Questions and Answers of Foundations Of Economics

Explain what happened to the value of marginal product of coders after 2007 and explain why it happened.
Millions of acres of U.S. farmland that grow corn, soybean, and wheat are rented, and land rent is the biggest cost of growing these crops. With rising crop prices, rents doubled during the past six
Explain how the Bureau of Labor Statistics expects the market for coders to change in the future and draw a graph to show the expected changes.
Read Eye on Price Gouging on p. 162 and explain why it was inefficient to stop Mr. Shepperson from selling his generators. EYE on PRICE GOUGING Should Price Gouging Be Illegal? Price gouging is the
Figure 1 shows the rental market for apartments in Corsicana, Texas.1. What is the rent and how many apartments are rented? If a rent ceiling of $900 a month is set, what is the rent and how many
Why did soybean prices fall in 2015? Draw graphs to show the soybean market and the cost and revenue curves of a soybean farmer at the start and end of 2015. Show the change in the soybean farmer’s
Using the chained-dollar method, compare the growth rates of nominal GDP and real GDP in 2019.
If the base year is 2019, use the chained-dollar method to calculate real GDP in 2018 and 2019. In terms of what dollars is each of these two real GDPs measured?
When the price level_______, the inflation rate ______.A. Rises rapidly; increasesB. Rises rapidly; is highC. Falls; is zeroD. Rises slowly; falls
Use Figure 29.2 to work Problems. Initially, the economy is at point B.Some events change aggregate supply from AS0 to AS1. Describe two possible events. What is the new equilibrium point? If
Use the table, which shows commercial bank’s balance sheet, to work Problems. The commercial banks’ desired reserve ratio on all deposits is 5 percent and there is no currency drain.Calculate the
Because fluctuations in the world oil price make the U.S. short-run macroeconomic equilibrium fluctuate, someone suggests that the government should vary the tax rate on oil, lowering the tax when
Some events change aggregate demand from AD0 to AD1 and aggregate supply from AS0 to AS1. What is the new macroeconomic equilibrium?Use Figure 29.2 to work Problems. Initially, the economy is at
Because fluctuations in the world oil price make the U.S. short-run macroeconomic equilibrium fluctuate, someone suggests that the government should vary the tax rate on oil, lowering the tax when
“Brexit” expected to rattle U.S. economy The United Kingdom vote to leave the European Union (known as Brexit) is expected to affect the U.S. economy by driving up the value of the dollar.Explain
“Brexit” expected to rattle U.S. economy The United Kingdom vote to leave the European Union (known as Brexit) is expected to affect the U.S. economy by driving up the value of the dollar.Explain
The left part of the table describes four possible situations that might arise in 2020, depending on the level of aggregate demand in 2020. The right part of the table describes four possible
The left part of the table describes four situations that might arise in 2020, depending on the level of aggregate demand. The right part of the table describes four situations that might arise in
The left part of the table describes four possible situations that might arise in 2020, depending on the level of aggregate demand in 2020. The right part of the table describes four possible
The left part of the table describes four situations that might arise in 2020, depending on the level of aggregate demand. The right part of the table describes four situations that might arise in
China’s power to boost global economy is fading Whenever global growth faltered, Beijing splurged on roads, airports, and housing developments that fed companies and their employees across the
Read Eye on Fiscal Stimulus. How big was the fiscal stimulus package of 2008–2009, how many jobs was it expected to create, and how large was the multiplier implied by that expectation? Did the
How do an aging population and healthcare programs drive spending and the deficit and how do they create fiscal imbalance and generational imbalance?
A $1 trillion U.S. budget deficit is one big reason the Fed may have to cut rates The recent debt deal between the White House and Congress virtually guarantees trillion-dollar deficits well into the
What happens in Freezone if the central bank conducts an open market sale of securities? How will the interest rate change? Do you recommend that the central bank conduct an open market sale of
Fed cuts interest rates again but future drops this year are in doubt Fed policymakers cut rates but were divided about their future path. A majority projected no more cuts in the foreseeable future
Read Eye on the Fed in a Crisis. What are the key differences in monetary policy between the Great Depression and the slow recovery from the 2008–2009 recession?
