Foundations of Macroeconomics 8th edition Robin Bade, Michael Parkin - Solutions

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If you base your expectations of inflation on what has happened in the past, what kind of expectations are you demonstrating?
What three assumptions turn the equation of exchange into the quantity theory of money?
What does the quantity theory predict will happen to inflation if the money supply rises 10 percent?
What are two reasons why the quantity theory of money is problematic?
Frederic Bastiat wrote, "When goods do not cross borders, soldiers will." Discuss. (Religious)
Frederic Bastiat wrote: "It seems to me that this is theoretically right, for whatever the question under discussion-whether religious, philosophical, political, or economic; whether it concerns prosperity, morality, equality, right, justice, progress, responsibility, cooperation, property, labor,
Which countries are the two greatest trading partners for the United States? With which countries is trade rapidly increasing?
How does considering trade in the broader cultural context change one’s analysis?
Frederic Bastiat wrote that "government is the great fiction through which everybody endeavors to live at the expense of everybody else." Is this a correct way to understand the fight about tariffs? (Austrian)
On average, women are paid less than men. What are the likely reasons for that? Should the government intervene with a law that requires firms to pay equal wages to those with comparable skills? (Feminist)
About 10,000 tickets for a Men's Final Four college basketball games at the St. Louis Edward Jones Dome are to be sold in a lottery system for between $110 and $130 apiece. Typically applications exceed available tickets by 100,000. A year before the game, scalpers already offer to sell tickets for
Biological evolution occurs very slowly; cultural evolution occurs less slowly, but still slowly compared to institutional and market evolution.a. Give some examples of these observations about the different speeds of adjustment.b. Explain the relevance of these observations to economic reasoning.
Most religions argue that individuals should not fully exploit market positions. For example, the text makes it sound as if allowing prices to rise to whatever level clears the market is the best policy to follow. That means that if, for example, someone were stranded in the desert and were willing
Rent control today looks far different from the rent freeze New York City enacted after World War II. Most rent controls today simply restrict annual rent increases and guarantee landlords a "fair return" in return for maintaining their properties.a. How would the economic effects of today's rent
Kennesaw University Professor Frank A. Adams III and Auburn University Professors A. H. Barnett and David L. Kaserman recently estimated the effect of legalizing the sale of cadaverous organs, which currently are in shortage at zero price. What are the effects of the following two possibilities on
In the early 2000s a drought in Australia's rice-growing regions raised the world price of rice from 12 to 24 cents a pound. Demonstrate graphically the effect of the drought on equilibrium price and quantity in the world rice market.
Suppose the demand for movies is represented by QD = 15 − 4P, and the supply of movies is represented by QS = 4P − 1. Determine if each of the following is a price floor, price ceiling, or neither. In each case, determine the shortage or surplus.a. P = $3b. P = $1.50c. P = $2.25d. P = $2.50
Nobel Prize-winning economist Bill Vickrey suggested that automobile insurance should be paid as a tax on gas, rather than as a fixed fee per year per car. How would that change likely affect the number of automobiles that individuals own?
Taxes can be levied on consumers or producers.a. Demonstrate the effect of a $4 per-unit tax on suppliers on equilibrium price and quantity.b. Demonstrate the effect of a $4 per-unit tax on consumers on equilibrium price and quantity.c. How does the impact on equilibrium prices (paid by consumers
In Japan, doctors prescribe drugs and sell the drugs to the patient, receiving a 25 percent markup. In the United States, doctors prescribe drugs, but, generally, they do not sell them.a. Which country prescribes the most drugs? Why?b. How would a plan to limit the price of old drugs, but not new
Quotas are quantity restrictions on imported goods. Demonstrate the effect of a quota on the price of imported goods.
The city of Pawnee issues a fixed number of fishing licenses each year.a. Using the accompanying graph, demonstrate the effect of a limit of 100 fishing licenses at a cost of $20 per license.b. Is there excess supply or demand for licenses? Label the excess supply or demand on the graph.c. What is
Will a country do better importing or exporting a good for which it has a comparative advantage? Why?
