Macroeconomics Policy And Practice 1st Edition Frederic S. Mishkin - Solutions

Unlock the potential of your studies with comprehensive resources for "Macroeconomics Policy and Practice 1st Edition" by Frederic S. Mishkin. Access the Online Solutions Manual featuring detailed Answers Key and Solutions PDF to enhance your understanding. Dive into solved problems with step-by-step answers that offer clarity and insight. Explore a Test Bank filled with questions and answers for thorough preparation. Chapter solutions and the instructor manual provide invaluable support for educators and learners alike. Discover these textbook solutions available for Free Download, ensuring you have the tools needed to excel in your studies.

1. Graph the index of consumer sentiment, using data since 1965. Can you pick out the recessions of 1969-1970, 1973-1975, 1980, 1981-1982, 1990-1991, and 2001? Construct scatter plots relating the consumer sentiment index to the growth rates of real consumption expenditures and real consumption
7 Consumers typically pay a higher real interest rate to borrow than they receive when they lend (by making bank deposits, for example). Draw a consumer's budget line under the assumption that the real interest rate earned on funds lent, r" is lower than the real interest rate paid to borrow,
7 Consumers typically pay a higher real interest rate to borrow than they receive when they lend (by making bank deposits, for example). Draw a consumer's budget line under the assumption that the real interest rate earned on funds lent, r" is lower than the real interest rate paid to borrow,
6 Draw a budget line and indifference curves for a consumer who initially is a borrower. Be sure to indicate the no-borrowing, no-lending point and the optimal consumption point. Then show the effect on the budget line and the consumer's optimal consumption of an increase in the real interest rate.
5 "A permanent increase in government purchases has a larger effect than a temporary increase of the same amount." Use the saving-investment diagram to evaluate this statement, focusing on effects on consumption, investment, and the real interest rate for a fixed level of output. (Hint: The
4 Economists often argue that a temporary increase in government purchases-say, for military purposeswill crowd out private investment. Use the savinginvestment diagram to illustrate this point, explaining why the curve(s) shift. Does it matter whether the temporary increase in military spending
3a. Analyze the effects of a temporary increase in the price of oil (a temporary adverse supply shock) on current output, employment, the real wage, national saving, investment, and the real interest rate.Because the supply shock is temporary, you should assume that the expected future MPK and
2 A country loses much of its capital stock to a war.a. What effects should this event have on the country's current employment, output, and real wage?b. What effect will the loss of capital have on desired investment?c. The effects on desired national saving of the wartime losses are ambiguous.
1 Use the saving-investment diagram to analyze the effects of the following on na tional saving, investment, and the real interest rate. Explain your reasoning.a. Consumers become more future-oriented and thus decide to save more.b. The government announces a large, one-time bonus payment to
9 A consumer lives three periods, called the learning period, the working period, and the retirement period. Her income is 200 during the learning period, 800 during the working period, and 200 again during the retirement period. The consumer's initial assets are 300. The real interest rate is
8 A consumer has initial real wealth of 20, current real income of 90, and future real income of 1l0. The real interest rate is 10% per period.a. Find the consumer's PVLR.b. Write the equation for the consumer's budget constraint (using the given numerical values) and graph the budget line.
7 Suppose that the economywide expected future marginal product of capital is MPl(f = 20 - 0.02K, where K is the future capital stock. The depreciation rate of capital,d, is 20% per period. The current capital stock is 900 units of capital. The price of a unit of capital is 1 unit of output.
6 An economy has full-employment output of 6000. Government purchases, G, are 1200. Desired consumption and desired investment are Cd = 3600 - 2000r + 0.10Y, and J d = 1200 - 4000r, where Y is output and r is the real interest rate.a. Find an equation relating desired national saving, Sd, to r and
5 An economy has full-employment output of 9000, and government purchases are 2000. Desired consumption and desired investment are as follows:Real Interest Desired Desired Rate (%j Consumption Investment 2 6100 1500 3 6000 1400 4 5900 1300 5 5800 1200 6 5700 1100a. Why do desired consumption and
4 The Missing Link Chain-Link Fence Company is trying to determine how many cha in-link fabrica ting machines to buy for its factory. If we define a chain-link fence of some specified length to be equal to one unit of output, the price of a new fabricating machine is 60 units of output, and the
3 You have just taken a job that requires you to move to a new city. In relocating, you face the decision of whether to buy or rent a house. A suitable house costs $200,000 and you have saved enough for the down payment. The (nominal) mortgage interest rate is 10% per year, and you can also earn
2 Hula hoop fabricators cost $100 each. The Hi-Ho Hula Hoop Company is trying to decide how many of these machines to buy. HHHHC expects to produce the following number of hoops each year for each level of capital stock shown. Number of N umber of Hoops Fabricators Produced per Year 0 0 1 100 2 150
1 A consumer is making saving plans for this year and next. She knows that her real income after taxes will be $50,000 in both years. Any part of her income saved this year will earn a real interest rate of 10% between this year and next year. Currently, the consumer has no wealth (no money in the
10 Explain why the saving curve slopes upward and the investment curve slopes downward in the saving- investment diagram. Give two examples of changes that would shift the saving curve to the right, and two examples of changes that would shift the invest- ment curve to the right.
