economy of that country was in a period of recession or of rapid growth?Explain.
Many think that the size of a trade deficit is due to a lack of competitiveness of domestic sectors, such as autos. Explain why this is not true.
Is it better for your country to be an international lender or borrower?
If countries reduced trade barriers, would the international flows of money increase?
If a country is a big exporter, is it more exposed to global financial crises?
A government official announces a new policy. The country wishes to eliminate its trade deficit, but will strongly encourage financial investment from foreign firms. Explain why such a statement is contradictory.
From time to time, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Explain why such a statement is economically impossible.
What is the difference between trade deficits and balance of trade?

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Principles Of Economics 2nd Edition Steven A. Greenlaw: University Of Mary Washington, David Shapiro: Pennsylvania State University - Solutions

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