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foundations macroeconomics
Foundations of Macroeconomics 8th edition Robin Bade, Michael Parkin - Solutions
Which of the events raise the real wage rate and which of the events lower the real wage rate?Use the following list of events that occur one at a time to work Problem.The Middle East cuts supplies of oil to the United States.The New York Yankees win the World Series.U.S. labor unions negotiate
Which of the events increase the equilibrium quantity of labor and which decrease the equilibrium quantity of labor?Use the following list of events that occur one at a time to work Problem.The Middle East cuts supplies of oil to the United States.The New York Yankees win the World Series.U.S.
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 each change
Calculate the quantity of labor employed, the real wage rate, and potential GDP.Use the information set out in the tables above about the economy of Athabasca to work this Problem. Production function Labor hours (millions) Labor market Real GDP (millions of 2009 dollars) Real Quantity of Quantity
If the labor force participation increases, explain how employment, the real wage rate, and potential GDP change.Use the information set out in the tables above about the economy of Athabasca to work this Problem. Production function Labor hours (millions) Labor market Real GDP (millions of 2009
What was the percentage increase in production from 2012 to 2015, and by what percentage did the price level rise from 2012 to 2015?The base year is 2012. Real GDP in 2012 was $15 trillion. The GDP price index in 2015 was 105, and real GDP in 2015 was $16 trillion.
Calculate nominal GDP in 2012 and in 2015 and the percentage increase in nominal GDP from 2012 to 2015.The base year is 2012. Real GDP in 2012 was $15 trillion. The GDP price index in 2015 was 105, and real GDP in 2015 was $16 trillion.
Use the information provided to estimate how much of the unemployment in Ames and El Centro in 2009 was cyclical and how much was natural. Explain your assumptions in arriving at your estimates.The metro areas with the lowest and highest unemployment In December 2015, Ames, Iowa, had the lowest
Explain why the natural unemployment rate is not zero and why the unemployment rate fluctuates around the natural unemployment rate.
Where do sales and inventories of existing homes appear in the circular flow of expenditure and income? Explain how an increase in sales of existing homes and a low inventory of existing homes affects real GDP.Purchases of new U.S. homes surged in December and 2015 was the best year for housing
Where do new-home sales appear in the circular flow of expenditure and income? Explain how a surge in new home sales affects real GDP.Purchases of new U.S. homes surged in December and 2015 was the best year for housing since 2007. Existing-home sales also increased in the best year since 2006. The
Explain where these activities appear in the National Income and Product Accounts of Japan.
Explain where these activities appear in the National Income and Product Accounts of the United States.Mitsubishi Heavy Industries makes the wings of the new Boeing 787 Dream liner in Japan. Toyota assembles cars for the U.S. market in Kentucky.
The table above shows the PPF of an island community. This community€™s opportunity cost of producing 1 pound of fish ______.A. Is the increase in the quantity of berries gathered as the quantity of fish increases by 1 poundB. Increases as the quantity of berries gathered increasesC. Is
The table above shows the PPF of an island community. Choose the best statement.A. When a drought hits the island, its PPF shifts outward.B. When the islanders discover a better way of catching fish, the island€™s PPF shifts outward.C. When islanders reduce the time they spend gathering
The table above shows the PPF of an island community. Choose the best statement.A. Suppose that this community produces 3 pounds of fish and 20 pounds of berries. If it decides to gather more berries, it faces a trade off.B. When this community produces 4 pounds of fish and 12 pounds of
The income gap has widened in China. In 2014, the pay of workers in the coastal regions increased by 9.7 percent while that of workers in the inland regions grew by 9 percent. Explain how the distribution of personal income in China can be getting more unequal even though the poorest are
Compare the scale of agricultural production in the advanced and developing economies. In which is the percentage higher? In which is the total amount produced greater?
On a diagram of the circular flow model, indicate in which real or money flow each entry in the list belongs.General Motors’ pays its workers wages.IBM pays a dividend to its stockholders.You buy your groceries.Southwest rents some aircraft.Nike pays Serena Williams for promoting its sports shoes.