9 Give two equivalent ways of describing equilibrium in the goods market. Use a diagram to show how goods market equilibrium is attained.
6 What are the two components of the user cost of cap- 9 Give two equivalent ways of describing equilibrium ital? Explain why each is a cost of using a capital good.
5 What effect does a temporary increase in government purchases-for example, to fight a war-have on desired consumption and desired national saving, for a constant level of output? What is the effect on desired national saving of a lump-sum tax increase? Why is the effect of a lump-sum tax increase
4 Define the expected after-tax real interest rate. If the tax rate on interest income declines, what happens to the expected after-tax real interest rate?
3 Use the concepts of income effect and substitution effect to explain why the effect on desired saving of an increase in the expected real interest rate is potentially ambiguous.
3. Plot a graph of quarterly data for real CDP and fullemployment CDP from 1970 to the present. (In the FRED database, full-employment CDP is called Real Potential CDP.) Which variable is "smoother"? Can you pick out the dates of recessions (1953-1954, 1957-1958, 1960-1961, 1969-1970, 1973-1975,
2. Using monthly data from 1948 to the present, calculate and graph the total working-age population (called the civilian noninstitutional population), the number of employed workers, the number of unemployed workers, and the number of workers in the labor force. At the Web site of the Bureau of
1. Using the production function in Equation (3.2) and annual data for real CDP, the capital stock, and civilian employment from the sources in Table 3.1, calculate and graph U.s. total factor productivity for the period since 1948. Calculate and graph the growth rate of total factor productivity.
7 Self-employed workers in the United States must pay Social Security taxes equal to 12.4% of any income up to $94,200 in 2006. This income level of $94,200 is known as the "cap." Income in excess of the cap is not subject to Social Security tax, so self-employed workers with incomes exceeding
5 Suppose that under a new law all businesses must pay a tax equal to 6% of their sales revenue. Assume that this tax is not passed on to consumers. Instead, consumers pay the same prices after the tax is imposed as they did before. What is the effect of this tax on labor demand? If the labor
4 How would each of the following affect Helena Handbasket's supply of labor?a. The value of Helena's home triples in an unexpectedly hot real estate market.b. Originally an unskilled worker, Helena acquires skills that give her access to a higher-paying job. Assume that her preferences about
3 During the 1980s and 1990s the average rate of unemployment in Europe was high. Some economists claimed that this rate was in part the result of "real-wage rigidity," a situation in which unions kept real wages above their market-clearing levels.a. Accepting for the sake of argument that real
2 How would each of the following affect the current level of full-employment output? Explain.a. A large number of immigrants enter the country.b. Energy supplies become depleted.c. New teaching techniques improve the educational performance of high school seniors.d. A new law mandates the shutdown
1a. A technological breakthrough raises a country's total factor productivity A by 10%. Show how this change affects the graphs of both the production function relating output to capital and the production function relating output to labor.b. Show that a 10% increase in A also increases the MPK and
10 Consider an economy that initially has a labor force of 2000 workers. Of these workers, 1900 are employed and each works 40 hours per week. Ten units of output are produced by each hour of labor.a. What is the total number of hours worked per week in the economy? What is the total output per
9 You are given the following data on the unemployment rate and output. Year 1 2 Unemployment rate 8% 6% Output 950 1030 3 4 7% 5% 1033.5 1127.5a. Assume that the natural rate of unemployment is 6% and that (Y - Y)IY = 2(u - 11) . Find the fullemployment level of output in each year.b. Calculate
8 Use the data in Fig. 3.14 to calculate how many people become unemployed during a typical month. How many become employed? How many leave the labor force?
