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foundations macroeconomics

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

Blizzard of 2016 ranks 4th among worst winter storms of past 100 yearsMillions of Americans were digging out after the Blizzard of 2016 blanketed 434,000 square miles of the mid-Atlantic and parts of the Northeast with several feet of snow. The storm, which disrupted the lives of 103 million
U.S. potential GDP is the value of the goods and services produced in the United States ________.A. In the reference base yearB. When the U.S. unemployment rate is zeroC. When the U.S. economy is at full employmentD. When the U.S. inflation rate is zero
The demand for labor curve shows the relationship between _________.A. The quantity of labor employed and firms’ profitsB. All households’ willingness to work and the real wage rateC. The quantity of labor businesses are willing to hire and the real wage rate D. The labor force and the
The supply of labor is the relationship between __________.A. The quantity of labor supplied and leisure time forgoneB. the real wage rate and the quantity of labor suppliedC. Firms’ willingness to supply jobs and the real wage rateD. The labor force participation rate and the real wage rate
Households’ labor supply decisions are influenced by all of the following except _______.A. the opportunity cost of taking leisure and not workingB. the after-tax wage rateC. unemployment benefitsD. the number of full-time jobs available
The full-employment quantity of labor _______.A. increases if labor becomes more productiveB. cannot increase because everyone who wants a job has oneC. increases as the economy moves along its production functionD. decreases if the income tax rates decrease
The natural unemployment rate _______.A. increases if unemployment benefits become more generousB. increases in a recessionC. increases as the average age of the labor force risesD. decreases as firms outsource manufacturing jobs
Job rationing ________.A. increases the natural unemployment rateB. has no effect on the natural unemployment rateC. increases labor turnover as firms compete for high quality laborD. decreases the demand for labor, which lowers the real wage rate
An efficiency wage results in all of the following except _________.A. a decrease in the rate of labor turnoverB. an increase in the full-employment quantity of laborC. greater work effortD. an increase in the cost of monitoring work effort
Explain why sustained growth of real GDP per person can transform a poor country into a wealthy one.
In 2015, India’s real GDP grew by 7.3 percent a year and its population grew by 1.3 percent a year. If these growth rates are sustained, in what years woulda. Real GDP be twice what it was in 2015?b. Real GDP per person be twice what it was in 2015?
Describe how potential GDP per person has grown since 1960.
Explain how saving and investment in capital change labor productivity. Why do diminishing returns arise? Provide an example of diminishing returns. Use a graph of the productivity curve to illustrate your answer.
Explain the link between labor hours, labor productivity, and real GDP.
Which of the events increase potential GDP and which decrease it?
Which of the events raise the real wage rate and which lower it?Use the following list of events, which occur in the United States one at a time, to work this Problem.Dell introduces a new supercomputer that everyone can afford.A major hurricane hits Florida.More high school graduates go to
Which of the events increase the equilibrium quantity of labor and which decrease it?Use the following list of events, which occur in the United States one at a time, to work this Problem.Dell introduces a new supercomputer that everyone can afford.A major hurricane hits Florida.More high school
Sort the items into four groups: those that change the production function, those that change the demand for labor, those that change the supply of labor, and those that do not change the production function, the demand for labor, or the supply of labor. Say in which direction any changes occur.Use
When the price level is rising at ______ and the real interest rate is 1 percent a year, the nominal interest rate is 3 percent a year.A. 4 percent a yearB. 3 percent a yearC. 2 percent a yearD. 1 percent a year
When the CPI increases from 200 in 2016 to 210 in 2017 and the nominal wage rate is constant at $10 an hour, the real wage rate ______.A. increases by 10 percentB. increases to $15 an hourC. decreases by 5 percentD. is $10 an hour
If nominal GDP increases by 5 percent a year and the GDP price index rises by 2 percent a year, then real GDP increases by ________.A. 7 percent a yearB. 3 percent a yearC. 2.5 percent a yearD. 10 percent a year
Of the alternative measures of the price level, _________ overcomes the bias of the CPI and is a better measure of the cost of living because it _________.A. GDP price index; uses a current basketB. PCEPI; uses a current basket of all consumption goodsC. PCEPI excluding food and energy; is less
The CPI bias arises from all of the following items except ________.A. the introduction of new goods and servicesB. the improved quality of goodsC. the goods and services bought by poor peopleD. consumers’ responses to price changes
When the price level_______, the inflation rate ______.A. rises rapidly; increasesB. rises rapidly; is highC. falls; is zeroD. rises slowly; falls
The BLS reported that the CPI in July 2010 was 226. This news tells you that _______.A. consumer prices during July were 226 percent higher than they were during the base yearB. the CPI inflation rate in July was 26 percent a yearC. consumer prices rose by 26 percent during the month of JulyD. the
The CPI measures the average prices paid by __________ for _________.A. urban consumers; a fixed basket of consumption goods and servicesB. urban consumers; the average basket of goods and services they buyC. all consumers; housing, transportation, and foodD. everyone who earns an income; the
To maintain this real interest rate, how must the nominal interest rate change if the inflation rate falls to 4.5 percent a year?Brazil keeps interest rates on hold Brazil’s inflation rate climbed to 10.7 percent at the end of 2015 and the country’s Monetary Policy Committee kept its benchmark
Calculate the real interest rate in Brazil?Brazil keeps interest rates on hold Brazil’s inflation rate climbed to 10.7 percent at the end of 2015 and the country’s Monetary Policy Committee kept its benchmark interest rate at 14.25 percent.
