Questions and Answers of Foundations Macroeconomics

What changes in the guaranteed program might be made to fit your moral sensibilities about governmental responsibilities?
Categorize each of the following as cyclical or structural unemployment:a. An autoworker is laid off during a recession until car sales pick up.b. A steelworker loses his job because steel is now
Economists such as Frédéric Bastiat believed in natural liberty, which is based on a belief that a God has naturally ordered the world for the benefit of all. According to these economists, saving
What changes in the guaranteed program might be made to make it more politically acceptable?
What is a reservation wage and how is it related to structural unemployment?
Name four reasons why the target rate of unemployment has increased over the past 40 years.
Why does the concept of unemployment involve normative judgments?
Will someone who believes that unemployment is an individual’s responsibility believe that the current measure of unemployment over-or underestimates the level of unemployment? Explain.
College degrees are usually associated with higher wages. Does that association mean that what one learns in college increases college students’ productivity?
Since a jobs program puts people to work, would it impose costs on society?
How does the safety net in the proposed guaranteed jobs program differ from the current safety net?
In what ways would the guaranteed jobs program outlined in the text be more expensive if it provided useful jobs for society?
Why does the author suggest that students be ineligible for the guaranteed jobs program even though many students are in need?
According to the quantity theory of money, the government controls inflation through the supply of money.a. Does that mean that the government can stop inflation if it wants to do so?b. What reasons
What is asset price inflation? Why does it matter?
The book of Leviticus in the Bible states, "You shall do no injustice in judgment, in measurement of length, weight, or volume. You shall have just balances, just weights, a just ephah, a just hin. I
When it comes to understanding inflation, and even other aspects of the business cycle, ecological economists will often emphasize the role of energy, and especially oil, in shaping macroeconomic
What are three costs of inflation that economists focus on?
True or false? The short-run Phillips curve is just a figment of economists’ imagination.
This chapter discusses causes of inflation.a. Do you believe the cause of inflation is to be found in the institutional structure of wage- and price-setting institutions or in excess demand for goods
When would policy makers change from an inflation target being an upper bound to a target to aim for? When would this policy fail to produce the expected result?
Wayne Angell, a former Fed governor, stated in an editorial, "The Federal Reserve should get back on track getting inflation rates so low that inflation would no longer be a determining factor in
Radicals see the trade-off between inflation and unemployment as one that pits inflation-phobic investors-out to protect the value of their assets and the corporate profits in which they
How does inflation allow central banks to run more expansionary monetary policy?
What is meant by a placebo effect and how is it related to unconventional monetary policy?
Why do lenders tend to lose out in an unexpected inflation?
What are the benefits of a small amount of inflation?
What are the distributional effects of asset inflation caused by an increase in the money supply?
Why have policy makers changed their focus from keeping inflation from getting too high to keeping inflation from getting too low?
Why is a zero interest rate lower bound important to policy making?
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
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?
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?
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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.
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
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
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.

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