How is the personal distribution of income in India changing?Poor India makes millionaires at fastest pace India, with the world’s largest population of poor people, also paradoxically created millionaires at the fastest pace in the world. Millionaires increased by 22.7 percent to 123,000.
Why might incomes of $1 a day and $2 a day underestimate the value of the goods and services that these households actually consume?Poor India makes millionaires at fastest pace India, with the world’s largest population of poor people, also paradoxically created millionaires at the fastest
Which of the following classifications is correct?A. City streets are consumption goods because they wear out with use.B. Stocks are capital goods because when people buy and sell them they make a profit.C. The coffee maker in the coffee shop at an airport is a consumption good because people buy
Which of the following statements about U.S. production is correct?A. Construction accounts for a larger percentage of total production than does manufacturing. B. Real estate services account for 14.5 percent of the value of total production, larger than any other item of services
Which of the following items is not a factor of production?A. An oil rig in the Gulf of MexicoB. A ski jump in UtahC. A bank loan to a farmerD. An orange grove in Florida
What is human capital?A. A fruit pickerB. Unskilled laborC. Your professor’s knowledge of the economyD. An auto assembly line robot
Which of the following statements is correct?A. Labor earns wages and entrepreneurship earns bonuses.B. Land earns interest and capital earns rent.C. Entrepreneurship earns interest and capital earns profit.D. Capital earns interest and labor earns wages.
How are goods and services produced in the global economy?A. Developing countries use less human capital but just as much physical capital as advanced economies.B. Emerging economies use more capital-intensive technology than do developing economies.C. Human capital in all economies is similar.D.
In the circular flow model, which of the following items is a real flow?A. The flow of government expenditures to firms for the goods boughtB. The flow of income from firms to households for the services of the factors of production hiredC. The flow of U.S. borrowing from the rest of the worldD.
If the farm uses its resources efficiently, what is the opportunity cost of an increase in chicken production from 300 pounds to 500 pounds a year? Explain your answer.Use the table, which shows a farm€™s production possibilities, Soybean (bushels Chicken (pounds per year) per
The table shows the quantities of corn and beef that a farm can produce in a year. Draw a graph of the farm€™s PPF. Mark on the graph:An inefficient combination of corn and beef label this point A.An unattainable combination of corn and beef label this point B.An efficient combination of
The people of Food land have 40 hours of labor a day to bake pizza and bread. The table shows the maximum quantity of either pizza or bread that Food land can bake with different quantities of labor. Can Food land produce 30 pizzas and 30 loaves of bread a day? If it can, is this output efficient,
Make a graph of the production possibilities frontier with malaria control on the x-axis and other goods and services on the y-axis.Malaria can be controlled The World Health Organization’s malaria chief says that it is too costly to try to fully eradicate the disease. He says that by using
Is the $208 million that electricity producers will spend to comply with the new rules part of the opportunity cost of producing electricity?Representatives Waxman of California and Markey of Massachusetts proposed a law to limit greenhouse gas emissions from electricity generation and require
Describe how the opportunity cost of controlling malaria changes as more resources are used to reduce the number of malaria cases.Malaria can be controlled The World Health Organization’s malaria chief says that it is too costly to try to fully eradicate the disease. He says that by using
Explain how the following events influence U.S. production possibilities:Some retail workers are re-employed building dams and wind farms.More people take early retirement.Drought devastates California’s economy.
Is the $821 billion that the government would spend on incentive programs and compensation for higher energy prices part of the opportunity cost of producing electricity?Use the following information.Representatives Waxman of California and Markey of Massachusetts proposed a law to limit
In the African nation of Senegal, to enroll in school a child needs a Birth Certificate that costs $25. This price is several weeks’ income for many families. Explain how this requirement is likely to affect the growth of human capital in Senegal.
