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foundations macroeconomics

Macroeconomics For Today 11th Edition Irvin B. Tucker - Solutions

The fiscal authorities in question 2 were so impressed with themselves that they have decided to raise the saving rate even further, to .45. Evaluate this policy. use of the following parameter
The Solovian economy in question 1 begins with a capital stock of 500 and a labor force of 100 in period 0. Construct a spreadsheet model that calculates in each subsequent period: the labor force,
The Solovian saving rate has been raised to .4 as the result of a fiscal surplus. Evaluate the steady state capital-labor ratio, labor productiv- ity, and consumption per worker in the new long-run
Suppose the national saving rate in Solovia is .15. Evaluate the steady state capital-labor ratio, labor productivity, and consumption per worker. use of the following parameter values: The
In the Classical model of endogenous growth, the government collects a one-period consumption tax of 15 from the capitalists in period 0, investing its fiscal surplus in capital. (Units are constant
Use the Classical model of exogenous growth to find the endogenous variables in an economy in which the natural rate of growth is 5 percent per year. make use of the following parameter values: labor
In the Classical model of exogenous growth, describe the effects on all the endogenous variables of each of the following parameter changes: (a) an increase in labor productivity, holding the
Use the Classical model of endogenous growth to find the endogenous variables in an economy in which the conventional wage is 80 per labor unit.make use of the following parameter values: labor
In the Classical model of endogenous growth, describe the effects on all the endogenous variables of each of the following parameter changes: (a) an increase in labor productivity, holding the
Use the statistical appendix of the Economic Report of the President to gather data on the percentage composition of GDP, including net exports and the fiscal surplus of the government sector.
Draw the IS-LM-BP diagram for a small open economy under flexible exchange rates whose central bank has reduced the money supply (i) with zero capital mobility (ii) with perfect capital mobility.
In the previous question, for each case analyze the effects of this policy on each term in the income-expenditure and investment-saving identi- ties for an open economy. Explain and interpret your
Draw the IS-LM-BP diagram for a small open economy under flexi- ble exchange rates whose government has reduced spending under (i) relatively immobile capital (ii) perfect capital mobility. In each
Use the Salter-Swan framework to construct a policy program for a small open economy with an inflationary level of GDP and a trade surplus.
Draw the IS-LM-BP diagram for a small open economy with relatively mobile capital that has revalued its currency. Determine the effect on each term in the income-expenditure and investment-saving
Draw the IS-LM-BP diagram for a small open economy under fixed exchange rates whose government has reduced its spending (i) with zero capital mobility and no sterilization and (ii) with perfect
Draw the IS-LM-BP diagram for a small open economy with relatively mobile capital under fixed exchange rates whose central bank has re- duced the domestic money supply (i) without sterilization (ii)
Use the statistical appendix of the Economic Report of the President to find data on the current account and the trade balance in the U.S. Evaluate our practice of using the trade balance to measure
Draw the balance of payments schedule and the IS curve on the same diagram. Identify the level of GDP at which net exports are zero.
The interest rate in the U.S. is 6% while the interest rate in Europe is 8%. The euro is currently trading for $.95. Calculate the exchange rate that financial markets expect in one year assuming
Construct the T-accounts for the central bank showing the effects of a balance of payments deficit.
Use the statistical appendix of the Economic Report of the President to find data on the interest (federal funds) rate, the inflation rate and unemployment in the U.S. Make a graph showing the
Compare the responses of a populist central bank and a conservative central bank after a negative demand shock that shifts the IS curve inward. Use the kinked AD curves developed in the text.use of
Use the Phillips curve and IS-RF diagrams to analyze the behavior of the economy after an increase in the natural rate of unemployment.use of the following data for a hypothetical economy:Note that
Draw the Phillips curve diagram and the IS-RF diagram describing problem 2. Draw the diagrams describing problem 4.use of the following data for a hypothetical economy:Note that we have used
Start from the original data. Consider a fiscal contraction that shifts the AD curve to -311+ 1.075 u. Calculate the effect of the policy on inflation and unemployment in short run (in year 1) and in
Calculate the real and nominal rate of interest in years 0, 1, 2, and in the long run in the previous problem. Explain the pattern you observe.use of the following data for a hypothetical
The central bank has decided to get tougher on inflation. The reaction function shifts to r = 3 + 1.5 .5 u and the AD curve becomes T = .566.358 u. Assuming we start in year 0 from the long-run equi-
Calculate the central bank's target rate of inflation. Calculate the nominal rate of interest in long-run equilibrium. Why does it differ from the natural rate of interest?use of the following data
Using the statistical appendix of the Economic Report of the President, gather data on the price level and the unemployment rate over a time period of your choice. (You can use price data suggested
Prove that the sacrifice ratio is 1/a.Where indicated, these problems refer to a hypothetical economy described by the following:Note that we have used a percentage for the natural rate of
Use the data in problem 1, construct a spreadsheet. model for this hypothetical economy and use it to solve recursively for the path taken by the unemployment and inflation rates for 25 years. Make a
In year 0, the monetary growth rate is 10% per year and the economy is in long-run equilibrium. The central bank decides to reduce inflation to 4% per year in three equal steps. Their target path for
In the previous problem, calculate the total amount of excess unem- ployment that would result from the monetary stimulus from year 0 until the economy achieves its new long-run equilibrium. Be
Using the previous problem, calculate the inflation and unemployment rates in years 0, 1, and 2 as well as in the new long-run equilibrium.Where indicated, these problems refer to a hypothetical
In year 0, the monetary growth rate is 5% per year and the economy is in long-run equilibrium. The central bank changes the growth rate of money to 10% per year in year 1 and all subsequent years.