Evaluate the following statement: Comparative advantage will benefit all people because everyone has a comparative advantage in something. Therefore, trade based on comparative advantage should be facilitated without undue government intervention. (Austrian)
Widgetland has 60 workers. Each worker can produce 4 widgets or 4 wadgets. Each resident in Widgetland currently consumes 2 widgets and 2 wadgets. Wadgetland also has 60 workers. Each can produce 3 widgets or 12 wadgets. Wadgetland’s residents each consume 1 widget and 8 wadgets. Is there a basis
Global outsourcing has cost the U.S. economy more than 3 million jobs since 2001, three-quarters of which have been in the manufacturing industry.a. How does outsourcing affect the bargaining power of U.S. workers and the bargaining power of U.S. employers?b. What will it likely do to the overall
Suppose that two countries, Machineland and Farmland, have the following production possibility curves:a. Explain how these two countries can move from points A and C, where they currently are, to points B and D.b. If possible, state by how much total production for the two countries has risen.c.
The normal textbook presentation of international trade does not include the international trader. How does including the trader in the model provide a different view of trade than one would get from a model that did not include the trader?
In David Ricardo’s original example of comparative advantage in his Principles of Political Economy, written in 1817, Portugal possesses an absolute advantage in both the production of cloth and the production of wine. But England has a comparative advantage in the production of cloth, while
How important is international trade in terms of its relationship to total U.S. production? What does this suggest about the importance of trade policies relative to other countries?
One of the basic economic laws is the “law of one price.” Does it imply that the U.S. wage level will have to equal the Chinese wage level if free trade is allowed? Why or why not?
One way to equalize imports and exports would be to pass a law that (1) in order to import, importers must provide a certificate certifying that an equal value of exports had occurred; and (2) in order to export, exporters must provide a certificate certifying that an equal value of imports had
Would you expect the resource curse to improve or worsen the distribution of income in a country?
Using the graph below, indicate domestic production and net imports.a. Would the United States want to raise or lower the world supply of the good? Why? b. How might that happen? Sw Pw Quantity Price
How does a depreciation of a currency change the price of imports and exports? Explain using the U.S. dollar and the Chinese yuan.
How do inherent comparative advantages differ from transferable comparative advantages?
How has globalization made the rich richer and poor poorer in the United States?
True or false? Wages in China are lower than those in the United States. This means that China has a comparative advantage in everything. Explain your answer.
What are four reasons why economists’ and laypeople’s view of trade differ?
Country A can produce, at most, 40 olives or 20 pickles, or some combination of olives and pickles such as the 20 olives and 10 pickles it is currently producing. Country B can produce, at most, 120 olives or 60 pickles, or some combination of olives and pickles such as the 100 olives and 50
What are some reasons why a small country might not get the gains of trade?
Assuming a law such as the one suggested in question 4 were passed in the mid-1990s in the U.S., what subgroups of U.S. workers would have likely been helped, and what subgroups of U.S. workers would have likely been hurt?
In the Wealth of Nations Adam Smith claimed, “Servants, labourers and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconvenience to the whole. No society can surely be
Economics is often referred to as the study of choice.a. In U.S. history, have men and women been equally free to choose the amount of education they receive even within the same family?b. What other areas can you see where men and women have not been equally free to choose?c. If you agree that men
In the late 19th century, Washington Gladden said, "He who battles for the Christianization of society, will find their strongest foe in the field of economics. Economics is indeed the dismal science because of the selfishness of its maxims and the inhumanity of its conclusions."a. Evaluate this
Oftentimes, to be considered for a job, you have to know someone in the firm. What does this observation tell you about the wage paid for that job?
In a centrally planned economy, how might central planners estimate supply or demand? (Austrian)
Why are international organizations limited in their effectiveness?
What are two organizations that countries can use to coordinate economic relations and reduce trade barriers?
Name two international organizations that countries have developed to coordinate economic actions.
What are the two largest categories of state and local government expenditures?
List the three major forms of business.a. What form is most common?b. What form accounts for the largest proportion of sales?
Why is entrepreneurship a central part of any business?