Explain why a strong jobs report complicates the Fed's decision about cutting interest rates.
What is the problem that might arise if the Fed keeps the interest rate too high for too long?
U.S. trade gap widened in May despite tariff moves The U.S. trade gap widened sharply in May despite a new round of tariffs on Chinese goods that took effect in the first half of the month.Explain
Explain how the expected future exchange rate will change.
Does interest rate parity hold between Brazil and the United States? If interest rate parity does hold, what is the expected rate of appreciation or depreciation of the Brazilian real against the
The free floating yuan-U.S. dollar exchange rate will rise if ________ in the foreign exchange market.A. The Fed agrees not to sell U.S. dollarsB. The People’s Bank of China buys U.S. dollarsC. The
Read Eye on the Dollar. When and why did the dollar rise against the euro and when and why did it fall?
The spreadsheet in the table provides data on the U.S. economy: Column A is the year; the other columns are quantities sold in millions per year of compact discs (column B), music videos (column C),
The spreadsheet in the table provides data on the U.S. economy: Column A is the year; the other columns are quantities sold in millions per year of compact discs (column B), music videos (column C),
The following data shows the relationship between two variables x and y.Is the relationship between x and y positive or negative? Calculate the slope of the relationship when x equals 2 and when x
The table provides data on the price of a balloon ride, the temperature, and the number of rides a day. Draw graphs to show the relationship between• The price and the number of rides, when the
Use the information in the table to work Problems. Column A is the year; the other columns are quantities sold in millions per year of compact discs (column B), music videos (column C), and video
Draw a time-series graph of the quantity of music videos sold. Say in which year or years the quantity sold (a) Was highest, (b) Was lowest, (c) Decreased the most, and (d)
Use the following data on the relationship between two variables x and y to work Problems.Is the relationship between x and y positive or negative? Explain. X y 0 0 1 I 2 4 3 9 4 16 5 25
Use the following data on the relationship between two variables x and y to work Problems.Calculate the slope of the relationship when x equals 2 and x equals 4. How does the slope change as the
The table provides data on the price of hot chocolate, the temperature, and the cups of hot chocolate bought. Draw graphs to show the relationship between• The price and cups of hot chocolate
Sara has $12 to spend on popcorn and nuts. Popcorn is $3 a bag, and nuts is $3 a bag. FigureA13.1 illustrates Sara’s preferences. Use the figure to work Problems.What is the relative price of nuts
Sara has $12 to spend on popcorn and nuts. Popcorn is $3 a bag, and nuts is $3 a bag. FigureA13.1 illustrates Sara’s preferences. Use the figure to work Problems.Suppose that the price of nuts
Sara has $12 to spend on popcorn and nuts. Popcorn is $3 a bag, and nuts is $3 a bag. FigureA13.1 illustrates Sara’s preferences. Use the figure to work Problems.What quantities of popcorn and nuts
Marc has a budget of $20 a month to spend on lattes and e-books. The price of latte is $5 a bottle, and the price of an e-book is $10. Figure A13.4 illustrates his preferences. Use Figure A13.4 to
In most states, there is no sales tax on food. Some people say that a consumption tax—a tax on all goods and services—would be better. If all sales taxes are replaced by a consumption tax, what
Taxes on sugary drinks work as intended Governments around the world have put a tax on sugary drinks, and the demand for these drinks has decreased. Draw a graph to illustrate how a tax on sugary
Marc has a budget of $20 a month to spend on lattes and e-books. The price of latte is $5 a bottle, and the price of an e-book is $10. Figure A13.4 illustrates his preferences. Use Figure A13.4 to
Marc has a budget of $20 a month to spend on lattes and e-books. The price of latte is $5 a bottle, and the price of an e-book is $10. Figure A13.4 illustrates his preferences. Use Figure A13.4 to
An island economy produces only bananas and coconuts. The table gives the quantities produced and prices in 2018 and in 2019. The base year is 2018.Calculate nominal GDP in 2018 and nominal GDP in
The Beatles set to stream on Christmas Eve The Beatles are set to join the streaming revolution as its revenue generation overtakes that from downloads. Draw a graph to illustrate a Beatle fan’s
Calculate the value of 2019 production in 2018 prices and the percentage increase in production when valued at 2018 prices.
