Macroeconomics Private And Public Choice 14th Edition James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson - Solutions

Unlock the full potential of your economics studies with our comprehensive collection of solutions and answers for "Macroeconomics: Private and Public Choice, 14th Edition" by James D. Gwartney, Richard L. Stroup, Russell S. Sobel, and David A. Macpherson. Our online resource offers a complete solution manual, with step-by-step answers to all textbook questions and solved problems, ensuring you grasp each concept thoroughly. Explore our extensive test bank, chapter solutions, and instructor manual to aid your learning. Access free downloadable PDFs of the answers key and solutions, enhancing your study experience with ease.

4 (a) "The motivating force behind a market economy is individual self-interest."(b) "Cooperation among individuals is the keystone of a market system. Without cooperation there would be no exchange and economic welfare would suffer drastically."Are these statements true or false? Explain your
3 Which of the following do you think would lead to an increase in the current demand for beef: (a) higher pork prices, (b) higher incomes, (c) higher feed grain prices,(d) a banner-year corn crop, (e) an increase in the price of beef?
2 How many of the following "goods" do you think conform to the general law of supply: (a) gasoline, (b) cheating on exams, (c) political favors from legislators, (d) the services of heart specialists, (e) children, ( t) legal divorces, (g) the services of a minister?Explain your answer in each
1 What is the purpose of prices? Do prices do anything other than ration goods to those with the most dollar votes? Explain. What factors determine the price of a good?
What are TWO M ETHODS OF MAKING DECISIONS
6 SENATOR DOGOODER: I favor an increase in the minimum wage because it would help the unskilled worker.SENATOR DONOTHING: I oppose an increase in the minimum wage because it would cause the unemployment rate among the young and unskilled to rise.Is the disagreement between Senator Dogooder and
5 "Reasonable rental housing could be brought within the economic means of all if the government would prevent landlords from charging more than $200 per month rent for a quality three-bedroom house." Use the economic way of thinking to evaluate this view.
What's Wrong with This Economic Experiment?A researcher hypothesizes that the medical attention received by U.S. citizens 1s madequate because many people cannot afford medical care. The researcher interviews 1 00 randomly selected individuals and asks them, "Would you use physician services or
3 Write a couple of paragraphs, explaining in your own words the meaning and essential ingredients of the economic way of thinking.
2 What does it mean to economize? Do you attempt to economize? Why or why not?
1.Indicate how each of the following changes would influence the incentive of a decision-maker to undertake the action described.(a) A reduction in the temperature from 80° to 50° on one's decision to go swimming(b) A change in the meeting time of the introductory economics course from 1 1 :00
7. Suppose that a very high tariff was placed on steel imported into the United States. How would that affect employment in the U.S.auto industry? (Hint: Think about how higher steel prices will impact the cost of producing automobiles.)
14. *Why will political decentralization make it more difficult for governments to levy taxes and spend the revenues on things that provide citizens with little value relative to cost?
13. *Even though workers in low-wage countries often seek to immigrate to higher-wage countries, the flow of investment toward many low-wage countries is small. Why is this so?
12. *Firms can choose where to establish a production facility. What are some of the major factors that will influence whether a firm will invest and produce in a country?
11. Why are income levels in the United States so high? Is the United States prosperous because it is democratic? Discuss.
10. *Does a country have to be democratic in order to achieve economic freedom? If a country is democratic, will it necessarily be economically free? Why or why not?
9. Do we count on majority rule to protect civil liberties such as the right to free speech, freedom of the press, the right to assembly, and religious freedom? Should we count on majority rule to protect economic rights like the freedom to trade, the freedom to compete in the business or
8. *If there were no high-income developed countries like those of Western Europe, North America, and Japan, would less-developed countries like Hong Kong, Singapore, South Korea, China, and India have been able to grow so rapidly in recent decades?Explain.
6. *What are the major sources of economic growth? Why do some countries grow and achieve high-income levels while others stagnate in poverty? What do you think can be done to change this situation?
5. Indicate five of the world’s economies that are most free. How do the income levels and growth rates of freer economies compare with those that are less free?
4. *What conditions must be present for a country to achieve a high score on the Economic Freedom of the World (EFW) index?
3. “The rich countries are getting richer, while the poor are getting poorer.” Evaluate this statement.
2. Name five of the fastest-growing economies in the world since 1990. Why do you think these economies have grown so rapidly?
1. Name five countries with a high income per capita. Why do you think the income is so high in these countries? How many of your high-income countries also ranked among the fastest-growing countries in the world since 1990?
