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Macroeconomics In Context: A European Perspective 1st Edition Sebastian Dullien, Neva Goodwin, Jonathan M. Harris, Julie A. Nelson, Brian Roach, Mariano Torras - Solutions
1. 4. Go to the OECD’s Web site for the Better Life Index(www.oecdbetterlifeindex.org). Note that you can adjust the weights applied to each of the 11 well-being dimensions using a sliding scale.Adjust the weights based on your personal opinions. To which factors do you assign the most weight? To
1. 3. Go to the European Union’s “Europe 2020” Web site. Locate the scoreboard for your country. Answer the following questions:a. Which dimensions have improved compared to 2008? Which have deteriorated?b. For which indicators do you believe meeting the targets by 2020 is realistic?c. What
1. 2. Indicate whether each of the following actions or impacts would increase GDP.a. An individual purchases bottled water to avoid a contaminated municipal water supply.b. An individual obtains her drinking water from a water fountain at her workplace to avoid a contaminated municipal water
1.1. Describe in a short paragraph why measures of output do not always measure well-being. Include some specific examples beyond those given in the text.
1. 17. What is the maintenance-cost approach to estimating the value of environmental services?
1. 16. What is the damage-cost approach to estimating the value of environmental services?
1. 15. What are the potential problems with estimating environmental impacts in monetary terms?
1. 14. What is environmentally adjusted net domestic product?
1. 13. What are the three main functions of natural systems?
1. 12. What is the difference between the replacement-cost method and the opportunity-cost method for valuing household production?
1. 11. What are some examples of household production?
1. 10. What is the Human Development Index?
1. 9. What is the Better Life Index, and how is it measured?
1. 8. In how far has the EU made progress reaching the Europe 2020 targets?
1. 7. What is the Europe 2020 scoreboard, and what does it include?
1. 6. What are some of the main critiques of GDP as a measure of well-being?
1. 5. Do average levels of SWB increase as a country develops economically?
1. 4. Based on the scientific research, what is the relationship between the average level of SWB in a country and its GDP per capita?
1. 3. What is subjective well-being (SWB), and how is it commonly measured?
1. 2. What are satellite accounts?
1.1. What are the two major contexts for economic activity?
1.2. Suppose that your national government officially adopted your preferred indicator from the previous question. How do you think this would change specific policy debates in your country? What new policies do you think could be enacted?
1.1. Of the various alternative indicators presented in this chapter, which one would you advocate as the best approach for measuring economic well being? What do you think are the strengths and weaknesses of this indicator?
1. 2. Some people have argued that the monetary valuation of environmental costs and benefits is important because “any number is better than no number”—without valuation, these factors are omitted from GDP accounts. Others say that it is impossible to express environmental factors adequately
1.1. In Burgess County, current irrigation methods are leading to rising salt levels in agricultural fields. As a result, the number of kilograms of corn that can be harvested per hectare is declining. If you are a county agricultural economist, what two approaches might you consider using to
1. 2. Think back on at least one household activity in which you have engaged in the past couple of days that in principle could be replaced by market or third-person services. How would that activity be valued by the replacement-cost method? By the opportunity-cost method? What sorts of
1.1. Do you think that national governments should incorporate a monetary estimate of the value of household production in national accounting statistics? How do you think the inclusion of household production would affect the measurement of economic activity in developed versus developing
1.2. Give examples of each of the following:■ Efforts to supplement GDP■ Efforts to adjust GDP■ Efforts to replace GDP Are there some alternatives discussed above that would fit into more than one of these categories? Are there some that are difficult to fit into any of them? Would you
1.1. Does the Europe 2020 scorecard include anything that you think should be left out or fails to account for something that you think should be included? Think hard about what you really think human well-being is about.
1. 2. In Chapter 3, we discussed how economies are based on natural, manufactured, social, and human capital. Only the value of manufactured capital (structures and equipment)—and, recently, software—is estimated in the current national accounts. Can you think of ways that the stocks of
1.1. GDP can be characterized as a (rough) measure of the amount of“throughput” taking place in an economy—as measuring the level of activity whose purpose it is to turn renewable and nonrenewable resources into new products. How does throughput relate to sustainable well-being? Is more
1. 11. (If Appendix is assigned) The “chained Year 1 euro” estimate of real GDP in the apples-and-oranges example (see Appendix) is smaller than the“constant Year 1 euro” estimate of real GDP. Can you explain why?(Hint: Compare the GDP growth rates derived using the two methods.)
