Principles Of Macroeconomics 2nd Edition Lee Coppock, Dirk Mateer - Solutions

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9. Discuss the following statement, using concrete examples where possible to illustrate your arguments: For advances in basic science to translate into improvements in standards of living, they must be supported by favorable economic conditions. (LO3, LO4, LO5)
8. Hester’s Hatchery raises fish. At the end of the current season, Hester has 1,000 fish in the hatchery. She can harvest any number of fish that she wishes, selling them to restaurants for $5 apiece. Because big fish make little fish, for every fish that she leaves in the hatchery this year she
7. Harrison, Carla, and Fred are housepainters. Harrison and Carla can paint 100 square feet per hour using a standard paintbrush, and Fred can paint 80 square feet per hour. Any of the three can paint 200 square feet per hour using a roller. (LO3)a. Assume Harrison, Carla, and Fred have only
6. The Good’n’Fresh Grocery Store has two checkout lanes and four employees. Employees are equally skilled, and all are able either to operate a register (checkers) or bag groceries (baggers). The store owner assigns one checker and one bagger to each lane. A lane with a checker and a bagger
5. Joanne has just completed high school and is trying to determine whether to go to community college for two years or go directly to work. Her objective is to maximize the savings she will have in the bank five years from now. If she goes directly to work she will earn $20,000 per year for each
4. Consider the following table containing data for Germany and Japan on the ratio of employment to population in 1980 and 2010:1980 2010 Germany 0.33 0.52 Japan 0.48 0.49Using data from Table 7.1, find average labor productivity for each country in 1980 and 2010. How much of the increase in output
3. The “graying of America” will substantially increase the fraction of the population that is retired in the decades to come. To illustrate the implications for U.S. living standards, suppose that over the 56 years following 2016, the share of the population that is working returns to its 1960
2. Suppose labor productivity in the United States was $100,000 per worker in 2015. Calculate the value of labor productivity in the year 2035 (20 years later) if (LO1) a. productivity continues to grow by 3.1 percent per year. b. productivity growth falls to 1.4 percent per year. (Note: You do not
1. Richland’s real GDP per person is $40,000, and Poorland’s real GDP per person is $20,000. However, Richland’s real GDP per person is growing at 1 percent per year and Poorland’s is growing at 3 percent per year. Compare real GDP per person in the two countries after 10 years and after 20
8. Discuss the following statement: “Because the environment is fragile and natural resources are finite, ultimately economic growth must come to an end.” (LO6)
7. What major contributions can the government make to the goal of increasing average labor productivity? (LO5)
6. What are the costs of increasing economic growth? (LO4)
5. Discuss how talented entrepreneurs and effective managers can enhance average labor productivity. (LO3)
4. You have employed five workers of varying physical strength to dig a ditch. Workers without shovels have zero productivity in ditchdigging. How should you assign shovels to workers if you don’t have enough shovels to go around? How should you assign any additional shovels that you obtain?
3. What is human capital? Why is it economically important? How is new human capital created? (LO3)
2. Why do economists consider growth in average labor productivity to be the key factor in determining longrun living standards? (LO2)
1. What has happened to real GDP per person in the industrialized countries over the past century? What implications does this have for the average person? Are there implications for different countries in different regions (e.g., Japan versus Ghana)? (LO1)
LO6 Analyze whether having finite resources implies that there are limits to growth.
LO5 Evaluate government policies that promote economic growth.
LO4 Identify the costs of increasing economic growth.
LO3 List the determinants of average labor productivity within a particular country and use these concepts to analyze per capita GDP differences across countries.
LO2 Explain why GDP per capita is the product of average labor productivity and the proportion of the population that is employed and use this decomposition to discuss the sources of economic growth.
LO1 Show how small differences in growth rates can lead to large differences in living standards.
10.* The Bureau of Labor Statistics has found that the base-year expenditures of the typical consumer break down as follows:Suppose that since the base year, the prices of food and beverages have increased by 10 percent, the price of housing has increased by 5 percent, and the price of medical care
9. Frank is lending $1,000 to Sarah for two years. Frank and Sarah agree that Frank should earn a 2 percent real return per year. a. The CPI (times 100) is 100 at the time that Frank makes the loan. It is expected to be 110 in one year and 121 in two years. What nominal rate of interest should
8. On January 1, 2012, Albert invested $1,000 at 6 percent interest per year for three years. The CPI on January 1, 2012, stood at 100. On January 1, 2013, the CPI (times 100) was 105; on January 1, 2014, it was 110; and on January 1, 2015, the day Albert’s investment matured, the CPI was 118.
