5 Steps To A 5 AP Macroeconomics 2018 2018 Edition Dodge, Eric R - Solutions

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2.3 Express the relationship between the income approach and the expenditure approach to measuring GDP in the form of an equation.
2.2 Explain the concept of value added.
2.1 What are the three approaches to measuring GDP?
3. Plot the annual GDP growth rate for any one country from 2000 to the present. In addition, download data on real residential property prices from BIS (http://stats.bis.org/statx/toc/SPP.html) for the chosen country and plot its growth rate. What is the relationship between the GDP growth rate
2. Plot the annual inflation rate as measured by the annual growth rate of the implicit GDP deflator and lending interest rate for any one country from 1960 to the present. What is the relationship between the inflation rate and the nominal interest rate? Is it consistent with the prediction of
1. Download data for gross national income (GNI) per capita based on constant 2010 U.S.dollars and gross domestic product (GDP) per capita based on constant 2010 U.S. dollars for any one country from 1960 to the present and then plot it. Are there any significant differences in the two trends?
10. LO 7 In Figure 1.15, after peaking in 2006, the relative price of housing declines by about 40% at the end of 2012. What does the relative price of housing measure? Discuss the economic impact of a continuous decline in housing price in the years 2008 and 2009 with reference to Figures 1.14 and
9. LO 7 Determine how increases in the interest rate spread in Figure 1.14 match with recessions in Figure 1.13. Does an increase in the interest rate spread always occur when there is a recession? Does a recession always occur when there is an increase in the interest rate spread?Comment.
8. LO 7 In Figure 1.13, discuss the severity of the 2008–2009 recession relative to previous recessions.
7. LO 7 Refer to Figures 1.11 and 1.12 to determine the relationship between the nominal interest rate, inlation rate, and real interest rate in 2008–2009. What type of monetary policy was impl emented during this period?
6. LO 7 What diference do you notice between the variability in the inlation rate before and after 1985?Provide an explanation for this phenomenon.
5. LO 7 Refer to Figure 1.8 and determine the iscal policy that the U.S. government implemented for the period 2008–2009. Why was this policy implemented?What are the possible limitations of this policy?
4. LO 7 In Figure 1.6, does unemployment change more rapidly when it is increasing, or when it is decreasing? Speculate on why this regularity might be observed in the data.
3. LO 3 Give an example of a model that is used in some area other than economics, other than the roadmap example explained in this chapter.What is unrealistic about this model? How well does the model perform its intended function?
2. LO 3 Suppose that you had the special power to travel in time and to carry out any experiment you wanted on the economy. If you could turn back the clock to the time of the Great Depression, what experiment would you like to run on the U.S. economy? Why?
1. LO 3 Consider the following data on the population and the real GDP of the economies of the Four Asian Dragons.Year Hong Kong Singapore South Korea Taiwan Population (in millions)1960 3.07 1.65 24.17 10.67 2010 6.99 5.08 49.09 23.14 2011 7.04 5.19 49.36 23.19 2012 7.10 5.30 49.61 23.27 2013 7.16
1.23 How does a government deficit lead to a current account deficit?
1.22 What led to the large default premium in credit markets between 2008 and 2009?
1.21 Compare the causes of the recession in 2001 to that in 1974–1975.
1.20 Explain the difference between the nominal interest rate and the real interest rate.
1.19 How does growth in money supply affect the inflation rate?
1.18 Why might a decrease in taxes have no effect?
1.17 What is the crowding out effect?
1.16 Why might the vacancy rate rise without a commensurate reduction in the unemployment rate?
1.15 Why was productivity growth low from 2010–2015?
1.14 What are the two key threads in modern business cycle theory?
1.13 Explain why a macroeconomic model should be built from microeconomic principles.
1.12 Why can macroeconomic models be useful? How do we determine whether or not they are useful?
1.11 What are the five features that a basic macroeconomic model should have?
1.10 Should a macroeconomic model be an exact description of the world? Explain why or why not.
1.9 Why should a macroeconomic model be simple?
1.8 Explain why experimentation is difficult in macroeconomics.
1.7 What is the difference between the trend and the business cycle component of an economic time series?
1.6 In a graph of the natural logarithm of an economic time series, what does the slope of the graph represent?
1.5 List six fundamental macroeconomic questions.
1.4 What was the constant annual growth rate of real GDP per capita for the United States over the period 1900–2014?
1.3 How is an improvement in the living standard of the average American measured?
1.2 What makes macroeconomics different from microeconomics? What do they have in common?
1.1 What are the primary defining characteristics of macroeconomics?
When a large increase in aggregate demand has an even greater increase in real GDP, economists refer to this as(A) the balanced budget multiplier.(B) the money multiplier.(C) the foreign substitution effect.(D) the wealth effect.(E) the spending multiplier.