1. 10. Go to the Eurostat Web site (http://ec.europa.eu/eurostat) and locate its information on the change of the consumer price index for the euro area(“Inflation HICP—all items”)? What month is this for? By how much have prices risen over the past 12 months? For which three euro-area
1. 9. Match each concept in Column A with a definition or example in Column B:Column A Column Ba. A negative (subtracted) item in GDP 1. The year in which real and nominal values are equalc. An imputed valueb. A major cause of difference between GDP and national income 2. Purchases of computer
1. 8. Go to the Eurostat Web site (http://ec.europa.eu/eurostat). What are the latest figures for real GDP, current euro GDP, and the growth rate of GDP for the euro area? What time period do these represent? With which base year is real GDP expressed? In a second step, go to your country’s
1. 7. List the key simplifying assumptions of the traditional macro model concerning:a. The forms of capital included in the modelb. The sectors of the economyc. Who in the economy produces and invests
1. 6. Assume the same simple economy described in the previous question.a. Calculate a constant-weight price index for the second year, using the first year as the base.b. What is the growth rate of prices (inflation rate) from the first to the second year?
1. 5. Suppose an extremely simple economy produces only two goods, pillows and rugs. In the first year, 50 pillows are produced and sold at €5 each;11 rugs are produced and sold at €50 each. In the second year, 56 pillows are produced and sold for €5 each; 12 rugs are produced and sold at
1. 4. Using the relations among accounting categories demonstrated in the tables and identities in the text, use the information on values in the chart that follows (measured in Neverlandian pesos) from the country of Neverland in 2015 to find values for the following categories:a. Gross value
1. 3. In which line (or lines) of Table 5.3(the spending approach) would the value of each of the following be counted? “Not counted in any category” is also an option.a. A new refrigerator bought by a familyb. A bottle of wine produced in France and bought by a store in New Yorkc. New
1. 2. In which line (or lines) of Table 5.4(the income approach) would the value of each of the following be counted in the macroeconomic accounts of the euro area? If it is part of “net income flows from the rest of the world,” explain whether it reflects domestic (or foreign)production and
1.1. In which line (or lines) of Table 5.2(the product approach) would the value of each of the following be counted? “Not counted in any category” is also an option.a. Production of fresh apples, domestically grown for profitable saleb. Public health inspection servicesc. Education services
1.19. Explain how a country can finance an excess of imports over exports.
1. 18. Explain how savings, investment, and trade are related in the national accounts.
1. 17. Is there only one kind of price index? Explain.
1. 16. Describe the reasoning behind the “constant-weight” method traditionally used in estimating the price indexes.
1. 15. What are some problems with the “constant-price” approach to calculating real GDP?
1. 14. Describe the reasoning behind the “constant-price” approach to calculating real GDP.
1. 13. What are the major differences between GDP and national income?
1. 12. Describe the components of GDP according to the spending approach.
1. 11. Describe the components of GDP according to the product approach.
1. 10. How are “market values” determined for goods and services that are not exchanged in markets or when data is not available?
1. 9. Explain why the following two approaches arrive at the same number for the value of a final good: (a) looking at the market price of the good and (b) counting up the value added at each stage of its production.
1. 8. Explain why, in a simple economy, the three approaches would yield the same figure for the value of total production.
1. 7. What are the three approaches to GDP measurement?
1. 6. Explain four key phrases that appear in the definition of GDP.
1. 5. Explain the difference between gross and net investment.
1. 4. What forms of capital assets are tracked by the European statistical authorities?
1. 3. What are the five accounting sectors of the economy, according to European standards? What sorts of entities are included in each sector?
1. 2. Who compiles the European System of National and Regional Accounts?
1.1. For what purpose was national accounting in England and France originally begun?
1. 2. Do you think the savings rate of the euro area is appropriate? What might be done to raise this rate by individuals, corporations, or government?
1.1. Suppose that the country of Atlantis is investing and exporting a great deal, while it imports little. What can you say about its level of national saving? Suppose the country of Olympus invests more than it saves.How can it do this?
1. 2. How is the “constant-price” method of estimating real GDP similar to the use of “constant weights” in the computation of the price indexes?Explain.
1.1. The “constant-price” method of estimating real GDP uses prices for one year to calculate measures of GDP for all years. Why is it sometimes important to evaluate GDP in the current year using prices from some other year? Why can’t we just always use current prices? Explain.
1. 2. Sometimes GDP is defined as “The total market value of all final goods and services newly produced in a country over time.” Given the discussion, how true is this definition, really? Does GDP really count only goods and services exchanged in markets? Does it really account for all
1.1. The previous section explained why a country’s “production” and“income” can be thought of as roughly equal in a conceptual sense. Why, in practice, does the value of domestic production actually differ from the total of domestic incomes?
1. 2. Under the ESA definitions, would spending on education be counted as investment? Would buying shares in a company be considered investment? Why?