Use the statistical appendix of the Economic Report of the President to find data on the price level in the U.S. (You can use the same data suggested in the problems from Chapter 8.) Make a graph
In the previous problem, describe the short-run and long-run effects of the policy on each term in the income-expenditure identity and each term in the investment-saving identity. Discuss the
Draw the AS-AD and IS-LM diagrams that describe a contraction in the money supply. Identify the new short-run position and the new long-run equilibrium on each diagram. Be sure to label each
In the previous problem, describe the short-run and long-run effects of the policy on each term in the income-expenditure identity and each term in the investment-saving identity.
Draw the AS-AD and IS-LM diagrams that describe a tax cut. Identify the new short-run position and the new long-run equilibrium on each diagram. Be sure to label each important landmark on your
Use the statistical appendix of the Economic Report of the President to find data on the price level in the U.S. for the last three decades. Look for the chain-type price index that most closely
Use the AS curve from the previous problem to determine the price level when the price level last year was $6.25 per unit and the level of GDP is $92 per year. Explain the significance of your answer
Derive the aggregate supply curve for this economy. Graph the AS curve for three successive years when the level of GDP remains at $95 per year.This problem make use of the following data for a
In the previous problem, what money wage will workers bargain for in the next round of negotiations (i.e., next year), assuming there is no change in the level of GDP?This problem make use of the
If the level of GDP is $95 per year, what will the unemployment rate be? What real wage will workers expect to receive? If the money wage is $5 per worker, what price level do workers expect? What
Determine the natural rate of unemployment and the natural level of GDP for this economy.This problem make use of the following data for a hypothetical economy. The mark-up is .25, the wage curve is
Calculate the price that firms will set when the wage is $5 per worker. Calculate the real wage the workers receive. Calculate the price- determined real wage.This problem make use of the following
In general (i.e., without reference to the hypothetical data above), un- der what two conditions will the AD curve be vertical? One condition relates to the IS curve and the other condition relates
Derive the AD curve for this economy.use of the following data for a hypothetical economy:All variables (except P) are in units of constant dollars (per year for flows), which we will represent by
Find the IS-LM equilibrium in this economy when the price level P = 1. Repeat when P2 and when P.75. Graph these three points, with P on the vertical and Y on the horizontal axis.use of the following
Use the statistical appendix of the Economic Report of the President to evaluate the effects of fiscal policy on the level of investment in the U.S. during the 1980s. Make a graph showing the
Draw the IS-LM diagram that describes a monetary contraction. La-bel carefully, and explain the effects of the contraction on each of the variables in the income-expenditure and investment-saving
Draw the IS-LM diagram that describes a tax cut. Label carefully, and explain the effects of the tax cut on each of the variables in the income-expenditure and investment-saving identities.
Set up a spreadsheet that lets you change the parameters of the IS-LM model experimentally. Make two copies of the model in your spread-sheet, one to use as a control (with the original parameter
Design a policy plan to increase national saving without changing the level of GDP, using any combination of fiscal and monetary policy.
If the demand for money in this economy were $$M^d = P(2Y)$$, would monetary or fiscal policy be more effective as a stabilization tool?
If the investment equation in this economy were $$I = 50 + 2Y$$, would monetary or fiscal policy be more effective as a stabilization tool?
Determine if crowding out or crowding in occurred in problem 3.
The central bank increases the money supply by $280. Calculate the new level of GDP and the new interest rate.
The government increases spending by $200. Calculate the new level of GDP and the new interest rate.
Calculate the equilibrium level of GDP and the interest rate.
Derive the IS and LM curves for this economy.
List all the parameter changes that might make the LM curve steeper, and explain the economic rationale.