An economy produces only food and fun. The table shows the quantities produced and prices in 2018 and 2019. The base year is 2019.Calculate nominal GDP in 2018 and nominal GDP in 2019. Item
If the base year is 2019, compare the growth rates of nominal GDP and real GDP in 2019.
Using the chained-dollar method, compare the growth rates of nominal GDP and real GDP in 2019.In 2019ItemQuantityPriceApples109boxes$14aboxPears67boxes$7abox
Calculate the value of 2019 production in 2018 prices and the percentage increase in production when valued at 2018 prices.In 2018ItemQuantityPriceApples93boxes$7aboxPears50boxes$12aboxIn
Calculate the value of 2018 production in 2019 prices and the percentage increase in production when valued at 2019 prices.The table shows some data for an economy which produces only haircurts and
Using the chained-dollar method, calculate real GDP in 2018 and 2019. In terms of what dollars is each of these two real GDPs measured?In 2018ItemQuantityPriceApples93boxes$7aboxPears50boxes$12aboxIn
If the base year is 2018, use the chained-dollar method to calculate real GDP in 2018 and 2019. In terms of what dollars is each of these two real GDPs measured?In
If the base year is 2018, compare the growth rates of nominal GDP and real GDP in 2019.In 2018ItemQuantityPriceApples93boxes$7aboxPears50boxes$12aboxIn
Suppose the cost of acquiring a skill increases and the value of marginal product of skill increases. Draw demand-supply graphs of the labor markets for high-skilled and low-skilled labor to explain
A firm in monopolistic competition maximizes its profit by ________.A. Differentiating its good and producing the quantity at which price equals marginal revenueB. Producing the quantity at which
The GDP price index in the United States in 2014 was about 104, and real GDP in 2014 was $16.2 trillion (2012 dollars). The GDP price index in 2019 was about 112, and real GDP in 2019 was $19
The GDP price index in the United States in 2014 was about 104, and real GDP in 2014 was $16.2 trillion (2012 dollars). The GDP price index in 2019 was about 112, and real GDP in 2019 was $19
The base year is 2012. Real GDP in 2012 was $15 trillion. The GDP price index in 2019 was 105, and real GDP in 2019 was $16 trillion.Calculate nominal GDP in 2012 and in 2019 and the percentage
The base year is 2012. Real GDP in 2012 was $15 trillion. The GDP price index in 2019 was 105, and real GDP in 2019 was $16 trillion.What was the percentage increase in production from 2012 to 2019,
A news report says that falling oil prices pushed the CPI down 0.1 percent in a month in which energy prices fell 2.4 percent and the price of gasoline fell by 3.9 percent.Given the further
A news report says that falling oil prices pushed the CPI down 0.1 percent in a month in which energy prices fell 2.4 percent and the price of gasoline fell by 3.9 percent.By what percentage did the
Zimbabwe central bank hikes interest rate to 50 percent In an attempt to lower inflation, the Reserve Bank of Zimbabwe has raised its interest rate to 50 percent a year. Steve H. Hanke, an economics
Zimbabwe central bank hikes interest rate to 50 percent In an attempt to lower inflation, the Reserve Bank of Zimbabwe has raised its interest rate to 50 percent a year. Steve H. Hanke, an economics
Use the following list of events, which occur in the United States one at a time, to work Problems.• Dell introduces a new supercomputer that everyone can afford.• A major hurricane hits
Read Eye on Potential GDP on p. 626 and then use the following information to work Problems. In South Korea, real GDP per hour of labor is $22, the real wage rate is $15 per hour, and people work an
Use the following list of events, which occur in the United States one at a time, to work Problems.• Dell introduces a new supercomputer that everyone can afford.• A major hurricane hits
Use the information set out in the tables above about the economy of Athabasca to work Problems.If the labor force participation increases, explain how employment, the real wage rate, and potential
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
Suppose that the United States cracks down on illegal immigrants and returns millions of workers to their home countries.In the countries to which the immigrants return, explain how employment, the
Blizzard conditions shut down stretch of I-90 in Washington A potent winter storm is causing major disruptions to travel and daily routines across the Northwest. Heavy snow can be expected through
In 2018, India’s real GDP grew by 7.1 percent a year and its population grew by 1.1 percent a year. If these growth rates are sustained, in what years would• Real GDP be twice what it was in
It’s time to start worrying about the National Debt The budget deficit this year is expected to reach $1 trillion. The government is financing this gap between its outlays and tax revenue by
Explain how fintech has changed the loanable funds market. Using data and making assumptions, draw a graph of the loanable funds market to illustrate the effects of fintech on the interest rate.