Which of the entries in the list are consumption goods and services? Explain your choice.List• An interstate highway• An airplane• A school teacher•
Is the $846 billion that electricity producers would pay for the right to emit greenhouse gasses part of the opportunity cost of producing electricity?Representatives Waxman of California and Markey of Massachusetts proposed a law to limit greenhouse gas emissions from electricity generation and
Would the Waxman-Markey law achieve production efficiency?Representatives Waxman of California and Markey of Massachusetts proposed a law to limit greenhouse gas emissions from electricity generation and require electricity producers to generate a minimum percentage of power using renewable fuels,
If Tom and Abby specialize and trade 15 balls for 1 racket, what are the gains from trade?Figure 3.3 (on below) shows Tom€™s production possibilities and Figure 3.4 (on the next page) shows Abby€™s production possibilities. Tom uses all his resources and produces 2 rackets and
Which of the entries in the list are capital goods? Explain your choice.List• An interstate highway• An airplane• A school teacher•
In the circular flow model, explain the real flow and/or the money flow in which each item below belongs. Illustrate your answers on a circular flow diagram. You buy a coffee at Starbucks.The government buys some Dell computers.A student works at a FedEx office.Donald Trump rents a Manhattan
What is Tom€™s opportunity cost of producing a racket? What is Abby€™s opportunity cost of a racket? Who has a comparative advantage in producing rackets? Who has a comparative advantage in producing balls?Figure 3.3 (on below) shows Tom€™s production possibilities
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 setting up her Internet shopping business. The rest of the week, she completed application forms and attended two job interviews. Husband
Read Eye on the Environment and describe a trade off faced when deciding how to generate electricity and whether to use wind power.
Which of the entries in the list are factors of production? Explain your choice.
Boeing’s Dream liner has had a rocky start.1. Why doesn’t Boeing manufacture all the components of the Dream liner at its own factory in the United States?2. Describe some of the changes in what, how, and for whom, that would occur if Boeing manufactured all the components of the Dream liner at
The global economy has seen a fall in the number of landlines and rapid growth in the number of smartphones. In the United States, 41 percent of households have no landline and 90 percent have a smartphone. In Africa, 33 percent have a smartphone. Describe the changes in what, how, and for whom
Read Eye on the Dream liner and then answer the following questions:How many firms are involved in the production of the Dream liner and how many are identified in the figure ?Is the Dream liner a capital good or a consumption good? Explain why? State the factors of production that make the
Why you can get a free college education in Germany but not in California Even American students can get a free college degree in Germany, where high taxes pay for colleges. Despite college being free, fewer students in Germany earn college degrees than in the United States and more enter
The pace at which new businesses are created in the U.S. economy and the percentage of U.S. jobs in young firms has fallen. Ryan Decker and others, “The Role of Entrepreneurship in U.S. Job Creation and Economic Dynamism” Journal of Economic Perspectives, 2014. Explain how you would
Define the factor of production called capital. Give three examples of capital, different from those in the chapter. Distinguish between the factor of production capital and financial capital.
With more job training and more scholarships to poor American students, which special factor of production is likely to grow faster than in the past?
Which factor of production earns the highest percentage of total U.S. income? Define that factor of production. What is the income earned by this factor of production called?
Which of the following items are not factors of production? Explain why not.Vans used by a baker to deliver bread1,000 shares of Amazon.com stockUndiscovered oil in the Arctic Ocean
Which of the following items are not capital goods? Explain why not. An auto assembly lineA shopping mallA golf ball
Which of the following items are not consumption goods and services? Explain why not. A chocolate barA ski liftA golf ball
The scientific method uses models to ___________.A. Clarify normative disagreementsB. Avoid the need to study real questionsC. Replicate all the features of the real worldD. Focus on those features of reality assumed relevant for understanding a cause and effect relationship
Which of the following best illustrates your marginal benefit from studying?A. The knowledge you gain from studying 2 hours a night for a monthB. The best things forgone by studying 2 hours a night for a monthC. What you are willing to give up to study for one additional hourD. What you must give
A rational choice is ___________.A. The best thing you must forgo to get somethingB. What you are willing to forgo to get somethingC. Made by comparing marginal benefit and marginal costD. The best for society
Which of the following is not a key idea in the economic way of thinking?A. People make rational choices by comparing costs and benefits.B. Poor people are discriminated against and should be treated more fairly.C. A rational choice is made at the margin.D. Choices respond to incentives.