The central bank sells $500 in bonds in an open market operation. There are no banks, so the money supply consists only of currency. Using the LM curve from problem 2, calculate the shift in the LM
Use the LM curve from the previous two problems to decide whether agents experience an excess supply or excess demand with respect to their money holdings when the interest rate is .08 per year and
The supply of money is $1600 and the price level is 1. Use the demand for money from the previous problem to derive the LM curve.
The demand for money is Md = P(2Y - 8000 i). Find the demand for real balances when i = .05 per year and Y = $1000 per year. Repeat when i = .08 per year and Y = $1000 per year. Repeat when i = .08
List the parameter changes that make the IS curve steeper, and explain. the economic rationale.
Graph the investment equation in problem 1. Determine which of the positions on the investment equation in problem 1 are on the IS curve in problem 2. Refer to Figure 4.1.
Government spending increases to $300 per year. How will this affect the IS curve in problem 2? Calculate the change in Y when i = .05 per year.
Use the IS curve from the previous problem to decide whether firms have produced too much or too little output to achieve equilibrium in the product market if the interest rate is .08 per year and
The consumption function is C = 120+.6(YT), T= $200 per year, G=$250 per year, and the investment equation is given in the previous problem. Derive the IS curve.
The investment equation takes the form IP 50+.2Y-2000i. Calcu late planned investment spending when i =.05 per year (5% per year) and Y $1000 per year. Repeat for i = .05 per year and Y = $700 per
Set up a spreadsheet that lets you change the parameters of the Keynesian model experimentally. Make two copies of the model in your spreadsheet, one to use as a control (with the original parameter
Go back to the original data, but replace the investment equation above with $$I^P = 100 + .1Y$$ and calculate the level of national saving. Now suppose households attempt to save more of their
Use the investment-saving identity to explain where the government will get the funding for its fiscal policy in the previous question. What has the fiscal deficit done to national saving?use of the
The government wants to increase GDP by $250. Calculate the level of government spending required.use of the following data for a hypothetical economy:All variables are in units of constant dollars
Draw the Keynesian cross diagram and identify the positions described in the previous two problems.use of the following data for a hypothetical economy:All variables are in units of constant dollars
Derive the equation for aggregate demand. Calculate the level of de- mand and unplanned inventory change when output is $500 per year, and describe the supply response. Repeat when output is $1200
Calculate the equilibrium level of output.use of the following data for a hypothetical economy:All variables are in units of constant dollars per year, which we will represent by the $ symbol. Unless
Use the statistical appendix of the Economic Report of the President to find data on prices and costs for nonfinancial corporate businesses in the U.S. Calculate the mark-up, the wage share of
The elasticity of product demand in the previous question has a value of 3. Verify that the mark-up is 50% (see appendix).
The firm (firm i) described in question 2 thinks its demand curve has the form YPY, where Y represents aggregate income. It fore- casts that the level of GDP will be $1000 per year. What price will
The firm described in the previous question sells 100 units of its output. Calculate its total profits, profits as a share of output, and wages as a share of output.
If the wage is $5 per worker, each worker produces one unit of output, and firms charge a 50% mark-up over marginal cost, what price will the firms charge?
If 200 million workers produce $10 trillion per year in output, in what units should labor be measured so that the production function is Y = N?
Use the statistical appendix of the Economic Report of the President to find data on each term in the income-expenditure identity for a closed economy. Make a graph describing the percentage
Use the balance sheets of the commercial banks and the monetary au- thority in the Flow of Funds Accounts of the United States to calculate the size of the money multiplier.
Show the T-accounts of the central bank, the banking sector, and the nonbank private sector after an open market sale of a bond by the central bank.
The reserve ratio is .2, the currency-deposit ratio is .6, and there are $375 in currency and $125 in bank reserves. Calculate the money sup- ply. If the central bank purchased a bond for $100, by
An open economy with GDP equal to $10 trillion per year has invest- ment spending of $2 trillion per year, consumption spending of $6.5 trillion per year, and government spending of $1.8 trillion per
In a closed economy, consumption spending is $100 per year, govern- ment spending is $50 per year, and $250 worth of final goods and services were actually produced. Calculate the level of actual
The GDP is $10 trillion per year measured in current prices. Measured in the prices prevailing in year 2000, the GDP is 9 trillion constant dollars per year. Calculate the Paasche price index with
Consider an economy with three final goods industries, A, B, and C. In years 1 and 2, the prices (p) in $ per unit and outputs (q) in units of type A, B, and C per year are:Calculate the GDP in each
Imagine a two-industry economy. Industry A employs 10 workers each paid $50 per year to produce an intermediate good worth $1100 per year and uses $100 of its own output as an input (think of seed
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?
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? Assume ticket prices are

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