7 Consider an economy with 500 people in the labor force. At the beginning of every month, 5 people lose their jobs and remain unemployed for exactly one month; one month later, they find new jobs and become employed. In addition, on January 1 of each year, 20 people lose their jobs and remain
6 Suppose that the production function is Y = 9K".5�P5. With this production function, the marginal product of labor is MPN = 4.5Ko sN-()5 The capital stock is K = 25. The labor supply curve is NS = 100[(1 - 1)10]', where 10 is the real wage rate, 1 is the tax rate on labor income, and hence (1 -
5 Consider an economy in which the marginal product of labor MPN is MPN = 309 - 2N, where N is the amount of labor used. The amount of labor supplied, NS, is given by NS = 22 + 1210 + 2T, where 10 is the real wage and T is a lump-sum tax levied on individuals.a. Use the concepts of income effect
4 The marginal product of labor (measured in units of output) for a certain firm is MPN = A(100 - N), where A measures productivity and N is the number of labor hours used in production. The price of output is $2.00 per unit.a. If A = 1.0, what will be the demand for labor if the nominal wage is
3 Acme Widget, Inc., has the following production function. Number of Workers o 1 2 3 4 5 6 Number of Widgets Prod uced o 8 15 21 26 30 33a. Find the MPN for each level of employment.b. Acme can get $5 for each widget it produces. How many workers will it hire if the nominal wage is $38? If it is
2 An economy has the production function In the current period, K = 100 and N = 100.a. Graph the relationship between output and capital, holding labor constant at its current value. What is the MPK? Does the marginal productivity of capital diminish?b. Graph the relationship between output and
1 The following data give real GOP, Y, capital, K, and labor, N, for the U.s. economy in various years. �ar Y K N 1960 1970 1980 1990 2000 2502 3772 5162 7113 9817 2695 4044 5831 7809 10,392 65.8 78.7 99.3 118.8 136.9 Units and sources are the same as in Table 3.1. Assume that the production
15 What is Okun's law? If the unemployment rate increas- es by 2 percentage points between this year and next year, by how much will output change during the same period? Assume that the natural unemployment rate and full-employment output are constant.
8 Define full-employment output. How is full-employment output affected by an increase in labor supply? By a beneficial supply shock?
6 Use the concepts of income effect and substitution effect to explain why a temporary increase in the real wage increases the amount of labor supplied, but a permanent increase in the real wage may decrease the quantity of labor supplied.
4 Explain why the profit-maximizing level of employ- ment for a firm occurs when the marginal revenue prod- uct of labor equals the nominal wage. How can this profit-maximizing condition be expressed in real terms?
4. If the real interest rate were approximately constant, then in periods in which inflation is high, the nominal interest rate should be relatively high (because the nominal interest rate equals the real interest rate plus the inflation rate). Using annual data since 1948, graph the three-month
3. Graph the annual (December to December) CPI inflation rate and the annual (fourth quarter to fourth quarter) GOP deflator inflation rate since 1960 on the same figure. What are the conceptual differences between these two measures of infla tion? Judging from your graph, would you say that the
2. On the same figure, graph national saving and investment as fractions of real GOP, using quarterly U.s. data since 1947. (Note that national saving is called gross saving in the FRED database.) How does the behavior of these variables in the past ten years compare to their behavior in earlier
1. Graph the four main expenditure components of GOP, in real terms, since the first quarter of 1947. Also graph the expenditure components as a share of total real GOP. Do you see any significant trends?