13. *When the government is heavily involved in the regulation of markets, how will this influence the gains from trade? How will it influence the degree of rent-seeking by business and labor groups and the campaign contributions available to politicians?
12. *The diversity of goods available to consumers today is much greater than in the past. How does this influence consumer welfare? Do the GDP growth figures capture the impact of the increased diversity?Why or why not?
10. What impact do natural resources have on economic growth? Will it be possible for a country with few natural resources to grow rapidly?Why or why not?
9. How does money of stable value influence the volume of trade? When the inflation rate is volatile, how is the volume of trade affected? How will this influence the income levels of people?
7. What must an entrepreneur do in order to introduce a new innovative product? What determines whether the new product will be a success or failure? How important is innovation as a source of economic growth? Discuss.
6. “Regulatory policies that restrict trade and voluntary agreements between parties will retard economic progress.” Indicate why you either agree or disagree with this statement.
4. What happened to economic growth between 1000 and 1800? How did the situation change after 1800? Why were these two periods so dramatically different? Discuss.
3. *“Without aid from industrial nations, poor countries are caught in a poverty trap. Because they are poor, they are unable to save and invest;and, lacking investment, they remain poor.” Evaluate this view.
2. Indicate in your own words why trade, entrepreneurial discovery, and investment are important sources of economic growth and achievement of high income levels.
12. Keynesian economists argue that economic conditions in recent years would have been much worse if it had not been for the increases in government spending and the large budget deficits.They also argue that the recovery would have been more robust if the spending increases and budget deficits
10. Prior to the mid-1970s, many economists thought that inflation would lead to a lower rate of unemployment. Why? How does the modern view of the Phillips curve differ from the earlier view?
9. How does the long-term unemployment rate present during 2009–2011 compare with the long-term rate accompanying prior recessions? Why do you think this was the case?
8. During difficult times, politicians are under strong pressure to take action. One recently stated, “We are going to keep trying things until we fine something that works.” Do you believe this is a good strategy? Why or why not?
5. *How would you expect the actual unemployment rate to compare with the natural unemployment rate in the following cases?a. Prices are stable and have been stable for the last four years.b. The current inflation rate is 3 percent, and this rate was widely anticipated more than a year ago.c.
13. What is the quantity theory of money? Is the theory valid?
12. According to economists of the Austrian school, what is the major cause of the business cycle? Would economists of the Keynesian school agree? Discuss.
9. Is stability in the general level of prices through time important?Why or why not? Should price stability be the goal of monetary policy? Should monetary policy-makers try to shift monetary policy in a manner that will smooth the ups and downs of the business cycle? Explain your responses.
6. How rapidly has the money supply (M1) grown during the past twelve months? How rapidly has M2 grown? Do you think the monetary authorities should increase or decrease the growth rate of the money supply during the next year? Why? (The data necessary to answer this question are available at the
3. *What is the opportunity cost of the following?a. obtaining a $100,000 houseb. holding the house for one yearc. obtaining $1,000d. holding the $1,000 in your checking account for one year
2. *How would each of the following influence the quantity of money you would want to hold?a. an increase in the interest rate earned on checking depositsb. an increase in the expected rate of inflationc. an increase in incomed. an increase in the differential interest rate between money market
18. *Suppose that the reserve requirements are 10 percent and that the Federal Reserve purchases $2 billion in securities from a brokerage firm on a given day.a. How will this transaction affect the M1 money supply?b. If the brokerage firm that sold the bonds to the Fed deposits the proceeds of the
17. Suppose that the reserve requirement is 10 percent and the balance sheet of the People’s National Bank looks like the accompanying example.a. What are the required reserves of People’s National Bank? Does the bank have any excess reserves?b. What is the maximum loan that the bank could
16. *Suppose that the Federal Reserve purchases a bond for $100,000 from Donald Truck, who deposits the proceeds in the Manufacturer’s National Bank.a. What will be the impact of this transaction on the supply of money?b. If the reserve requirement ratio is 20 percent, what is the maximum amount
15. How would the following influence the growth rates of the M1 and M2 money supply figures over time?a. an increase in the quantity of U.S. currency held overseasb. a shift of funds from interest-earning checking deposits to money market mutual fundsc. a reduction in the holdings of currency by
14. Why is the actual money deposit multiplier generally less than the potential multiplier?
13. *Are the following statements true or false?a. “You can never have too much money.”b. “When you deposit currency in a commercial bank, cash goes out of circulation and the money supply declines.”c. “If the Fed would create more money, Americans would achieve a higher standard of
11. What is the federal funds interest rate? If the Fed wants to use open market operations to lower the federal funds rate, what action should it take? Explain.
