Macroeconomics Policy And Practice 2nd Global Edition Frederic S Mishkin - Solutions

Unlock the comprehensive solutions to "Macroeconomics Policy and Practice 2nd Global Edition" by Frederic S Mishkin with our expertly crafted answers key. Dive into our online resource that offers a complete solution manual in PDF format, featuring solved problems and step-by-step answers. Explore our test bank and chapter solutions that provide detailed questions and answers, enhancing your understanding of the textbook. Our instructor manual is designed to guide you through complex concepts with ease. Enjoy the convenience of a free download, ensuring you have the tools you need to succeed in your studies.

3. What are two important properties of economic models? Models are often simplified descriptions of a real-world phenomenon. Does this mean that they are unrealistic?
2. What is meant by empiricism?
1. What does it mean to say that economists use the scientific method? How do economists distinguish between models that work and those that don’t?
9. It is the night before your economics final exam and you must decide how many hours to study. The total benefits in the following table shows how many more points you will earn because of increased knowledge. The total cost column shows how many points you will lose because of careless errors
8. An economist observes that many students spend $100,000 to go to college. This researcher could ask whether such spending is worth it, or she could assume that it is worth it. In other words, she could assume that students are optimizing and that the education system is in equilibrium. If we
7. In 2014, California was in its third year of a major drought. With water supplies dwindling, Governor Brown issued a plea for a voluntary 20 percent reduction in water use. This target was not reached. In early 2015 Governor Brown issued an executive order requiring local water agencies to
6. Consider the following three statements:a. You can either stand during a college football game or you can sit. You believe that you will see the game very well if you stand and others sit but that you will not be able to see at all if you sit and others stand. You therefore decide to stand.b.
5. Suppose you are ready to check out and see two lines: Line A has 3 people, while line B has 5 people.a. Assume people just chose lines at random and have not yet had a chance to switch lines. Would you consider this situation to be in equilibrium? Why or why not?b. Assume that all 8 shoppers
4. You have decided that you are going to consume 600 calories of beer and snacks at a party Saturday night. A beer has 150 calories and a snack has 75 calories.a. Create a table that shows the various combinations of beer and snacks you can consume. To keep things simple, use only round numbers
3. You have 40,000 frequent flier miles. You could exchange your miles for a round-trip ticket to Bermuda over spring break. Does that mean your flight to Bermuda would be free? Explain your reasoning.
2. You are thinking about buying a house. You find one you like that costs $200,000. You learn that your bank will give you a mortgage for $160,000 and that you will have to use all of your savings to make the down payment of $40,000. You calculate that the mortgage payments, property taxes,
1. You have already purchased (non-refundable and unsellable) tickets to a concert on Friday night. A friend also invites you to her birthday party on Friday. While you like your friend, you politely decline because you really want to go to the concert.a. You learn that your friend is serving
11. Identify cause and effect in the following examples:a. A rise in the worldwide price of peaches and a drought in California;b. A surge in cocoa prices and a pest attack on the cocoa crop.
10. Explain the concept of causation with the help of a simple real-life example.
9. Economists are often concerned with the free-rider problem.a. What is meant by free riding? Explain with an example.b. Explain why dropping trash on a city street is an example of the free-rider problem.
8. Suppose the market price of corn is $3.50 per bushel. What are the three conditions that will need to be satisfied for the corn market to be in equilibrium at this price?
7. The costs of many environmental regulations can be calculated in dollars—for instance, the cost of “scrubbers” that reduce the amount of air pollution emitted by a coal factory. The benefits of environmental regulations often are most directly expressed in terms of lives saved (reduced
6. This chapter introduced the idea of opportunity cost.a. What is meant by opportunity cost?b. What is the opportunity cost of taking a year after graduating from high school and backpacking across Europe? Are people who do this being irrational?
5. What does a budget constraint represent? How do budget constraints explain the trade-offs that consumers face?
4. How does microeconomics differ from macroeconomics? Would the supply of iPhones in the United States be studied under microeconomics or macroeconomics? What about the growth rate of total economic output in the national economy?
3. Examine the following statements and determine whether they are normative or positive in nature. Explain your answers.a. Car sales in Europe rose 9.3 percent from 2014 to 2015.b. The U.S. government should increase carbon taxes to reduce carbon emissions that cause global warming.
2. Many people believe that the study of economics is focused on money and financial markets. Based on your reading of the chapter, how would you define economics?
1. Why do we have to pay a price for most of the goods we consume?
What can emerging market countries do to strengthen prudential regulation and supervision of their banking systems? How would these steps help avoid future financial crises?
How did the financial crises in South Korea and Argentina affect aggregate demand, shortrun aggregate supply, and output and inflation?
What objections to the new classical model have been raised?