7. The following table lists the actual per-gallon prices for unleaded regular gasoline for June of each year between 1978 and 1986, together with the values of the CPIs for those years. For each year from 1979 to 1986, find the CPI inflation rate and the change in the real price of gasoline, both
6. The typical consumer’s food basket in the base year 2015 is as follows: 30 chickens at $2.00 each 10 hams at $6.00 each 10 steaks at $8.00 each A chicken feed shortage causes the price of chickens to rise to $5.00 each in the year 2016. Hams rise to $7.00 each, and the price of steaks is
5. According to the U.S. Census Bureau (www.census. gov), nominal income for the typical family of four in the United States (median income) was $23,618 in 1985, $34,076 in 1995, $46,326 in 2005, and $49,276 in 2010. In purchasing power terms, how did family income compare in each of those four
4. Consider the following table. It shows a hypothetical income tax schedule, expressed in nominal terms, for the year 2014.Family income $80,000 25The legislature wants to ensure that families with a given real income are not pushed up into higher tax brackets by inflation. The CPI (times 100) is
3. Refer to the CPI data given in Problem 2. A report found that the real entry-level wage for college graduates declined by 5 percent between 2003 and 2010. The nominal entry-level wage in 2010 was $14.35 per hour. (LO2) a. What was the real entry-level wage in 2010? b. What was the real
2. Here are values of the CPI (multiplied by 100) for each year from 2000 to 2010. For each year beginning with 2001, calculate the rate of inflation from the previous year. What happened to inflation rates over the 2000s? (LO1) 2000 122.7 2001 128.2 2002 132.3 2003 136.5 2004 140.2 2005 144.4 2006
1. Government survey takers determine that typical family expenditures each month in the year designated as the base year are as follows: 25 pizzas at $10 each Rent of apartment, $600 per month Gasoline and car maintenance, $100 Cell phone service, $50 In the year following the base year, the
8. True or false: If both the potential lender and the potential borrower correctly anticipate the rate of inflation, inflation will not redistribute wealth from the creditor to the debtor. Explain. (LO5)
7. How does inflation affect the real return on holding cash? (LO5)
6. “It’s true that unexpected inflation redistributes wealth, from creditors to debtors, for example. But what one side of the bargain loses, the other side gains. So from the perspective of the society as a whole, there is no real cost.” Do you agree? Discuss. (LO4)
5. Give two reasons the official inflation rate may understate the “true” rate of inflation. Illustrate by examples. (LO3)
4. Describe how indexation might be used to guarantee that the purchasing power of the wage agreed to in a multiyear labor contract will not be eroded by inflation. (LO2)
3. Why is it important to adjust for inflation when comparing nominal quantities (for example, workers’ average wages) at different points in time? What is the basic method for adjusting for inflation? (LO2)
2. What is the difference between the price level and the rate of inflation in an economy? (LO1)
1. Explain why changes in the cost of living for any particular individual or family may differ from changes in the official cost-of-living index, the CPI. (LO1)
LO5 Summarize the connections among inflation, nominal interest rates, and real interest rates.
LO4 Distinguish between inflation and relative price changes in order to find the true costs of inflation.
LO3 Discuss the two most important biases in the CPI.
LO2 Show how the CPI is used to adjust dollar amounts to eliminate the effects of inflation.
LO1 Explain how the consumer price index (CPI) is constructed and use it to calculate the inflation rate.