Go to a store in your community.a. Ask what limitations the owners faced in starting their business.b. Were these limitations necessary?c. Should there have been more or fewer limitations?d. Under what heading of reasons for government intervention would you put each of the limitations?e. Ask what
The text discusses consumer sovereignty and suggests that it guides the market choices.a. Is consumer sovereignty a myth or reality in today's consumer culture?b. Do consumers "direct" the economy as suggested by the text, or has invention become the mother of necessity, as Thorstein Veblen once
Tom Rollins founded a company called Teaching Co. He taped lectures at the top universities, packaged the lectures on DVD, and sold them for between $20 and $230 per series.a. Discuss whether such an idea could be expanded to include college courses that one could take at home.b. What are the
This chapter emphasized the importance of the relationship between how the economic system is organized and value systems. Knowing that how I raise my child will greatly shape how he or she will ultimately fit into the social and economic process, should I raise my child to be selfless,
One of the specific problems socialist economies had was keeping up with capitalist countries technologically.a. Can you think of any reason inherent in a centrally planned economy that would make innovation difficult?b. Can you think of any reason inherent in a capitalist economy that would foster
In economics, a household is defined as a group of individuals making joint decisions as though acting as one person.a. How do you think decisions are actually made about things like consumption and allocation of time within the household?b. Does bargaining take place?c. If so, what gives an
In his The Social Contract, Jean-Jacques Rousseau argued that "no State has ever been founded without a religious basis [but] the law of Christianity at bottom does more harm by weakening than good by strengthening the constitution of the State." What does he mean by that, and is he correct?
In a centrally planned socialist economy, what is the central coordinating mechanism?
Friedrich Hayek, the man quoted at the start of the chapter, is an Austrian economist who won a Nobel Prize in economics. He argued that government intervention is difficult to contain. Suppose central planners have decided to financially support all children with food vouchers, free day care, and
In a market economy, what is the central coordinating mechanism?
State the law of one price. How is it related to the movement of manufacturing out of the United States?
Suppose the United States and Japan have the following production possibility tables:a. Draw each country€™s production possibility curve.b. In what good does the United States have a comparative advantage?c. Is there a possible trade that benefits both countries?d. Demonstrate your
State what type of graph or chart you might use to show the following real-world data:a. Interest rates from 1929 to 2013.b. Median income levels of various ethnic groups in the United States.c. Total federal expenditures by selected categories.d. Total costs of producing between 100 and 800 shoes.
If neither of two countries has a comparative advantage in either of two goods, what are the gains from trade?
A country has the following production possibility table:a. Draw the country€™s production possibility curve.b. What€™s happening to the trade-off between food and clothing?c. Say the country gets better at the production of food. What will happen to the production possibility
Say that the hourly cost to employers per German industrial worker was $44. The hourly cost to employers per U.S. industrial worker was $34, while the average cost per Taiwanese industrial worker was $20.a. Give three reasons why firms produce in Germany rather than in a lower-wage country.b.
Writing in 1776, Adam Smith was concerned with not only the profound effects of the division of labor on productivity (as your textbook notes) but also its stultifying effect on the human capacity. In The Wealth of Nations, Smith warned that performing a few simple operations over and over again
Thorstein Veblen wrote that vested interests are those seeking "something for nothing." In this chapter, you learned how technology shapes the economy's production possibilities over time so that a country becomes increasingly good at producing a subset of goods.a. In what ways have vested
In two hours Just Born Candies can produce 30,000 Peeps or 90,000 Mike and Ikes or any combination in between.a. What is the trade-off between Peeps and Mike and Ikes?b. Draw a production possibility curve that reflects this trade-off.c. Identify and label three points: efficient production,
It has been said that “capitalism robs us of our sexuality and sells it back to us.”a. Does sex sell?b. Is sex used to sell goods from Land Rovers to tissue paper?c. Who, if anyone, is exploited in the use of sex to sell commodities?d. Are both men and women exploited in the same ways?
Design a grade production possibility table and curve that demonstrates a rising trade-off as the grade in each subject rises.
Research shows that after-school jobs are highly correlated with decreases in grade point averages. Those who work 1 to 10 hours get a 3.0 GPA and those who work 21 hours or more have a 2.7 GPA. Higher GPAs are, however, highly correlated with higher lifetime earnings. Assume that a person earns
The text makes it look as if maximizing output is the goal of society.a. Is maximizing output the goal of society?b. If the country is a Christian country, should it be?c. If not, what should it be? (Religious)
Is it possible to use objective economic analysis as a basis for government planning? (Austrian)
Why might government be less capable than the market to do good? (Austrian)
State whether the following statements belong in positive economics, normative economics, or the art of economics.a. In a market, when quantity supplied exceeds quantity demanded, price tends to fall.b. When determining tax rates, the government should take into account the income needs of
Tyler Cowen, an economist at George Mason University, presents an interesting case that pits the market against legal and social forces. The case involves payola-the payment of money to disk jockeys for playing a songwriter's songs. He reports that Chuck Berry was having a hard time getting his
About 100,000 individuals in the United States are waiting for organ transplants, and at an appropriate price many individuals would be willing to supply organs. Given those facts, should human organs be allowed to be bought and sold?