Imagine that you are given $1,000 to spend and told that you must spend it all buying items from a Sears catalog. But you do have a choice of catalog. You may select from the 1903 catalog or from Sears.com today. You will pay the prices quoted in the catalog that you choose. Which catalog will you
In 1988, the average wage rate was $9.45 an hour and in 2008 the average wage rate was $18.00 an hour. The CPI in 1988 was 118.3 and in 2008 it was 215.3. Which real wage rate is higher?
The table shows the quantities of the goods that Harry bought and the prices he paid during two consecutive weeks. Harry€™s CPI market basket contains the goods he bought in Week 1. Calculate Harry€™s CPI in Week 2. What was his inflation rate in Week 2? Week I Price Week 2
The people on Coral Island buy only juice and cloth. The CPI market basket contains the quantities bought in 2016. The average household spent $60 on juice and $30 on cloth in 2016 when the price of juice was $2 a bottle and the price of cloth was $5 a yard. In the current year, 2017, juice is $4 a
Pete is a student who spends 10 percent of his expenditure on books and supplies, 30 percent on tuition, 30 percent on rent, 10 percent on food and drink, 10 percent on transportation, and the rest on clothing. The price index for each item was 100 in 2006. The table shows the prices in 2016. What
Compare the method used by Box-Office Mojo to calculate real box-office receipts with the method to calculate the real price of a postage stamp. Compare and contrast the real variables that each method calculates.
Read Eye on Box Office Hits on p. 184 and using BLS data for the CPI in 1982 and 1997, determine which movie had the greater real box office revenues, E.T.: The Extra-Terrestrial, which earned $435 million in 1982 or Titanic, which earned $601 million in 1997.
By what percentage did the prices of other items in the CPI basket change?Falling oil prices pushed the CPI down 0.1 percent in December 2015. Energy prices fell 2.4 percent and the price of gasoline fell by 3.9 percent.
