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macroeconomics
Exploring Macroeconomics 7th Edition Robert L. Sexton - Solutions
What is demand-pull inflation?
What are recessionary and inflationary gaps?
What is the long-run macroeconomic equilibrium?
What is short-run macroeconomic equilibrium?
How can a change in input prices change the short-run aggregate supply curve but not the long-run aggregate supply curve? How could it change both long- and short-run aggregate supply?
What would happen to the short- and long-run aggregate supply curves if the capital stock grew and available supplies of natural resources expanded over the same period of time?
What would happen to short- and long-run aggregate supply curves if the government required every firm to file explanatory paperwork each time a decision was made?
What would discovering huge new supplies of oil and natural gas do to the short- and long-run aggregate supply curves?
Which of the following could be expected to shift the short-run aggregate supply curve rightward?a. A rise in the price of oilb. A natural disasterc. Wage increases without increases in labor productivityd. All of the above
The short-run aggregate supply curve will shift to the left, other things being equal, ifa. energy prices fall.b. technology and productivity increase in the nation.c. an increase in input prices occurs.d. the capital stock of the nation increases.
What factors shift the short-run aggregate supply curve exclusively?
Which factors of production affect the short-run and long-run aggregate supply curves?
The sticky wages effect is explained in the text as follows:a. When the price level decreases, output prices rise relative to input prices (costs), raising producers’ short-run profit margins.b. At equilibrium prices, when costs rise, profit margins are able to float with them and be passed
Why is the long-run aggregate supply curve vertical at the natural rate of real output?
Why do producers supply more as the price level increases in the short run?
What does the aggregate supply curve represent?
What variables shift the aggregate demand curve to the left?
What variables shift the aggregate demand curve to the right?
What is the difference between a movement along and a shift in the aggregate demand curve?
What is the open economy effect, and how does it imply a downward-sloping aggregate demand curve?
According to the real wealth effect, if you are living in a period of falling price levels on a fixed income (i.e., not indexed), the cost of the goods and services you buy ___________________ and your real income ___________________.a. decreases; decreasesb. increases; increasesc. decreases;
Why is the aggregate demand curve downward sloping?
How is the aggregate demand curve different from the demand curve for a particular good?
How would an increase in personal taxes or a decrease in transfer payments affect consumption?
Investment (I) includesa. the amount spent on new factories and machinery.b. the amount spent on stocks and bonds.c. the amount spent on consumer goods that last more than 1 year.d. the amount spent on purchases of art.e. all of the above.
Aggregate demand is the sum of _____________________.a. C 1 I 1 Gb. C 1 I 1 G 1 Xc. C 1 I 1 G 1 (X 2 M)d. C 1 I 1 G 1 (X 1 M)
Which direction will an increasing budget deficit change the equilibrium interest rate, the loanable funds supply curve, the level of loanable funds in the economy, and the likely rate of economic growth, ceteris paribus?
In the event of a corporate bankruptcy, would you rather be a bondholder, a preferred stockholder, or a common stockholder in the ailing corporation? Explain.
In 2006, a majority of subprime loans were ___________________ loans, with a(n)___________________ fixed rate for the first few years, which then reset to a(n) ___________________ rate for the rest of the term.
If the government runs a budget ___________________, other things being equal, it will tend to increase national saving, decrease the real interest rate, increase the amount of investment, and increase economic growth.
Starting from a balanced budget, a government’s move to a budget ___________________ would increase public saving and increase national saving, other things being equal.
In a(n) ___________________ economy, GDP is the sum of consumption plus investment plus government purchases.
At a real interest rate below equilibrium, a(n)___________________ for loanable funds would occur.
At a(n) ___________________ real interest rate, a greater quantity of loanable funds will be supplied.
The reason it is difficult, without inside information, to consistently pick winners in the stock market is because the value of a stock is a(n) ___________________.
A(n) ___________________ is an owner of a corporation, whereas a(n) ___________________ is a creditor of a corporation.
Owners of preferred stock receive a(n)___________________ dividend payment, whereas owners of ___________________ stock do not.
An economy that invests a(n) ___________________ fraction of its GDP tends to grow faster.
Saving refers to a(n) __________________ concept, while savings refers to a(n) __________________ concept.