An import quota on foreign automobiles is expected to(A) increase domestic efficiency and protect domestic producers at the expense of foreign producers.(B) decrease the price of automobiles and protect domestic consumers at the expense of foreign producers.(C) increase the price of automobiles and
Which component of a nation’s balance of payments recognizes the purchase and sale of real and financial assets between nations?(A) The capital account(B) The official reserves account(C) The current account(D) The trade deficit account(E) The trade surplus account
If in a given year the government collects more money in net taxes than it spends, there would exist(A) a current account deficit.(B) a budget surplus.(C) a trade surplus.(D) a budget deficit.(E) a trade deficit.
U.S. dollars and the European Union’s (EU’s) euro are exchanged in global currency markets. Which of the following is true?(A) If inflation is high in the EU and the price level in the United States is stable, the value of the dollar appreciates.(B) If the Fed decreases the money supply, the
Suppose the President plans to cut taxes for consumers and also plans to increase spending on the military. How does this affect real GDP and the price level?(A) GDP increases and the price level decreases.(B) GDP decreases and the price level increases.(C) GDP stays the same and the price level
As the Japanese economy expands, in what ways do U.S. net exports, the values of the dollar and the yen change?
Suppose the economy is in long-run equilibrium when a temporary expansionary supply shock is felt in the economy. This changes the short-run Phillips curve, the short-run unemployment rate, and the long-run unemployment rate in which of the following ways?
Which of the following is a predictable advantage of expansionary monetary policy in a recession?(A) It decreases aggregate demand so that the price level falls, which increases demand for the dollar.(B) It increases investment, which increases aggregate demand and increases employment.(C) It
Which of the following could limit the ability of a central bank to conduct expansionary monetary policy?(A) Money demand is nearly perfectly elastic.(B) Investment demand is nearly perfectly elastic.(C) Banks make loans with all excess reserves.(D) Households carry very little cash, holding their
Holding all else equal, which of the following monetary policies would be used to boost U.S. exports?(A) Increasing the discount rate(B) Increasing the reserve ratio(C) Buying government securities(D) Lowering tariffs(E) Removing import quotas
Which of the following is likely to shift the long-run aggregate supply curve to the right?(A) A nation that devotes more resources to nondurable consumption goods, rather than durable capital goods(B) Research that improves the productivity of labor and capital(C) More restrictive trade
Congress has embarked on another round of expansionary fiscal policy to boost employment and get reelected. As chair of the central bank, how would you reduce the “crowding-out” effect and what macroeconomic problem might your policy exacerbate?(A) Increase the reserve ratio, risking the
Suppose that elected officials and the central bank agree to combine fiscal and monetary policies to lessen the threat of inflation. Which of the following combinations would likely accomplish this goal?
For a given level of government spending, the federal government usually experiences a budget____during economic____and a budget ______during economic_______.(A) deficit, recession, surplus, expansion(B) surplus, recession, deficit, expansion(C) deficit, expansion, surplus, recession(D) surplus,
Of the following choices, which combination of fiscal and monetary policy would most likely reduce a recessionary gap?
Monetary tools of the Federal Reserve do not include which of the following choices?(A) Buying Treasury securities from commercial banks(B) Changing tariffs and quotas on imported goods(C) Changing the reserve ratio(D) Changing the discount rate(E) Selling Treasury securities to commercial banks
If the economy were experiencing a recessionary gap, choose the option below that would be an appropriate fiscal policy to eliminate the gap, and the predicted impact of the policy on real GDP and unemployment.
The reserve ratio is .10 and Mommy Morebucks withdraws $1 million from her checking account and keeps it as cash in her refrigerator.How does this withdrawal potentially impact money in circulation?(A) Decreases it by $9 million(B) Decreases it by $1 million(C) Decreases it by $100,000(D) Increases
Which of the following insures the value of the U.S. dollar?(A) The euro and other foreign currencies held by the Federal Reserve(B) Gold bars in secure locations like Fort Knox(C) The promise of the U.S. government to maintain its value(D) The value of the actual paper on which it is printed.(E)
What is the main difference between the short-run and long-run Phillips curve?(A) The short-run Phillips curve is downward sloping and the long-run Phillips curve is upward sloping.(B) The short-run Phillips curve is upward sloping and the long-run Phillips curve is vertical.(C) The short-run
Daddy Morebucks withdraws $1 million from his savings account and puts the cash in his refrigerator. This affects M1 and M2 in which of the following ways?