Given the further information that the weight on energy prices in the CPI is 8 percent, by how much would the CPI have changed in December 2015 if energy prices had not changed?Falling oil prices pushed the CPI down 0.1 percent in December 2015. Energy prices fell 2.4 percent and the price of
In 2015, Annie, an 80-year-old, is telling her granddaughter Mary about the good old days. Annie says that in 1935, you could buy a nice house for $15,000 and a jacket for $5. Mary says that in 2015 such a house costs $220,000 and such a jacket costs $70. The CPI in 1935 was 16.7 and in 2015 it was
Calculate the unemployment rate and the labor force participation rate, and compare these rates with those in the United States in 2016.Use the following information gathered by a BLS labor market survey of four households to work the following Problem.Household 1: Candy worked 20 hours last week
Real GDP per person is not an accurate measure of the standard of living because it ______.A. Includes the goods and services that governments buyB. Omits the goods and services that people produce for themselvesC. Includes goods and services bought by firmsD. Omits the goods and services imported
The following statements about the business cycle are correct except ______.A. It is a regular predictable cycle in real GDP around potential GDPB. From the peak to the trough, the economy is in a recessionC. From the trough to the peak, the economy is in an expansionD. It is a periodic movement in
When using the income approach to measure GDP at market prices, in addition to summing all factor incomes it is necessary to ________.A. Subtract depreciation because profit is not reported as net profitB. Add depreciation because capital depreciates when goods are manufacturedC. Add indirect taxes
The expenditure approach to measuring U.S. GDP equals _________.A. The sum of U.S. consumption expenditure and U.S. investmentB. U.S. government expenditure minus taxes paid by AmericansC. All expenditure on final goods and services produced in the United States in a given time periodD. All
Saving equals ________.A. Income minus consumption expenditure minus net taxesB. Income minus net taxesC. Total income minus total expenditureD. Net taxes minus government expenditure
Calculate nominal GDP in 2016 and 2017.Use the table, which shows an economy€™s total production and the prices of the final goods it produced in 2016 and 2017. GDP data for 2016 Quantity Item Price $2 Fish 00 Berries 50 $6 GDP data for 2017 Quantity Price Item Fish 75 $5 $10 Berries 65
In the market for cell phones, which of the following events increases the supply of cell phones?A. New technology lowers the cost of making a cell phoneB. Rise in the price of an e-book reader (a substitute in production)C. An increase in people’s incomesD. A rise in the wage rate paid to
In the countries to which the immigrants return, explain how employment, the real wage rate, and potential GDP would change.Suppose that the United States cracks down on illegal immigrants and returns millions of workers to their home countries.
Explain how the U.S. real wage rate, U.S. employment, and U.S. potential GDP would change.Suppose that the United States cracks down on illegal immigrants and returns millions of workers to their home countries.
When floods wiped out the banana crop in Central America, the equilibrium price of bananas ________ and the equilibrium quantity of bananas ________.A. Rose; increasedB. Rose; decreasedC. Fell; increasedD. Fell; decreased
A decrease in the demand for chocolate with no change in supply will create a ________ of chocolate at today’s price, but gradually the price will ________.A. Surplus; fallB. Shortage; fallC. Surplus; riseD. Shortage; rise
A minimum wage set above the market equilibrium wage rate ________.A. Increases both employment and the quantity of labor suppliedB. Decreases unemployment and raises the wage rate of those employedC. Raises the wage rate of those employed and increases the supply of jobsD. Increases unemployment
A rent ceiling creates a ________ of housing if it ________ the equilibrium rent.A. Surplus; is less thanB. Shortage; is less thanC. Surplus; exceedsD. Shortage; exceeds
Figure 5.1 shows the flows of income and expenditure in an economy. In 2013, U was $2 trillion, V was $1.5 trillion, W was $7 trillion, J was $1.5 trillion, and Z was zero. Calculate total income, net taxes, and GDP. FIGURE 5.1 Chapter Checkpoint Problem I Financial wmarkets House- holds
Calculate nominal GDP in 2016 and 2017.An economy produces only funand food. The table shows the prices and the quantities of fun and food producedin 2016 and 2017. The base year is 2016. GDP data for 2016 Quantity Price $2 Item Fun 40 Food 60 $3 GDP data for 2017 Quantity Price Item Fun 35 $3 Food
Calculate the percentage increase in real GDP in 2017.An economy produces only fun and food. The table shows the prices and the quantities of fun and food produced in 2016 and 2017. The base year is 2016. GDP data for 2016 Quantity Price $2 Item Fun 40 Food 60 $3 GDP data for 2017 Quantity Price
If potential GDP was $270 in 2016 and it grew by 1 percent in 2017, in which phase of the business cycle is the economy? Explain.An economy produces only fun and food. The table shows the prices and the quantities of fun and food produced in 2016 and 2017. The base year is 2016. GDP data for 2016
Which component of GDP changed because retail sales increased? Which component of GDP changed because business inventories increased?The Commerce Department reported that in December 2015, retail sales rose by 0.2, net exports decreased, inventories held by businesses rose by 0.1 percent, and total
Explain the effect of the fall in net exports on GDP.The Commerce Department reported that in December 2015, retail sales rose by 0.2, net exports decreased, inventories held by businesses rose by 0.1 percent, and total sales by businesses fell by 0.6 percent.
Does the statement that total sales by businesses fell by 0.6 percent mean that GDP decreased by 0.6 percent? Explain your answer.
Read Eye on the Booms and Busts and explain why the NBER reported that the 2008 recession began before real GDP had fallen for two successive quarters.