Which of the following is true?a. Subprime loans became much more common-leading up to the financial crisis.b. In 2006, more than half of subprime loans were hybrids.c. Hybrid home loans were often taken out on the assumption that home prices would continue to rise and the borrower expected to
Which of the following is true of the financial crisis of 2008?a. The financial crisis had multiple causes.b. Fannie Mae and Freddy Mac’s willingness to buy subprime loans reduced the perceived risk others felt in issuing or buying them.c. Home loan standards were lowered-contributing to the
Why does Y 2C 2G 5S in a simple, closed economy?
At a given interest rate if the quantity of loanable funds supplied is less than the quantity of loanable funds demanded,a. there is a surplus of loanable funds and real interest rates will rise.b. there is a surplus of loanable funds and real interest rates will fall.c. there is a shortage of
Corporations can finance their growtha. by issuing bonds.b. by issuing new shares of stock.c. through plowbacks.d. by all of the above.
What are stocks?
What are bonds?
Answer the following questions about real GDP per capita.a. If Country A had four times the initial level of real GDP per capita of Country B and it was growing at 1.4 percent a year, while real GDP was growing at 2.3 percent in Country B, how long would it take before the two countries had the
Malthusa. predicted that per capita economic growth would eventually become negative.b. predicted that wages would ultimately reach equilibrium at a subsistence level.c. relied heavily on the law of diminishing returns.d. ignored the potential for technological advances.e. All of the above are true.
Thomas Malthus’s model assumed thata. the economy was agricultural, using land and labor.b. the supply of land was fixed.c. sexual desire worked to increase population.d. all of the above are true.
Which of the following is true?a. If population expands faster than real output, per capita real GDP will fall.b. If real GDP expands faster than population, per capita real GDP will rise.c. With economies of large-scale production, larger populations can result in more efficient production.d. All
In a country that has an unstable government or judiciary, would you expect to see more or less entrepreneurial activity?a. Less because an unstable economy has fewer entrepreneursb. Less because of an unreliable infrastructure for protecting property rightsc. More because of fewer governmental
According to Paul Romer, a new growth economist,a. economic growth can continue unimpeded, as long as we keep coming up with new ideas.b. while the market is a great engine for economic growth, it can be “turbocharged” with strong institutional support for education and science.c. economic
Which of the following is true?a. In poor countries where there is little capital, small increases in capital investment can lead to relatively large increases in productivity.b. In rich countries, where workers already have large amounts of capital, increases in capital investment may have a very
In the long run, the most important determinant of a nation’s standard of living isa. its rate of productivity growth.b. its ability to export cheap labor.c. its ability to control the nation’s money supply.d. its endowment of natural resources.
Which of the following will lead to productivity growth?a. Technologyb. Natural resourcesc. Physical capitald. Human capitale. All of the above
What is human capital?
What factors contribute to economic growth?
When the Dutch “created” new land with their system of dikes, what did it do to their production possibilities curve? Why?
If long-run consequences were not important, would many students go to college or participate in internship programs without pay?
Even if “in the long run, we are all dead,” are you glad earlier generations of Americans worked and invested for economic growth?
Why does the production possibilities curve shift outward with economic growth?
According to the Rule of 70, if a nation grows at a rate of 5 percent per year, it will take roughly _____________________ for national income to double.a. 10 yearsb. 7 yearsc. 70 yearsd. 14 yearse. none of the above
An economy’s production possibilities curve will shift outward over time ifa. technological progress occurs.b. the stock of available capital decreases.c. emigration results in a decrease in the supply of available labor.d. the productivity of labor increases.e. either (a) or (d) occurs.
How much the economy can produce at its natural rate of output depends ona. technology.b. the quantity of available natural resources.c. the productivity of labor.d. the stock of available capital.e. all of the above.
Economic growth is usually measured by the annual percent change ina. nominal GDP.b. nominal GDP per capita.c. real GDP.d. real GDP per capita.
Economic growth refers to a(n) _____________________ in the output of goods and services in an economy.The greater the economic growth, the _____________________ goods citizens and their descendants will have to consume.a. decrease; lessb. decrease; morec. increase; mored. increase; less
What is productivity?
What is the Rule of 70?