What implications does the policy ineffectiveness proposition have for policy makers?
Why does it matter in the new classical model whether a policy change is anticipated or unanticipated by the public?
Why is the new classical model described as a misperceptions theory?
Suppose that a central bank renowned as an inflation-fighter appoints a new majority of governors choosing persons well-known to care more about unemployment than inflation.Would this affect the credibility of the bank?
Suppose the statistical office of a country does a poor job of measuring inflation and reports an annualized inflation rate of 4% for a few months, while the true increase in the price level has been around 2.5%. What will happen to the central bank’s credibility if it is engaged in inflation
As part of its response to the global financial crisis, the Fed lowered the federal funds rate target to nearly zero by December 2008, a considerable easing of monetary policy. However, survey-based measures of five-to-ten-year inflation expectations remained low until February 2010. Comment on the
Explain why having a nominal anchor could be a good way to constrain discretion of central bankers. Also, list the benefits of having a credible anchor.
In some countries, the president chooses the head of the central bank. The same president can fire the head of the central bank and replace him or her with another director at any time. Explain the implications of such a situation for the conduct of monetary policy. Do you think the central bank
What are the benefits and costs of sticking to a set of rules in each of the following cases?How do each of these situations relate to the conduct of economic policy?a) Going on a dietb) Raising children
Suppose an econometric model based on past data predicts a small decrease in domestic investment when the Federal Reserve increases the federal funds rate. Assume that the Federal Reserve is considering an increase in the federal funds rate target to fight inflation and promote a low-inflation
Why can rational expectations be considered to be optimal forecasts? What is the difference between adaptive and rational expectations?
What can you conclude from the data on inflation and central bank independence illustrated in Figure 21.4?
Define inflation targeting. Why have countries as different as Australia, Sweden, Brazil, and Philippines all adopted inflation targeting?
How does a credible nominal anchor help improve the economic outcomes that result from a positive aggregate demand shock?How does it help if a negative aggregate supply shock occurs?
Forecasting has often been described as trying to drive a car blindfolded and following directions given by someone who is looking out the back window. Does this description remind you of adaptive or rational expectations?Explain.
Greece is among the countries hit harder during the recent crisis. Do you think that the number of discouraged workers has gone up or down in Greece since 2007?
Xiaoyu earns the minimum hourly wage in China, and works 40 hours a week. When her boss offers to increase her hourly wage by 20%, she accepts the offer and decides to continue working 40 hours per week. What is the effect of Xiaoyu’s decision on the labor supply curve?
Suppose that the 2013 Japanese expansionary fiscal and monetary policy measures(‘Abenomics’) achieve their objectives. How would they affect employment and real wages?
How would the real wage increase mentioned in the previous question affect the quantity of labor supplied?
Suppose Australian real wage rates have risen in the recent past. How will it affect the quantity of labor demanded?
In the UK companies can deduct up to 175%of R&D spending in calculating their profit for tax purposes. How is that supposed to affect investment according to theory and to the available empirical evidence?
Using the expression for the expected marginal product of capital, MPKe = 3.6>Kt+1, plot the MPKe curve and determine the desired level of capital for the next period (measured in trillions)if the user cost equals 0.30(assume the price of capital is normalized to 1.0).
Assume that Yoko is considering investing in new computers for his company. The Japanese real interest rate is 4%, and computers are valued ¥100,000. The price of computers is not expected to change next year.a) Calculate the user cost of capital for computers, assuming that computers depreciate
What are the determinants of residential investment?
Define the just-in-time production method and how it relates to firms’ inventories.
What determines the user cost of capital? How would a rise in the interest rate affect it?
What are the components of investment spending? How would you classify within Spanish investment spending the price paid by Manuel who just decided to buy a newly built house by the sea in Andalucia?
Suppose Prakash has an income today of$30,000, an expected income in period 2 of$35,000, and initial wealth of $5,000. Prakash faces an interest rate of 5%.a) Graph Prakash’s intertemporal budget line. Denote the values of C1 and C2 at the intersection points with the horizontal and vertical
Briefly describe the building blocks of the Keynesian theory of consumption, also using the consumption function.
How do increases in future income and wealth affect the Intertemporal Budget Line (IBL)? How does it affect current and future consumption?
How would you explain the relationship between consumption and savings?
On June 19, 2013, following the FOMC’s regular policy meeting, the Chair of the FOMC made remarks during a press conference that were widely interpreted in financial markets to mean that the Fed might begin reducing the size of its $85 billion in monthly asset purchases sooner than expected.a)
Suppose that a laptop sells for €1,000 in Germany, and for £600 in the United Kingdom.Assuming a nominal exchange rate of 0.80 pound per euro,a) Calculate the real exchange rate between British and German laptops;b) Calculate the real exchange rate between British and German laptops if the