4. Government saving is defined as T - (G+TR+INT), where G is government purchases. But suppose that we split government purchases into two parts: government consumption expenditures (GCE) and government investment (GI) and that we define a new version of government saving, which is T - (GCE +
3. Economists have tried to measure the GDPs of virtually all the world's nations. This problem asks you to think about some practical issues that arise in that effort.a. Before the fall of communism, the economies of the Soviet Union and Eastern Europe were centrally planned. One aspect of central
2. Consider a closed economy with a single telephone company, Calls-R-Us. The residents of the country make 2 million phone calls per year and pay $3 per phone call. One day a new phone company, Cheap- Call, enters the market and charges only $2 per phone call. All of the residents immediately stop
9 The GDP deflator in Econoland is 200 on January 1, 2005. The deflator rises to 242 by January 1, 2007, and to 266.2 by January 1, 2008.a. What is the annual rate of inflation over the two-year period between January 1, 2005, and January 1, 2007? In other words, what constant yearly rate of infla-
8 Hy Marks buys a one-year government bond on Janu- ary 1, 2006, for $500. He receives principal plus interest totaling $545 on January 1, 2007. Suppose that the CPI is 200 on January 1, 2006, and 214 on January 1, 2007. This increase in prices is more than Hy had anticipated; his guess was that
7 For the consumer price index values shown, calculate the rate of inflation in each year from 1930 to 1933. What is unusual about this period, relative to recent experience? Year CPI 1929 51.3 1930 1931 50.0 45.6 1932 40.9 1933 38.8
6 Consider an economy that produces only three types of fruit: apples, oranges, and bananas. In the base year (a few years ago), the production and price data were as follows: Fruit Apples Bananas Oranges Quantity 3,000 bags 6,000 bunches 8,000 bags Price $2 per bag $3 per bunch $4 per bag In the
5 You are given the following information about an economy: Gross private domestic investment = 40 Government purchases of goods and services = 30 Gross national product (GNP)=200 Current account balance =-20 Taxes=60 Government transfer payments to the domestic private sector 25 Interest payments
4 For each of the following transactions, determine the con- tribution to the current year's GDP. Explain the effects on the product, income, and expenditure accounts.a. On January 1, you purchase 10 gallons of gasoline at $2.80 per gallon. The gas station purchased the gaso- line the previous week
3 ABC Computer Company has a $20,000,000 factory in Silicon Valley. During the current year ABC builds $2,000,000 worth of computer components. ABC's costs are labor, $1,000,000; interest on debt, $100,000; and taxes, $200,000. ABC sells all its output to XYZ Supercomputer. Using ABC's components,
2 National income and product data are generally revised. What effects would the following revisions have on con- sumption, investment, government purchases, net exports, and GDP?a. It is discovered that consumers bought $6 billion more furniture than previously thought. This furni- ture was
1 After a boat rescues everyone else from Gilligan's Island, the Professor and Gilligan remain behind, afraid of get- ting shipwrecked again with the same bunch of people.. The Professor grows coconuts and catches fish. Last year he harvested 1000 coconuts and caught 500 fish. He values one fish as
9. Describe how the CPI and CPI inflation are calculated. What are some reasons that CPI inflation may over- state true inflation?
8. For the purposes of assessing an economy's growth performance, which is the more important statistic: real GDP or nominal GDP? Why?
7. What is national wealth, and why is it important? How is national wealth linked to national saving?
3 What is the difference between intermediate and final goods and services? In which of these categories do capital goods, such as factories and machines, fall? Why is the distinction between intermediate and final goods important for measuring GDP?
3. Using data on the consumer price index (CPI) for all urban consumers, calculate and graph the annual U.S. inflation rate (the percentage change in the price index, December to December) for each year since 1948. In which periods within the postwar era did the United States experience the most
2. Graph the behavior of the civilian unemployment rate from 1961 until the present using monthly data. Can you see the periods of recession that occurred in 1969-1970, 1973-1975, 1980, 1981-1982, and 1990-1991? In terms of the unemployment rate, how does the 2001 recession compare in severity with
1.a. Calculate the total percentage growth in average labor productivity in the U.S. economy for the 1950s, 1960s, 1970s, 1980s, and 1990s. Define average labor produc- tivity for any year as real gross domestic product in the last quarter of the year divided by civilian employment in the last
5. In 2002, President George W. Bush imposed tariffs on certain types of imported steel. He argued that for- eign steel producers were dumping their steel on the U.S. market at low prices. The foreign steel producers were able to sell steel cheaply because they received subsidies from their
4. Which of the following statements are positive in nature and which are normative?a. A tax cut will raise interest rates.b. A reduction in the payroll tax would primarily ben- efit poor and middle-class workers.c. Payroll taxes are too high.d. A cut in the payroll tax would improve the Presi-
2. Prices were much higher in the United States in 2006 than in 1890. Does this fact mean that people were eco- nomically better off in 1890? Why or why not?
2. In a recent issue of the Survey of Current Business, find the data section entitled "Selected NIPA Tables." In Table 1.1.5, "Gross Domestic Product," find data on gross domestic product (a measure of total output), exports, and imports. In Table 3.2, "Federal Government Current Receipts and
1 Here are some macroeconomic data for the country of Oz for the years 2005 and 2006. Output Employment Unemployed Total labor force Prices 2005 12,000 tons of potatoes 1,000 workers 100 workers 1,100 workers 2 shekels/ton 2006 14,300 tons of potatoes 1,100 workers 50 workers 1,150 workers 2.5
Historically, when has the Federal government been most likely to run budget deficits? What has been the recent experience?