10. *If the Federal Reserve does not take any offsetting action, what would happen to the supply of money if the general public decided to increase its holdings of currency and decrease its checking deposits by an equal amount?
7. The excess reserves of the banking system were quite large during mid-year 2011. If the banks use these excess reserves to extend additional loans, what will happen to the money supply? Explain.Is this a potential problem? Why or why not?
6. *Suppose you withdraw $100 from your checking account. How does this transaction affect (a) the supply of money, (b) the reserves of your bank, and (c) the excess reserves of your bank?
4. “People are poor because they don’t have very much money. Yet, central bankers keep money scarce. If people had more money, poverty could be eliminated.” Evaluate this view. Do you think it reflects sound economics?
14. The “cash for clunkers” program of 2009 provided a subsidy of about $4,000 to those willing to buy a new car and have their old one destroyed. How did this policy affect the demand for new cars during the five months of the program? How did it affect the demand for new cars after it
13. * If the impact on tax revenues is the same, does it make any difference whether the government cuts taxes by (a) reducing marginal tax rates or (b) increasing the personal exemption allowance? Explain.
12. Marginal tax rates were cut substantially during the 1980s, and although rates were increased in the early 1990s, the marginal rates applicable in the highest income brackets were still well below the top rates of the 1960s and 1970s. How did the lower rates of the 1980s and 1990s affect the
11. What is the current rate of unemployment? How rapidly has real GDP grown during the past three years? What do these figures indicate about the validity of the Keynesian view? Explain.
10. * How do persistently large budget deficits affect capital formation and the long-run rate of economic growth? Do the proponents of the Keynesian, crowding out, and new classical theories agree on the answer to this question? Discuss.
9. Does fiscal policy have a strong impact on aggregate demand? Did the shift of the federal budget from deficit to surplus during the 1990s weaken aggregate demand? Did the government spending increases and large budget deficits of 2008–2011 strengthen aggregate demand? Discuss.
8. If the government becomes more heavily involved in subsidizing some businesses and sectors of the economy while levying higher taxes on others, how will this influence the quantity of rent seeking? How will this affect long-term growth? Explain your response.
7. “Bill Clinton reduced government spending and shifted the federal budget toward surplus, while Presidents Bush and Obama adopted the Keynesian policies of spending growth financed by borrowing. If we want to return to prosperity, we need to discard the Bush-Obama policies and return to those
6. Are changes in discretionary fiscal policy likely to be instituted in a manner that will reduce the ups and downs of the business cycle?Why or why not?
5. Outline the supply-side view of fiscal policy. How does this view differ from the various demand-side theories? Would a supplyside economist be more likely to favor a $1,000 rebate to all taxpayers or an equivalent reduction in marginal tax rates? Why?
4. Will increases in government spending financed by borrowing help promote a strong recovery from a severe recession? Why or why not?
3. Suppose that the government provides each taxpayer with a $1,000 tax rebate financed by issuing additional Treasury bonds. Outline alternative views that predict how this fiscal action will influence interest rates, aggregate demand, output, and employment.
2. What is the crowding-out effect? How does it modify the implications of the basic Keynesian model with regard to fiscal policy? How does the new classical theory of fiscal policy differ from the crowding-out model?
1. Suppose that you are a member of the Council of Economic Advisers. The president has asked you to prepare a statement on the question, “What is the proper fiscal policy for the next twelve months?” Prepare such a statement, indicating (a) the current state of the economy (that is, the
11. If uncertainty about the future causes households to increase their saving and reduce their consumption spending during a recession, how will this affect the economy? Explain. If households save little and spend most of their income on current consumption, how will this affect the economy?
10. When output and employment slowed in early 2008, the Bush Administration and the Democratic Congress passed legislation sending households a check for $600 for each adult (and $300 per child). These checks were financed by borrowing. Would a Keynesian favor this action? Why or why not?
9. “An increase in aggregate demand will tend to increase real output by a larger amount when unemployment is widespread than when the economy is operating at or near full employment.” Is this statement true? Explain.
8. *What are automatic stabilizers? Explain their major advantage.
7. Are discretionary changes in fiscal policy likely to be instituted in a manner that will help smooth the ups and downs of the business cycle? Why or why not?
6. *According to the Keynesian view, what fiscal policy actions should be taken if the unemployment rate is high and current GDP is well below potential output?
5. From a stabilization standpoint, why is proper timing of a change in fiscal policy important? Is it easy to time fiscal policy changes properly? Why or why not?