Comment on the advantages and disadvantages of exchange-rate pegging, mentioning the case of Argentina in the 1990s.
Explain what happens in a fixed exchange rate regime if a currency is overvalued. How can you tell that the Chinese renminbi (RMB) is not overvalued? What are the consequences of this misalignment?
What could be the effect of an increase in the interest rate by the European Central Bank (assume that there are no consequences on inflation) on the euro-dollar exchange rate?
What would happen to revenue from seignorage if the inflation rate was very high? Hint:check Equation 8 and assume a quickly rising price level.
Think about the “Britain’s Superfast Broadband Future” plan of the British government to build the best broadband network in Europe by 2015.a) Should this plan be considered government consumption or government investment?b) Describe the effect of that expenditure on the government debt
Some economists argue that fiscal authorities in a number of industrial countries are pursuing unsustainable policies. They believe that drastic steps need to be taken to control the fast growth of current and future liabilities of governments. This would also lessen their adverse effects on
Define crowding out and explain why it matters when evaluating the economic effects of government spending. A related argument is the size of the expenditure and tax multipliers.Why does it matter when deciding how to use fiscal policy in the aftermath of a crisis?
Indian government spending was $305.075 billion in 2011, and total revenues were $194.577 billion (source: WDI). Suppose that government purchases were $217.580 billion, transfer payments, $50.000 billion; and net interest payments, $37.495 billion. Calculate the government deficit and the primary
Look at the data in Table 16.2. What do high debt/GDP values imply for countries with low economic growth (e.g. Italy and Greece) where a fiscal stimulus could be beneficial?
Define a budget deficit and illustrate how it is related to public debt.
Illustrate the composition of government spending, then try to identify the reasons for the cross-country differences in spending shown in Figure 16.1.
None of the major central banks across the world responds to asset-price bubbles. Why?
The 2007–09 financial crisis originated in the US mortgage markets. How did it spread to the rest of the world?
Dr. Bill Lucarelli argued in an article that debt deflation could worsen the European sovereign debt. Explain how.
What are the benefits of financial globalization?
How does free trade promote financial development?
Who supports financial repression and why?
What is financial repression? Why does it occur?
Financial deepening is beneficial for growth.How would you comment on the Chinese growth performance in the light of that statement?
Illustrate the asymmetric information problem in financial systems. Do you think it to be a more severe problem in developing countries or in developed ones? Explain.
What is the difference between direct and indirect finance? What is microcredit, and to which category does it belong?
Up to 2012 the Japanese central bank was targeting a 1% inflation rate, but in 2013 it changed the target to 2%. Can monetary authorities target any rate?
In the United Kingdom GDP data take roughly four months to be produced, and initial data are usually revised multiple times in the following months. Explain why this could be an issue for policy makers.
Why do activists believe the economy’s self-correcting mechanism is slow?
Is stabilization policy more likely to be conducted with monetary policy or fiscal policy? Why?
Suppose that a negative aggregate demand shock occurs. Which are the possible responses of policy makers to such shock?
The US Fed, the European and Japanese central banks all have a 2% inflation target.Why isn’t zero inflation a policy objective?
The oil price increase in 2007–08 was a negative supply shock. Would you define it as a temporary or a permanent one? Explain.
Do the 2013 Japanese expansionary fiscal and monetary policies aim at affecting demand or supply? How?
Would an increase in expected inflation due to loose monetary policy conducted by the Bank of England affect the short-run aggregate supply curve in the United Kingdom? And the long-run aggregate supply curve? Explain.
What other than new capital affects the longrun aggregate supply curve?
Is the long-run Phillips curve different from the short-run Phillips curve? What does this imply for the Spanish policymakers mentioned in question 1?
According to the short-term Phillips curve, what should Spanish policymakers do to lower the high unemployment rates resulting from the 2007–09 financial crisis?
Define open market operations and explain how they are related to money supply.
What is the relationship between the MP curve and the aggregate demand curve?
How does an autonomous tightening or easing of monetary policy by a central bank affect the MP curve?
Assume the following estimates:Autonomous consumption: $1,625 billion Disposable income: $11,500 billion Using the consumption function in Equation 2, calculate consumption expenditure if an increase of $1,000 in disposable income leads to an increase of $750 in consumption expenditure.
At the end of 2011 the Italian GDP amounted to $2,192.360 billion. Given that household consumption expenditure was $1,349.950 billion, planned investment spending was$427.386 billion, and government final expenditure was $447.868 billion (source: WDI):a) Calculate spending on net exports.b) If
What causes the IS curve to shift?
What does the IS curve show? Why does it slope downward?
What happens to aggregate output if unplanned inventory investment is either positive or negative?

Showing 2800 - 2900 of 6280

First
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
Last

Macroeconomics Policy And Practice 2nd Global Edition Frederic S Mishkin - Solutions

Step by Step Answers