1.1. The ESA definitions of sectors use some conventions that are not obvious. To which sector might European statistical offices assign each of the following entities? Why?a. A local city government–owned golf course that charges fees similar to those at local private coursesb. A large nonprofit
1. 3. Using your understanding of the nonprice determinants of supply and of demand, analyze each of the following market cases. Draw a graph showing what happens in each situation, indicate what happens to equilibrium price and quantity, and explain why. The first case is done as an
1. 2. Continuing from the previous problem, suppose that new innovations in energy efficiency reduce people’s need for electricity. The supply side of the market does not change, but at each price, buyers now demand 3 million kWh fewer than before. For example, at a price of 11 cents per kWh,
1.1. Suppose that the supply-and-demand schedules for a local electric utility are as follows: The price is in cents per kilowatt-hour (kWh), and the quantity is millions of kilowatt-hours. The utility does not operate at prices less than 13 cents per kWh.Price Quantity supplied Quantity demanded
1. 15. What are some of the problems that can be created by large price swings?
1. 14. Describe why sellers of a good might adjust the quantity of what they produce rather than the price.
1. 13. Describe what is meant by the price elasticity of demand and the price elasticity of supply.
1. 12. Describe, using graphs, how an increase in demand affects equilibrium quantity and price. Repeat for a decrease in demand.
1. 11. Describe, using graphs, how an increase in supply affects equilibrium quantity and price. Repeat for a decrease in supply.
1. 10. Draw a graph illustrating surplus, shortage, and equilibrium.
1. 9. Describe how goods can be “complementary.” Describe how the demand curve for a good may be affected by an increase in the price of a second good that is complementary to the first.
1. 8. Describe how goods can be “substitutes.” Describe how the demand curve for a good may be affected by an increase in the price of a second good that is a substitute for the first.
1. 7. Describe two factors that might cause a demand curve to shift.
1. 6. Illustrate on a clearly labeled graph (a) a decrease in quantity demanded and (b) a decrease in demand.
1. 5. Define and sketch a demand curve.
1. 4. Describe two factors that might cause a supply curve to shift.
1. 3. Illustrate on a clearly labeled graph (a) a decrease in quantity supplied and (b) a decrease in supply.
1. 2. Define and sketch a supply curve.
1.1. Describe three characteristics of the type of market featured in classical analysis.
1. 2. Has there been any talk of “speculative bubbles” in news reports recently? If so, what markets are being discussed? What explanations are given for why prices may be so high?
1.1. Think of several things that you regularly buy. For which of these goods or services do prices seem to change rapidly? For which do they seem to change slowly? Can you explain why?
1. 2. Have you ever found yourself shut out of a class that you wanted to take because it was already full? Or has this happened to a friend of yours?Analyze this situation in terms of surplus or shortage. Are classes supplied “in a market”? Do you think that it would be good if they were?
1.1. Think about the market for high-quality basketballs. In each of the following cases, determine which curve shifts and in which direction.Also draw a graph and describe, in words, the changes in price and quantity. (Treat each case separately.)a. A rise in basketball players’ incomeb. An
1. 2. Verbally explain the difference between a change in quantity demanded and a change in demand. Considering the demand side of the market for lawn-mowing services, what kind of change (increase or decrease in quantity demanded or demand) would each of the following events cause?a. A new office
1. 2. Verbally explain the difference between a change in quantity supplied and a change in supply. Considering the supply side of the market for lawn-mowing services, what kind of change (increase or decrease in quantity supplied or supply) would each of the following events cause?a. A rise in the
1. 2. Think about a case recently in which you exchanged money for a good or service. Was that market “perfectly competitive”?
1.1. Have you ever traded on eBay or a similar Internet auction site? If you have, describe to your classmates how it works.
1. 5. Suppose that a tax system is set up as follows: Everyone gets to subtract€3,000 from their income and then pays the government 20 percent of the rest. Is this tax proportional, progressive, or regressive? Show your reasoning. (Hint: calculate what households with incomes of €10,000 per
1. 4. Match each concept in Column A with a definition or example in Column B:Column Aa. An important function of the core sphereb. Social capitalc. Progressive taxationd. A nonrenewable natural resourcee. Capital gainf. Quintile g. An important function of the public purpose sphere h. Net
1. 3. Statistics from the government of Thailand describe the household income distribution in that country, for 2009, as follows:Group of households Share of aggregate income (%)Poorest fifth 5.5 Second fifth 8.8 Middle fifth 13.2 Fourth fifth 21.5 Richest fifth 51.0 Source: National Statistics
1. 2. Which of the following are examples of exchange? Of transfer?a. De Beers mining company sells diamonds to wholesalersb. De Beers mining company takes diamonds from the minesc. You pay interest on credit card balancesd. Your bank donates posters for a local community fair
1.1. Which of the following are flows? Which are stocks? If a flow, which of the five major kinds of capital does it increase or decrease? If a stock, what kind of capital is it?a. The fish in a lakeb. The output of a factory during a yearc. The income that you receive in a monthd. The reputation
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