The economy is in a deep recession. Given this economic situation, which of the following statements about monetary policy is accurate?(A) Expansionary policy would only worsen the recession.(B) Expansionary policy greatly increases aggregate demand if investment is sensitive to changes in the
Which of the following is an example of contractionary monetary policy?(A) The Fed lowers the reserve ratio.(B) The Fed lowers the discount rate.(C) The Fed increases taxes on household income.(D) The Fed decreases spending on welfare programs.(E) The Fed sells Treasury securities to commercial
Which of the following fiscal policy combinations would be most likely to slowly increase real GDP without putting tremendous upward pressure on the price level?(A) Increase government spending with a matching decrease in taxes.(B) Decrease government spending with a matching increase in taxes.(C)
Which of the following is an example of an expansionary supply shock?(A) Rapid increasing wages(B) A greatly depreciated currency(C) Declining labor productivity(D) Lower than expected agricultural harvests(E) Lower factor prices in major industries
If the economy is suffering from extremely high rates of inflation, which of the following fiscal policies would be an appropriate strategy for the economy?(A) Increase government spending and decrease taxes.(B) Decrease government spending and increase taxes.(C) Increase government spending with
Which of the following might worsen a nation’s trade deficit?(A) Lower wages relative to other nations.(B) Lower taxes on corporate profits relative to other nations.(C) A higher interest rate on financial assets relative to other nations.(D) A higher rate of inflation relative to other
Which of the following increases the size of the tax multiplier?(A) An increase in the marginal propensity to consume.(B) An increase in the reserve ratio.(C) An increase in the marginal propensity to save.(D) A decrease in the spending multiplier.(E) A decrease in the velocity of money.
Which of the following is true about the relationship between the M1 and M2 measures of money?(A) M1 minus M2 equals 0.(B) M1 includes checking deposits, while M2 includes checking and saving deposits.(C) M2 includes coin and paper money, but M1 does not.(D) M2 is more liquid than M1.(E) M1 is
If $100 of new autonomous private investment were added to an economy with a marginal propensity to consume of .90, by how much would aggregate demand shift to the right?(A) $190(B) $900(C) $1,000(D) $1,900(E) $90
Which of the following is most likely to produce stronger economic growth over time?(A) More rapid consumption of natural resources.(B) Higher adult illiteracy rates.(C) A falling stock of capital goods.(D) Investment tax credits.(E) Higher taxes on foreign capital investment.
Which of the following is true of a typical contraction of the business cycle?(A) Consumption is falling, but household wealth is rising.(B) Consumption is increasing.(C) Private investment is rising.(D) Employment and inflation are low.(E) Private saving rates are rising.
In a private closed economy, which of the following statements is true?(A) Household saving can never be negative.(B) Investment is always greater than savings.(C) The economy is in equilibrium when consumption equals saving.(D) Saving is equal to zero when consumption equals disposable income.(E)
If the short-run aggregate supply curve is horizontal, it is because(A) there exist many unemployed resources so that output can be increased without increasing wages and prices.(B) any increase in output requires a corresponding increase in wages and prices.(C) increases in output cause prices to
Stagflation is the result of(A) a leftward shift in the aggregate supply curve.(B) a leftward shift in the aggregate demand curve.(C) a leftward shift in both the aggregate supply and aggregate demand curves.(D) a rightward shift in the aggregate supply curve.(E) a rightward shift in the aggregate
When we observe an unplanned decrease in inventories, we can expect(A) prices to begin to fall.(B) output to begin to rise.(C) saving to begin to fall.(D) output to begin to fall.(E) planned investment to begin to rise.
Suppose that current disposable income is $10,000 and consumption spending is $8,000. For every $100 increase in disposable income, saving increases $10. Given this information,(A) the marginal propensity to consume is .80.(B) the marginal propensity to save is .20.(C) the marginal propensity to
Suppose that the federal government reclassified the purchase of a new home as consumption spending rather than investment spending. This decision would(A) increase aggregate demand and decrease real GDP.(B) decrease aggregate demand and decrease real GDP.(C) decrease aggregate demand and increase
Of the following choices, the most direct exchange in the circular flow model of a private closed economy is when(A) households provide goods to firms in exchange for wage payments.(B) households provide resources to firms in exchange for goods.(C) households provide revenues to firms in exchange
According to the quantity theory of money, increasing the money supply serves to(A) stimulate short-run production and employment with very little long-run inflation.(B) increase short-run output, but it is the source of long-run inflation.(C) lower the unemployment rate while also lowering the
A policy supported by supply-side economists would be(A) higher taxes on corporate profits.(B) lower tax rates on interest earned from savings.(C) removal of investment tax credits.(D) a longer duration of unemployment benefits.(E) higher marginal income tax rates to fund social welfare programs.