Consider the effect of a financial crisis using the business cycle model with financial frictions in the case where the central bank does not follow the monetary policy rule (as described in panel(a) in Figure 22.8). In particular, assume that the policy interest rate does not decrease as inflation
Consider the effect of a financial crisis in a developing country using the business cycle model with financial friction. Compare the effects on output, inflation, and unemployment in a developing country to the effects on the same variables in a developed country.
Suppose the Obama administration is forced to increase taxes to pay for the cost of the health care reform in the United States.Describe the effect of such a policy according to the three business cycle models if this increase in taxes is fully anticipated by economic agents.
Speeches made by Federal Reserve officials are an integral part of the Fed’s management of expectations strategy. In a speech made in November 2002, then Fed Governor, Ben Bernanke, stated that the government might cut taxes, increase the federal deficit, and issue bonds that the Fed would buy by
For each of the following cases, determine which would be the preferred macroeconomic model to analyze business fluctuations.a) Most wages are the result of collective bargaining and are therefore quite rigid. In addition, expectations are based mostly on past data.b) Few prices are rigid, and
According to the Wall Street Journal (March 31, 2010), the Conference Board’s gauge of consumer confidence increased by around 100% between February 2009 and February 2010 in the United States. Use the New Keynesian model to describe the effects on output and inflation depending on whether the
Using the graphic representation of the new Keynesian model, describe the effects of an unanticipated negative demand shock (label this equilibrium as point 2). Compare this to an anticipated negative demand shock (label this equilibrium as point 3).
The following is an excerpt from a BLS report(www.bls.gov/opub/ils/pdf/opbils74.pdf) published in April 2009: “Among the marginally attached, the number of discouraged workers rose to 717,000 in the first quarter of 2009, a 70-percent increase from the first quarter of 2008.” Do you think this
The following graph is based on quarterly data on unemployment and real output growth in the United States between 2006(q1) and 2010(q1). Is this data consistent with the real business cycle theory hypothesis about the relationship between output and unemployment?
Assume the following production function:. The capital stock and output are measured in trillions and the labor stock is measured in millions of people.Yt = AK0.4 t L0.6 ta) Using the value of output and the capital and labor stocks, calculate the Solow residual and its growth rate for each period.
What role do financial frictions play in starting or intensifying recessions?Real Business Cycle Model
What are financial frictions and how do they affect the IS curve?
How do the traditional Keynesian, new Keynesian, and real business cycle models differ in their analysis of the effects of antiinflation policy?Business Cycle Models with Financial Frictions
How do the traditional Keynesian, new Keynesian, and real business cycle models differ in their analysis of the effects of expansionary policy?
Compare the traditional Keynesian, new Keynesian, and real business cycle models in terms of expectations, price flexibility, and potential sources of business cycle fluctuations.
What objections to the real business cycle model have been raised?REVIEW QUESTIONS All questions are available in at www.myeconlab.com.New Keynesian Model
What are the key ideas of the real business cycle model? How does it explain business cycle fluctuations?
Comment on the impact on the Fed’s credibility of the appointment of a majority of governors reluctant to increase interest rates to fight inflation for fears of causing too much unemployment in the short run.
Immediately after the central bank of New Zealand adopted inflation targeting in 1989, economic growth was low and unemployment increased for some time (until 1992) but economic growth resumed and unemployment decreased later. Comment on the relationship between inflation targeting and economic
Suppose the statistical office of a country does a poor job in measuring inflation and reports an annualized inflation rate of 4% for a few months, while the true increase in the price level has been around 2.5%. What would happen to the central bank’s credibility if it is engaged in inflation
As part of its response to the subprime financial crisis, the Fed lowered the federal funds rate target to nearly zero by December 2008, a considerable easing of monetary policy.However, survey-based measures of five to ten year inflation expectations remained low until February 2010. Comment on
Central banks that engage in inflation targeting usually announce the inflation target and time period for which that target will be relevant. In addition, central bank officials are held accountable for their actions (e.g., they could be fired if the target is not reached), which is also public
In some countries the president chooses the head of the central bank. The same president can fire the head of the central bank and replace him or her with another director any time. Explain the implications of such a situation for the conduct of monetary policy. Do you think the central bank will
Which are the benefits and costs of sticking to a set of rules in each of the following cases?How do each of these situations relate to the conduct of economic policy?a) Going on a dietb) Raising children

Showing 3400 - 3500 of 5010

First
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
Last

Macroeconomics Policy And Practice 1st Edition Frederic S. Mishkin - Solutions

Step by Step Answers