Of the three big questions, what, how, and for whom, which of the following is an example of a how question?A. Why do doctors and lawyers earn high incomes?B. Why don’t we produce more small cars and fewer gas guzzlers?C. Why do we use machines rather than migrant workers to pick grapes?D. Why do
Which of the following defines economics?Economics is the social science that studies ___________.A. The best way of eliminating scarcityB. The choices made to cope with scarcity, how incentives influence those choices, and how the choices are coordinatedC. How money is created and usedD. The
Which of the following describes the reason why scarcity exists?A. Governments make bad economic decisions.B. The gap between the rich and the poor is too wide.C. Wants exceed the resources available to satisfy them.D. There is too much unemployment.
Explain whether the Clean Power Plan has an opportunity cost.Use the following news clip Obama unveils major climate change policy Obama’s Clean Power Plan, which will set federal limits on carbon emissions from coal-fired power plants, will cost $8.4 billion and reap benefits of more than $34
Explain why someone might oppose the Clean Power Plan when its benefits exceed its costs.Use the following news clip Obama unveils major climate change policy Obama’s Clean Power Plan, which will set federal limits on carbon emissions from coal-fired power plants, will cost $8.4 billion and reap
What are the $8.4 billion of costs arising from using less coal to produce electricity? Who bears these costs: the users of electricity or the owners of power plants, or both the users and the owners?Use the following news clip Obama unveils major climate change policy Obama’s Clean Power Plan,
What are the more than $34 billion of benefits from using less coal to produce electricity? Who receives these benefits: the users of electricity or the owners of power plants, or both the users and the owners?Use the following news clip Obama unveils major climate change policy Obama’s Clean
Think about each of the items in the list and explain how they affect incentives and might change the choices that people make:A hurricane hits Central Florida.The World Series begins tonight but a storm warning is in effect for the area around the stadium.The price of a personal computer falls to
Think about the following news items and label each as involving a what, how, or for whom question: Today, most stores use computers to keep their inventory records, whereas 20 years ago most stores used paper records.Healthcare professionals and drug companies recommend that Medicaid drug
Which of the following are components of the opportunity cost of being a full-time student who lives at home?The things that the student would have bought with:A higher incomeExpenditure on tuitionA subscription to the Rolling Stone magazineThe income a student will earn after graduating
Label each of the entries in the list as a positive or a normative statement.Low-income people pay too much for housing.The number of U.S. farms has decreased over the past 50 years.Toyota expands parts production in the United States.Imports from China are swamping U.S. department stores.The rural
What is the social interest? Distinguish it from self-interest. In your answer give an example of self-interest and an example of social interest.
Suppose that Chris Pratt had been offered a part in another movie and that to hire him for Jurassic World, the producer had to double Chris Pratt’s pay. What incentives would have changed? How might the changed incentives have changed the choices that people made?Use the following
The headlines in the list appeared in The Wall Street Journal. Classify each headline as a signal that the news article is about a micro economic topic or a macroeconomic topic. Explain your answers. Job Gains Calm Slump WorriesWashington Post’s Profit FallsOvercapacity, Fuel Costs Hit
What are some of the components of marginal cost and marginal benefit that the producer of a movie faces?Use the following information Jurassic World had world-wide box office receipts of $1.66 billion. The movie’s production budget was $150 million with additional marketing costs. A successful
What contribution does a movie like Jurassic World make to coping with scarcity? When you buy a movie ticket, are you buying a good or a service?Use the following information Jurassic World had world-wide box office receipts of $1.66 billion. The movie’s production budget was $150 million with
Who decides whether a movie is going to be a blockbuster? How do you think the creation of a blockbuster movie influences what, how, and for whom goods and services are produced?Use the following information Jurassic World had world-wide box office receipts of $1.66 billion. The movie’s
Label each entry in the list as dealing with a microeconomic topic or a macroeconomic topic. Explain your answer.