What is economic growth
Fill in the missing data for the following table: Year GDP Deflator (in billions) Nominal GDP Real GDP (in billions) 2008 90.9 $7,000 2009 100 $8,000 2010 $10,000 $8,000 2011 140 $14,000 2012 150 $12,000
Answer these questions about GDP.a. Could next year’s real GDP exceed next year’s nominal GDP?b. Could real GDP grow at the same time that real GDP per capita falls?c. Could people’s real consumption possibilities expand at the same time that real GDP per capita falls?d. How does changing
Nominal GDP in Nowhereland in 2016 and 2017 is as follows:Can you say that the production of goods and services in Nowhereland has increased between 2008 and 2009? Why or why not? NGDP 2016 $4 trillion NGDP 2017 $4.8 trillion
List, from the largest magnitude to the smallest, the following categories: disposable personal income, gross national product, national income, net national product, personal income.
How does GNP compare to GDP when:a. earnings of foreigners and foreign firms in the United States equal earnings of American citizens and firms overseas?b. earnings of foreigners and foreign firms in the United States exceed earnings of American citizens and firms overseas?c. earnings of foreigners
Answer these questions about durable goods and GDP:a. Do consumer nondurable or durable goods tend to change more over the course of a business cycle?b. How are consumer durables like investments?c. Can either fixed investment or inventory be negative in a given year?d. Why isn’t all of
Fill in the missing data for the following table (in billions):Consumption: _____________________ Consumption of durable goods: $1,200 Consumption of nondurable goods: $1,800 Consumption of services: $2,400 Investment: _____________________ Fixed investment: $800 Inventory investment: $600
Using any relevant information below, calculate GDP using the expenditure approach.Inventory investment $ 50 billion Fixed investment 120 billion Consumer durables 420 billion Consumer nondurables 275 billion Interest 140 billion Indirect business taxes 45 billion Government wages and salaries 300
The expenditures on tires by the Ford Motor Company are not included directly in GDP statistics while consumer expenditures on replacement tires are included. Why?
To which category of U.S. GDP expenditure does each of the following correspond?a. Department of Motor Vehicles servicesb. Automobiles exported to Europec. A refrigeratord. A newly constructed four-bedroom housee. A restaurant mealf. Additions to inventory at a furniture store g. F-16 fighter jets
Which of the following are included in GDP calculations?a. Cleaning services performed by Molly Maid Corporationb. Lawn-mowing services performed by a neighborhood childc. Drugs sold illegally on a local street cornerd. Prescription drugs manufactured in the United States and sold at a local
Answer the following questions about GDP.a. What is the definition of GDP?b. Why does GDP measure only the final value of goods and services?c. Why does GDP measure only the value of goods and services produced within a country?d. How does GDP treat the sales of used goods?e. How does GDP treat
The value that individuals place on leisure is _____________________ in calculating GDP.
The most important nonmarket transactions omitted from GDP are services provided directly _____________________.
We do not have _____________________ enough information on the output of nonmarket transactions to include it in the GDP.
To calculate real per capita GDP, we divide _____________________ GDP by the _____________________ to get the value of real output of final goods and services per person.
The formula for converting any year’s nominal GDP into real GDP (in base year dollars) is real GDP equals _____________________ divided by the _____________________, times 100.
_____________________ income is the personal income available to individuals after taxes.
_____________________ must be subtracted from gross domestic product to get net national product.
The incomes received by persons providing goods and services are actually payments to the owners of _____________________ resources and are sometimes called _____________________ payments.
Factor payments include _____________________ for the use of labor services, _____________________ for land, _____________________ payments for the use of capital goods, and _____________________ for entrepreneurs, who put labor, land, and capital together.
Output creates _____________________ of equal value.
The _____________________ approach to measuring GDP involves summing the incomes received by producers of goods and services.
Imports must be _____________________ from GDP in order to obtain an accurate measure of domestic production.
_____________________ payments are not included in government purchases because that spending does not go to purchase newly produced goods or services.
When the economy is booming, investment purchases tend to _____________________ dramatically.
The two categories of investment purchases measured in the expenditures approach are _____________________ investment and _____________________ investment.
Investment, as used by economists, refers to the creation of _____________________ goods, whose purpose is to _____________________.
Sales of nondurable consumer goods tend to be _____________________ stable over time than sales of durable goods.
The most important single category of consumer durable goods is consumer _____________________.
Consumption refers to the purchase of consumer goods and services by _____________________.
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