12. The towns of Sawyer and Thatcher each have a labor force of 1,200 people. In Sawyer, 100 people were unemployed for the entire year, while the rest of the labor force worked continuously. In Thatcher, every member of the labor force was unemployed for 1 month and employed for 11 months. (LO5)
11. Skyler is downloading labor market data for the most recent month, but her connection is slow and so far this is all she has been able to get:Unemployment rate Participation rate Not in the labor force 5.9% 62.5% 63 million Find the labor force, the working-age population, the number of
10. The following is a report from a BLS survey taker: “There were 65 people in the houses I visited, 10 of them children under 16; 25 people had full-time jobs, and 5 had part-time jobs. There were 10 retirees, 5 fulltime homemakers, 5 full-time students over age 16, and 2 people who were
9. We discussed how the opportunity cost of sending children to school affects the level of school enrollment across countries. The United Nations Human Development Report 2019 reports the following data for per capita income in 2018 (in the equivalent of 2011 U.S. dollars): (LO4)Canada $43,602
8. The government is considering a policy to reduce air pollution by restricting the use of “dirty” fuels by factories. In deciding whether to implement the policy, how, if at all, should the likely effects of the policy on real GDP be taken into account? (LO4)
7. The nation of Potchatoonie produces hockey pucks, cases of root beer, and sandals. The following table lists prices and quantities of the three goods in the years 2017 and 2020. (LO3)Pucks Root Beer Sandals Year Quantity Price Quantity Price Quantity Price 2017 100 $5 300 $20 75 $20 2020 125 $9
6. Calculate the four components of expenditure and GDP for the following economy using data from the following table. (LO2)Consumption expenditures Exports Government purchases of goods and services Construction of new homes and apartments $550 75 200 100 Sales of existing homes and apartments 200
5. For each of the following transactions, state the effect both on U.S. GDP and on the four components of aggregate expenditure. (LO2) a. Your mother-in-law buys a new car from a U.S. producer. b. Your mother-in-law buys a new car imported from Sweden. c. Your mother-in-law’s car rental business
4. MNLogs harvested logs (with no inputs from other companies) from its property in northern Minnesota. It sold these logs to MNLumber for $1,500, and MNLumber cut and planed the logs into lumber. MNLumber then sold the lumber for $4,000 to MNFurniture. MNFurniture used the lumber to produce 100
3. Intelligence Incorporated produces 300 computer chips and sells them for $200 each to Bell Computers. Using the chips and other labor and materials, Bell produces 300 personal computers. Bell sells the computers, bundled with software that Bell licenses from Macrosoft at $50 per computer, to PC
2. How would each of the following transactions affect the GDP of the United States? (LO1) a. The U.S. government pays $1 billion in salaries for government workers. b. The U.S. government pays $1 billion to Social Security recipients. c. The U.S. government pays a U.S. firm $1 billion for newly
1. George and John, stranded on an island, use clamshells for money. Last year George caught 300 fish and 5 wild boars. John grew 100 bunches of bananas. In the twoperson economy that George and John set up, fish sell for 3 clamshells each, boars sell for 10 clamshells each, and bananas go for 10
7. What are the costs of a high unemployment rate? Do you think providing more generous government benefits to the unemployed would increase these costs, reduce these costs, or leave them unchanged? Discuss. (LO5)
6. True or false: A high participation rate in an economy implies a low unemployment rate. (LO5)
5. Would you say that real GDP per person is a useful measure of economic well-being? Defend your answer. (LO4)
4. Sara’s Rock Painting Stand painted 1,000 rocks last year and 1,200 rocks this year. She charged $4 per rock last year and $5 this year. If last year is taken as the base year, find Sara’s contribution to both nominal GDP and real GDP in both years. Which measure would be better to use if you
3. Give examples of each of the four types of aggregate expenditure. Which of the four represents the largest share of GDP in the United States? Can an expenditure component be negative? Explain. (LO2)
2. A large part of the agricultural sector in developing countries is subsistence farming, in which much of the food that is produced is consumed by the farmer and the farmer’s family. Discuss the implications of this fact for the measurement of GDP in poor countries. (LO1)
1. Why do economists use market values when calculating GDP? What is the economic rationale for giving high-value items more weight in GDP than low-value items? (LO1)
LO5 Calculate the unemployment rate and the participation rate and discuss the costs of unemployment.
LO4 Discuss the relationship between real GDP and economic well-being.
LO3 Define and compute nominal GDP and real GDP.
LO2 Apply the production, expenditure, and income methods for measuring GDP to analyze economic activity.
LO1 Explain how economists define an economy’s output.
The effects of tax cuts on consumer spending.
5. Which of the following would be studied by a macroeconomist? By a microeconomist? (LO3) a. The worldwide operations of General Motors. b. The effect of government subsidies on sugar prices. c. Factors affecting average wages in the U.S. economy. d. Inflation in developing countries. e.