The table shows the prices that Terry paid for some of his expenditures in June and July 2016. Explain and discuss why these prices might have led to commodity substitution or outlet substitution. Price in Price in June (dollars per unit) July Item Steak 4.11 4.01 Bread 3.25 3.12 Bacon 3.62 3.64
What was the percentage increase in production between 2008 and 2013, and by what percentage did the price level rise between 2008 and 2013?The GDP price index in the United States in 2008 was about 99, and real GDP in 2008 was $14.8 trillion (2009 dollars). The GDP price index in 2013 was about
Calculate nominal GDP in 2008 and in 2013 and the percentage increase in nominal GDP between 2008 and 2013.The GDP price index in the United States in 2008 was about 99, and real GDP in 2008 was $14.8 trillion (2009 dollars). The GDP price index in 2013 was about 107, and real GDP in 2013 was $15.5
The table shows the quantities of the goods that Suzie bought and the prices she paid during two consecutive weeks. Suzie€™s CPI market basket contains the goods she bought in Week 1. Calculate the cost of Suzie€™s CPI market basket in Week 1 and in Week 2. What
In Brazil, the reference base period for the CPI is 2000. By 2005, prices had risen by 51 percent since the base period. The inflation rate in Brazil in 2006 was 10 percent, and in 2007, the inflation rate was 9 percent. Calculate the CPI in Brazil in 2006 and 2007. Brazil’s CPI in 2008 was 173.
In Canada, the reference base period for the CPI is 2002. By 2014, prices had risen by 25.2 percent since the base period. The inflation rate in Canada in 2015 was 1.1 percent. Calculate the CPI in Canada in 2015.
When the unemployment rate _________ the natural unemployment rate, real GDP is _________ potential GDP and the output gap is _________.A. Exceeds; below; negativeB. Is below; below; negativeC. Exceeds; above; positiveD. Is below; above; negative
Potential GDP is the value of real GDP when ______.A. The unemployment rate equals the natural unemployment rateB. There is no frictional unemploymentC. There is no structural unemploymentD. The unemployment rate is zero
The economy is at full employment when all unemployment is ________.A. StructuralB. CyclicalC. Structural and cyclicalD. Structural and frictional
When the economy goes into recession, the biggest increase in unemployment is _________.A. Structural because jobs are lost in most statesB. Cyclical because jobs are lost in many industries as they cut productionC. Frictional because the creation of jobs slowsD. The combination of structural and
If the BLS included all marginally attached workers as being unemployed, the ________ would be __________.A. Unemployment rate; higherB. Labor force; unchangedC. Labor force participation rate; lowerD. Unemployment rate; lower
A marginally attached worker is a person who ________.A. Works part time for economic reasonsB. Works part time for non economic reasonsC. Doesn’t work, is available and willing to work, but hasn’t looked for job recentlyD. Has no job but would like one and has gone back to school to retrain
How would you explain the difference in the unemployment rates in Ames and El Centro in December 2015? Why is the difference almost certainly not explained by different cyclical unemployment rates?
The BLS survey reported the following data in a community of 320 people: 200 worked at least 1 hour as paid employees; 20 did not work but were temporarily absent from their jobs; 40 did not have jobs and didn’t want to work; 10 were available for work and last week they had looked for work; and
In July 2011, in the economy of Sandy Island, 10,000 people were employed and 1,000 were unemployed. During August 2016, 80 people lost their jobs and didn’t look for new ones, 20 people quit their jobs and retired, 150 people who had looked for work were hired, 50 people became discouraged
Read Eye on Full Employment. In which year, 2000 or 2016, was real GDP below potential GDP? How can you tell from the graph?
The Bureau of Labor Statistics reported that in the second quarter of 2008 the working-age population was 233,410,000, the labor force was 154,294,000, and employment was 146,089,000. Calculate for that quarter the labor force participation rate and the unemployment rate.
Using the information provided in the news clip, which types of unemployment were present in the U.S. economy in January 2016?Unemployment falls to 4.9 percent, lowest in 8 yearsU.S. unemployment of 4.9 percent is full employment. Only 151,000 jobs were created in January, down from 262,000 in
How would you expect a shrinking energy sector and an expanding manufacturing sector to influence the actual and natural unemployment rates?Unemployment falls to 4.9 percent, lowest in 8 yearsU.S. unemployment of 4.9 percent is full employment. Only 151,000 jobs were created in January, down from
Describe the relationship between the unemployment rate and the natural unemployment rate as the output gap fluctuates between being positive and being negative.
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