In France, real GDP was the same in 2012 as it had been in 2011, but in the last quarter of 2012 and the first quarter of 2013, France’s real GDP decreased. In the United States, real GDP increased in 2012, and in the first quarter of 2013, it was higher than in the last quarter of 2012.Based on
Classify each of the following items as a final good or service or an intermediate good or service and identify it as a component of consumption expenditure, investment, or government expenditure on goods and services:Banking services bought by TargetSecurity system bought by the White HouseCoffee
Calculate Iberia’s GDP.Use the following data on the economy of Iberia.Net taxes $18 billionGovernment expenditure $20 billionSaving $15 billionConsumption expenditure $67 billionInvestment $21 billionExports $30 billion
Calculate Iberia’s imports of goods and services.Use the following data on the economy of Iberia.Net taxes $18 billionGovernment expenditure $20 billionSaving $15 billionConsumption expenditure $67 billionInvestment $21 billionExports $30 billion
A ________ is a final good and ________ is an intermediate good.A. New car bought by a student; a used SUV bought by a dealerB. New textbook; a used textbookC. New iPhone bought by a student; a new computer bought by Wal-MartD. Tank of gasoline bought by you; jet fuel bought by Southwest Airlines
The base year is 2016. Calculate real GDP in 2016 and 2017. Use the table, which shows an economy€™s total production and the prices of the final goods it produced in 2016 and 2017, GDP data for 2016 Quantity Item Price Fish 100 $2 Berries 50 $6 GDP data for 2017 Item Quantity Price
Calculate the percentage increase in real GDP in 2017.Use the table, which shows an economy€™s total production and the prices of the final goods it produced in 2016 and 2017, GDP data for 2016 Quantity Item Price Fish 100 $2 Berries 50 $6 GDP data for 2017 Item Quantity Price Fish 75 $5
China reported that its real GDP grew by 6.9 percent in 2015, down from 7.3 percent in 2014. Experts think that China has overstated its true growth rate and many fear that its growth will slow further.How does China’s real GDP growth compare with that of the United States? If China’s growth
Gross domestic product is the market value of all the _______ in a given time period.A. Goods and services bought by AmericansB. Goods and services produced by American companies in all countriesC. Final goods and services produced by all firms located in the United StatesD. U.S.-produced goods and
Other things remaining the same, a fall in the price of peanuts will ________.A. Increase the supply of peanutsB. Decrease the supply of peanut butterC. Decrease the quantity supplied of peanutsD. Decrease the supply of peanuts
In the market for jeans, which of the following events increases the demand for a pair of jeans?A. The wage rate paid to garment workers rises.B. The price of a denim skirt (a substitute for jeans) rises.C. The price of denim cloth falls.D. New technology reduces the time it takes to make a pair of
Which of the following events illustrates the law of demand? Other things remaining the same, a rise in the price of a good will ________ .A. Decrease the quantity demanded of that goodB. Increase the demand for a substitute of that goodC. Decrease the demand for the goodD. Increase the demand for
China’s economic slowdown could help reduce the cost of steel used by U.S. auto makers.Explain how an economic slowdown in China influences the global steel market. What happens to the equilibrium price of steel?
Bacon is 25 percent cheaper now than a year ago and bacon sales are up 13 percent on the year. At the same time, the bird flu virus is killing millions of chickens, raising egg prices.Explain how this news clip illustrates the law of demand, why the price of bacon fell, and how the markets for
“Raising the minimum wage to $15 an hour will … bring dignity and respect to 2.2 million people, many of whom have been forced to live in poverty for too long,” said Governor Andrew Cuomo. Between 135,000 and 200,000 workers will see their hourly wage rise gradually to $15 by the end of 2018
During Valentine€™s week, more people buy chocolates and chocolates offer their chocolates in special red boxes, which cost more to produce than the everyday box. Set out the three-step process of analysis and show on a graph the adjustment process to the new equilibrium. Describe the
If the price of chocolates is $17.00 a box, describe the situation in the market. Explain how market equilibrium is restored.The table shows the demand and supply schedules for boxes of chocolates in an average week. Use this information. Quantity Quantity supplied Price (dollars per box) demanded
Concerns about the U.S. winter wheat crop and dry conditions in other wheat-producing nations have increased the price of wheat.Explain how an upcoming harvest influences today’s price of wheat.