Which of the following is not included in the U.S. GDP?(A) The U.S. military opens a new base in a foreign country with 1,000 U.S. personnel.(B) Japanese consumers buy thousands of CDs produced in the United States.(C) An American pop singer performs a sold-out concert in Paris.(D) A French
The figure above shows aggregate demand (AD) and supply (AS) for the economy. Assuming that aggregate demand remains constant, which of the following best predicts the short-run price level, the longrun price level, and the long-run level of output?
Which of the following would increase the aggregate demand function?(A) Higher levels of imported goods(B) Lower levels of consumer wealth(C) A higher real interest rate(D) Lower taxes on personal income(E) Lower levels of exported goods
Which of the following is true of money and financial markets?(A) As the demand for bonds increases, the interest rate increases.(B) For a given money supply, if nominal GDP increases, the velocity of money decreases.(C) When demand for stocks and bonds increases, the asset demand for money
The table above summarizes the local labor market. Based on this information, which of the following is an accurate statement?(A) The number of discouraged workers has fallen from 2003 to 2004.(B) Although the population has grown, the labor force has remained constant from 2003 to 2004.(C) The
Which choice produces a faster rate of economic growth for the United States?(A) Institution of higher tariffs on imported goods(B) More investment in capital infrastructure and less consumption of nondurable goods and services(C) Elimination of mandatory school attendance laws(D) Annual limits on
Which of the following is not an addition to national income?(A) Wages(B) Salaries(C) Interest(D) Depreciation of physical capital(E) Profits
Suppose the price level in the United States has risen in the past year, but production of goods and services has remained constant. Based on this information, which of the following is true?
How does an increasing national debt impact the market for U.S.dollars and the value of the dollar with respect to other currencies?
Which of the following is not a scarce economic resource?(A) Labor(B) Capital(C) Human wants(D) Land(E) Natural resources
Theo loses his job at the public swimming pool when the pool closes for the winter. This is an example of(A) cyclical unemployment.(B) discouraged worker.(C) seasonal unemployment.(D) frictional unemployment.(E) structural unemployment.
Which of the following transactions would be included in the official computation of gross domestic product?(A) Josh buys a new pair of running shoes.(B) Nancy offers to babysit her granddaughter.(C) Max buys his dad’s used car.(D) Eli cannot go to a concert, so he resells his ticket to a
In the last 20 years, firms that produce cameras have begun to produce fewer 35-mm cameras and more digital cameras. This trend is an example of(A) how central planners dictate which cameras are produced.(B) the market system answering the question of “how” cameras should be produced.(C) the
Which of the following is a consequence of removal of a protective tariff on imported steel?(A) Imports fall.(B) Income is transferred from steel consumers to domestic steel producers.(C) Income is transferred from foreign steel producers to domestic steel producers.(D) Allocative efficiency is
If Nation A can produce a good at lower opportunity cost than Nation B can produce the same good, it is said that(A) Nation A has comparative advantage in the production of that good.(B) Nation B has comparative advantage in the production of that good.(C) Nation A has absolute advantage in the
The price of gasoline has recently increased, while at the same time gasoline consumption has also increased. What is happening in the gasoline market?(A) This is evidence that contradicts the law of demand.(B) The price of crude oil has fallen, shifting the supply of gasoline to the right.(C) A
Now that the economy is operating on PPF2, what has happened to the opportunity cost of producing these goods?(A) The opportunity cost of producing tractors has decreased, while the opportunity cost of producing corn has increased.(B) The opportunity cost of producing tractors has increased, while
Lower interest rates in the United States cause the value of the dollar and exports to change in which of the following ways?Suppose that the production possibility frontier (PPF) of this nation moves from PPF1 to PPF2. Which of the following could be the cause of this movement?(A) Technological
Which of the following likely results in a permanent increase in a nation’s productive capacity?(A) A decline in the birth rate(B) Declining adult literacy rates(C) Widespread relocation of manufacturing firms to low-wage nations(D) National program of child immunization(E) A global increase in

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5 Steps To A 5 AP Macroeconomics 2018 2018 Edition Dodge, Eric R - Solutions

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