The Bureau of Economic Analysis reported that the U.S. capital stock was $57.3 trillion at the end of 2016, $59.8 trillion at the end of 2017, and $62.9 trillion at the end of 2018. Depreciation in
The Bureau of Economic Analysis reported that the U.S. capital stock was $57.3 trillion at the end of 2016, $59.8 trillion at the end of 2017, and $62.9 trillion at the end of 2018. Depreciation in
Explain why the saving rate might have increased and its effect on the supply of loanable funds.
Saudi Arabia posts $7.4 billion budget surplus The Saudi Finance Minister said that higher oil revenue and the introduction of value-added taxation and subsidy cuts have moved the country's budget
Use the table, which shows commercial bank’s balance sheet, to work Problems. The commercial banks’ desired reserve ratio on all deposits is 5 percent and there is no currency drain.Calculate the
Describe some of the financial services provided by fintech firms. How has fintech changed the quantity of personal loans? How has crowdfunding changed the interest rate on personal loans?
With an interest rate of 20 percent, what is the present value on December 31, 2020 of payments of $400 on December 31 each year for the next 3 years starting in 2021?
When the Fed engaged in QE between 2008 and 2014, by how much did the monetary base increase? Which component of the monetary base increased most, currency or bank reserves?
In 2007, the United States was at full employment. The quantity of money was growing at 6.4 percent a year, the nominal interest rate was 4.4 percent a year, real GDP grew at 1.9 percent a year, and
Suppose that the government passes a new law that sets a limit on the interest rate that credit card companies can charge on overdue balances. As a result, the nominal interest rate charged by credit
Annualized inflation in Venezuela soars to 1,000 percent Inflation in Venezuela hit a monthly rate of 23.3 percent in June and it was feared that it would soon move into unstoppable hyperinflation.
When Martin Feldstein describes the Fed’s monetary policy as “easy,” he means that the Fed has created a lot of money, has made money grow at a fast rate, and has pushed interest rates down.
Suppose that Tommy Hilfiger’s marginal cost of a jacket is a constant $100 and at one of the firm’s shops, total fixed cost is $2,000 a day. The profit maximizing number of jackets sold in this
Think about the markets for cable television service, wheat, athletic shoes, soda, toothbrushes, and ready-mix concrete. Which of these markets are examples of monopolistic competition? Explain your
Read Eye on Smartphones and then think about the ice cream market. Washtenaw Dairy in Ann Arbor, Michigan, sells 63 flavors of Strohs Mooney’s ice cream, and Ben and Jerry’s Web site also lists
Monopolistic competition differs from ________.A. Monopoly because firms cannot set their own priceB. Oligopoly because firms produce differentiated goods or servicesC. Perfect competition because
Use Figure 17.6, which shows the demand curve, marginal revenue curve, and cost curves of La Bella Pizza, a firm in monopolistic competition, to work Problems.What is the quantity that La Bella Pizza
Use Figure 17.1, which shows the demand curve, marginal revenue curve, and cost curves of Lite and Kool, Inc., a producer of running shoes in monopolistic competition, to work Problems 3 to 5.In the

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