What is the effect on the equilibrium in the orange juice market if orange juice becomes more popular and a cheaper robot is used to pick oranges?
What is the effect on the equilibrium price and equilibrium quantity of orange juice if the price of apple juice decreases and the wage rate paid to orange grove workers increases?
Why can we be confident that the market for coffee is competitive and that a decrease in supply rather than the greed of coffee growers is the reason for the 2014 rise in price?
Read Eye on the Price of Coffee and explain how we know that the price increased in 2014 because the supply of coffee decreased and not because the demand for coffee increased.
Are Venezuela’s price controls price floors or price ceilings? Draw a graph to illustrate the shortages of food created by the price controls.The government of Venezuela controls the price of food and there are shortages of milk, rice, coffee, pasta, sugar, corn flour, and cooking oil. Eggs have
Use the demand and supply model to explain how heavy rain will change the prices of corn and soybeans.Heavy rain has delayed the planting of corn and soybean and soggy conditions have slowed the winter wheat harvest.
The table shows the demand and supply schedules for student workers at campus venues. If the college introduces a minimum wage of $11.50 an hour, how many students are employed and how many students want work at campus venue but can€™t find a job? Wage rate (dollars per hour) 10.00
“As more people buy fuel-efficient hybrid cars, the demand for gasoline will decrease and the price of gasoline will fall. The fall in the price of gasoline will decrease the supply of gasoline.” Is this statement true? Explain.
The table shows the demand and supply schedules for running shoes. What is the market equilibrium? If the price is $70 a pair, describe the situation in the market. Explain how market equilibrium is restored. If a rise in income increases the demand for running shoes by 100 pairs a day at each
If the price of frozen yogurt falls, the quantity of ice cream consumed will decrease and the price of ice cream will rise.Use the laws of demand and supply to explain whether the statements is below are true or false. In your explanation, distinguish between a change in demand and a change in the
The United States does not allow oranges from Brazil (the world’s largest producer of oranges) to enter the United States. If Brazilian oranges were sold in the United States, oranges and orange juice would be cheaper.Use the laws of demand and supply to explain whether the statements is below
Explain how each of the following events changes the demand for or supply of air travel. Airfares tumble, while long-distance bus fares don’t change.The price of jet fuel rises.Airlines reduce the number of flights each day.People expect airfares to increase next summer.The price of train
Mary makes 10 pies and 20 cakes a day and her opportunity cost of producing a cake is 2 pies. Tim makes 20 pies and 10 cakes a day and his opportunity cost of producing a cake is 4 pies. If Mary and Tim specialize in the good in which they have a comparative advantage A. Mary produces only
The table shows the PPF of an island community. Choose the best statement.A. This community has enough resources to produce 2 pounds of fish and 36 pounds of berries.B. This community cannot produce 2 pounds of fish and 36 pounds of berries because this combination is inefficient.C. This community
Explain why it is not possible for everyone to have free Internet access to education, news, jobs, and more.
Sketch a PPF with education and news on the x-axis and other goods and services on the y-axis before and after the Internet.Everyone should have free Internet access to education, news, jobs, and more.
Explain how Internet access has changed the production possibilities and the opportunity cost of producing education and news.Everyone should have free Internet access to education, news, jobs, and more.
If the farm adopted a new technology, which allows it to use fewer resources to fatten chickens, explain how the farm€™s production possibilities will change. Explain how the opportunity cost of producing a bushel of soybean will be affected.Use the table, which shows a farm€™s
Provide two examples of economics being used as a tool by (a) A student, (b) A business, and (c) A government. Classify your examples as dealing with microeconomic topics and macroeconomic topics.
Suppose that the government introduces a minimum wage of $0.80 an hour. What is the real wage rate, the quantity of labor employed, potential GDP, and unemployment? Does the unemployment arise from job search or job rationing? Is the unemployment cyclical? Explain.The two tables set out information
Which of the events increase potential GDP and which decrease potential GDP?Use the following list of events that occur one at a time to workThe Middle East cuts supplies of oil to the United States.The New York Yankees win the World Series.U.S. labor unions negotiate wage hikes that affect all
What is the quantity of labor employed, potential GDP, the real wage rate, and total labor income?The two tables set out information about the economy of Nautica. Use this information to work Problem. Labor market Production function Labor hours (per day) Real GDP Real wage rate per hour) (2009

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