Say that divorce is made illegal unless both parties agree to remarry at the time of the divorce. If such a law were enacted, would you expect a divorced-person market for remarriage to develop? On average would you expect husbands or wives to have a higher price? Why?
Radical economists believe that all of economics, like all theorizing or storytelling, is value-laden. Theories and stories reflect the values of those who compose them and tell them. For instance, radicals offer a different analysis than most economists of how capitalism works and what ought to be
Economics is about strategic thinking, and the strategies can get very complicated. Suppose Marge kisses Mike and asks whether he liked it. She'd like Mike to answer "yes" and she'd like that answer to be truthful. But Mike knows that, and if he likes Marge, he may well say that he liked the kiss
In October of 2004, the supply of flu vaccine fell by over 50 percent when a major producer of the vaccine was shut down. The result was that the vaccine had to be rationed, with a priority schedule established: young children, people with weakened immunity, those over 65, etc., taking priority.a.
Economic institutions are “habits of thought” that organize society.a. In what way might patriarchy be an institution and how might it influence the labor market?b. Does the free market or patriarchy better explain why 98 percent of secretaries are women and 98 percent of automobile mechanics
In “Rational Choice with Passion: Virtue in a Model of Rational Addiction,” Andrew M. Yuengert of Pepperdine University argues that there is a conflict between reason and passion.a. What might that conflict be?b. What implications does it have for applying the economic model? (Religious)
To fight unemployment and close a recessionary gap, the Fed ______. A. Stimulates aggregate demand by lowering the federal funds rate, which increases the quantity of money B. Stimulates aggregate supply by lowering the federal funds rate, which increases potential GDP C. Increase
The Fed fights inflation by _______. A. Lowering the federal funds rate, which lowers interest rates and decreases aggregate demand B. Raising the federal funds rate, which raises interest rates and decreases aggregate demand C. Decreasing the monetary base, which raises the interest
The Fed’s monetary policy instrument is the ________. A. Inflation rate B. Federal funds rate C. Long-term interest rate D. Monetary base
The Fed’s operational goals include ________. A. A core inflation rate between 1 and 2 percent a year and an output gap as small as possible B. An economic growth rate of 3 percent a year and an unemployment rate equal to the natural unemployment rate C. A strong U.S. dollar on
The Fed’s “dual mandate” is to achieve ________. A. A government budget surplus and low interest rates B. Low inflation and maximum employment C. A stable quantity of money and stable prices D. Zero unemployment and a stable means of payment
What is the problem that might arise if the Fed keeps the interest rate too low for too long?Despite U.S. job creation exceeding forecasts in July, experts believe that with weak output growth, the Fed will not raise the interest rate until after the U.S. presidential election.
Explain why the Fed might be cautious about raising interest rates despite strong jobs growth. Despite U.S. job creation exceeding forecasts in July, experts believe that with weak output growth, the Fed will not raise the interest rate until after the U.S. presidential election.
Suppose that inflation is rising toward 5 percent a year, and the Fed, Congress, and the White House are discussing ways of containing inflation without damaging employment and output. The President wants to cut aggregate demand but to do so in a way that will give the best chance of keeping
What happens in Freezone if the central bank lowers the federal funds rate? Do you recommend that the central bank lower the interest rate? Why? Figure 17.3 shows the aggregate demand curve, AD, and the short-run aggregate supply curve, AS, in the economy of Freezone. Potential GDP is $300
What happens in Free zone if the central bank lowers the federal funds rate? Do you recommend that the central bank lower the interest rate? Why? Figure 17.3 shows the aggregate demand curve, AD, and the short-run aggregate supply curve, AS, in the economy of Freezone. Potential GDP is $300
What do you predict will happen in Freezone if the central bank takes no monetary policy actions? What monetary policy action would you advise the central bank to take and what do you predict will be the effect of that action?
What are the price level and real GDP? Does Free zone have an unemployment problem or an inflation problem? Why?Figure 17.3 shows the aggregate demand curve, AD, and the short-run aggregate supply curve, AS, in the economy of Free zone. Potential GDP is $300 billion. FIGURE 17.3 Chapter Checkpoint
Compare and contrast the Fed’s monetary policy response to the surge in desired reserves and currency holdings in the Great Depression and the 2008–2009 recession.

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Foundations of Macroeconomics 8th edition Robin Bade, Michael Parkin - Solutions

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