4. What is a budget deficit? How are budget deficits financed? Why do Keynesians believe that budget deficits will increase aggregate demand?
3. *What is the multiplier principle? What determines the size of the multiplier? Does the multiplier make it more or less difficult to stabilize the economy? Explain.
2. What do Keynesians think cause fluctuations in output? What must be done to maintain full-employment capacity?
1. What determines the equilibrium rate of output in the Keynesian model? Why did Keynes think the Great Depression lasted so long and the unemployment rate remained so high throughout the 1930s?
13. (a) Housing prices rose sharply between 2002 and mid-year 2006. Use the AD–AS model to illustrate the impact of the housing price increases on output and employment. (b) During 2007 and 2008, housing prices fell sharply. Use the AD–AS model to illustrate the impact of these price declines
12. Consider an economy with the following aggregate demand (AD) and aggregate supply (AS) schedules. These schedules reflect the fact that, prior to the period we’re examining, decision makers entered into contracts and made choices anticipating that the price level would be P105.a. Indicate the
11. Construct the AD, SRAS, and LRAS curves for an economy experiencing (a) full employment, (b) an economic boom, and (c) a recession.
10. *Suppose that an unexpectedly rapid growth in real income abroad leads to a sharp increase in the demand for U.S. exports. What impact will this change have on the price level, output, and employment in the short run in the United States? In the long run?
9. How will (a) an unexpected 3 percent fall in the price level in the goods and services market differ from (b) 1 percent inflation when 4 percent inflation had been expected? What impact would (a) and (b)have on the real price of resources, profit margins, output, and employment? Explain.
8. *When actual output exceeds an economy’s full-employment output, how will the self-correcting mechanism direct the economy to long-run equilibrium? Why can’t the above-normal output be maintained?
7. During 2007, there was a substantial reduction in housing prices, and the world price of crude oil rose sharply. How did these two changes influence aggregate demand and aggregate supply in the United States? Use the AD–AS model to indicate the expected impact of these changes on output and
6. *Assume that both union and management representatives agree to wage increases because they expect prices to rise 10 percent during the next year. Explain why the unemployment rate will probably increase if the actual rate of inflation next year is only 3 percent.
5. What is the difference between an anticipated and an unanticipated increase in aggregate demand? Provide an example of each. Which is more likely to result in a temporary spurt in the growth of real output?
4. When an economy dips into a recession, consumers will often be relatively pessimistic about the future for an extended period of time.How will this pessimism affect the speed and strength of the recovery?Feel free to use the data of Exhibit 2 in your response to this question.
3. What impact would a change that shifts an economy’s production possibilities curve outward have on the long-run aggregate supply curve? How have improvements in computer technology affected production possibilities and the long-run aggregate supply curve?Explain.
2. *Indicate how each of the following would influence U.S. aggregate supply in the short run:a. an increase in real wage ratesb. a severe freeze that destroys half the orange trees in Floridac. an increase in the expected rate of inflation in the futured. an increase in the world price of oil, a
1. *Explain how and why each of the following factors would influence current aggregate demand in the United States:a. increased fear of recessionb. increased fear of inflationc. rapid growth of real income in Canada and Western Europed. a reduction in the real interest ratee. a higher price level
16. Consider an economy with the following aggregate demand (AD)and short-run aggregate supply (SRAS) schedules. Decisionmakers have previously made decisions anticipating that the price level during the current period will be P105.a. Indicate the quantity of GDP that will be produced during the
15. *The following chart indicates the aggregate demand (AD) and short-run aggregate supply (SRAS) schedules of decision-makers for the current period. Both buyers and sellers previously anticipated that the price level during the current period would be P105.a. Indicate the quantity of GDP that
14. How is a nation’s trade balance related to its net inflow of foreign capital? If a nation is running a trade deficit, is this bad? Why or why not?
13. *How are bond prices related to interest rates? Why are they related?
12. *If a bond pays $1,000 per year in perpetuity (each year in the future), what will the market price of the bond be when the longterm interest rate is 10 percent? What would it be if the interest rate were 5 percent?
11. Does inflation transfer wealth from lenders to borrowers? Why or why not? 12. *If a bond pays $1,000 per year in perpetuity (each year in the future), what will the market price of the bond be when the long-term interest rate is 10 percent? What would it be if the interest rate were 5 percent?

Showing 4700 - 4800 of 7318

First
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
Last

Macroeconomics Private And Public Choice 14th Edition James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson - Solutions

Step by Step Answers