4. Which of the following statements are positive and which are normative? (LO2) a. If the Federal Reserve raises interest rates, demand for housing is likely to fall. b. The Federal Reserve should raise interest rates to keep inflation at an acceptably low level. c. Stock prices are likely to fall
3. The Bureau of Economic Analysis, or BEA, is a government agency that collects a wide variety of statistics about the U.S. economy. From the BEA’s website (www.bea.gov), find data for the most recent year available on U.S. exports and imports of goods and services. Is the United States running
2. Is it possible for average living standards to rise during a period in which average labor productivity is falling? Discuss, using a numerical example for illustration. (LO1)
1. Over the next 50 years the Japanese population is expected to decline, while the fraction of the population that is retired is expected to increase sharply. What are the implications of these population changes for total output and average living standards in Japan, assuming that average labor
7. Baseball statistics, such as batting averages, are calculated and reported for each individual player, for each team, and for the league as a whole. What purposes are served by doing this? Relate to the idea of aggregation in macroeconomics. (LO3)
6. What type of macroeconomic policy (monetary, fiscal, structural) might include each of the following actions? (LO2)a. A broad government initiative to reduce the country’s reliance on agriculture and promote high-technology industries. b. A reduction in income tax rates. c. Provision of
5. True or false: Differences of opinion about economic policy recommendations can always be resolved by objective analysis of the issues. Explain. (LO2)
4. True or false: Economic growth within a particular country generally proceeds at a constant rate. Explain. (LO1)
3. Why is average labor productivity a particularly important economic variable? (LO1)
1. How did the experience of the Great Depression motivate the development of the field of macroeconomics? (LO1) 2. Generally, how does the standard of living in the United States today compare to the standard of living in other countries? To the standard of living in the United States a century
LO3 Understand the difference between microeconomics and macroeconomics and how aggregation is used.
LO2 Identify the three major types of macroeconomic policy and discuss the difference between positive and normative analyses of macroeconomic policy.
LO1 Discuss the broad issues that macroeconomists study and the types of data they use and interpret.
13. In March 2020, global crude oil prices tumbled from over $50 a barrel to below $23 per barrel, bringing prices to their lowest level in nearly two decades. This precipitous drop in crude oil prices was fueled by two major shocks to the oil market. First, the COVID-19 pandemic led to a massive
10. Suppose the current issue of The New York Times reports an outbreak of mad cow disease in Nebraska, as well as the discovery of a new breed of chicken that gains more weight than existing breeds that consume the same amount of food. How will these developments affect the equilibrium price and
9. Predict what will happen to the equilibrium price and quantity of oranges if the following events take place. (LO3) a. A study finds that a daily glass of orange juice reduces the risk of heart disease. b. The price of grapefruit falls drastically. c. The wage paid to orange pickers rises. d.
2. Indicate how you think each of the following would shift demand in the indicated market. (LO1) a. The incomes of buyers in the market for Adirondack vacations increase. b. Buyers in the market for pizza read a study linking pepperoni consumption to heart disease.c. Buyers in the market for
1. How would each of the following affect the U.S. market supply curve for corn? (LO1) a. A new and improved crop rotation technique is discovered. b. The price of fertilizer falls.c. The government offers new tax breaks to farmers. d. A tornado sweeps through Iowa.
9. Once a week, Hector purchases a six-pack of cola and puts it in his refrigerator for his two children. He invariably discovers that all six cans are gone on the first day. Jin also purchases a six-pack of cola once a week for his two children, but unlike Hector, he tells them that each may
LO2 Explain and apply the Cost-Benefit Principle, which says that an action should be taken if, but only if, its benefit is at least as great as its cost. 0
5. Explain why the supply curve for foreign currency is vertical. Let’s say you return from a trip to Mexico with 1,000 pesos. If you decide to exchange these pesos for dollars, does your action shift the supply of pesos?6. For each of the following transactions, determine whether it will be
4. The price of a dozen roses in the United States is about $30. Use this information, along with the exchange rates given in Table 20.1, to answer the following questions.a. Assuming that PPP holds perfectly, what is the price of a dozen roses in Turkey? Express your answer in units of Turkish
3. Explain the numerical effect on both the U.S.current account and the U.S. capital account from each of these examples.a. In the United States, the Best Buy company purchases $1 million worth of TVs from the Samsung corporation, a Korean firm, using U.S. dollars. In addition, Samsung keeps the
2. From Chapter 8, we know that the primary cause of inflation is expansion of the money supply. In this chapter, we find an additional side effect of monetary expansion. What is this effect? Use demand and supply of foreign currency to illustrate your answer. L-9658
1. If interest rates in India rise relative to interest rates around the world, how is the world value of the rupee affected? Illustrate these effects in the market for rupees. L-9658
6. Is a trade deficit a sign of economic weakness?Why or why not? L-9658
5. What are three factors that might make a capital account surplus grow? L-9658
4. Sometimes, official government reserves are singled out in the balance of payments accounts. For example, when China buys U.S.financial assets (currency and Treasury securities), this purchase is classified as “Official Government Reserves.” On which side of the balance of payments should

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Principles Of Macroeconomics 2nd Edition Lee Coppock, Dirk Mateer - Solutions

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