Principles Of Macroeconomics 8th Edition Sayre, J.E.; Morris, A.J. - Solutions

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6. If Max receives an unemployment check, would we include that transfer payment from the government in this year’s GDP? Why or why not? L-P82
5. Is a larger GDP always better than a smaller GDP? Explain your answer with an example.
4. A friend of yours is reading a financial blog and comes to you for some advice about GDP.She wants to know whether she should pay attention to nominal GDP or real GDP. Which one do you recommend, and why?
3. A farmer sells cotton to a clothing company for $1,000, and the clothing company turns the cotton into T-shirts that it sells to a store for a total of $2,000. How much did GDP increase as a result of these transactions?
2. What is the largest component (C, I, G, or NX)of GDP? Give an example of each component.
Why do economists stress real GDP rather than nominal GDP when looking at GDP changes over time?
What component of consumption do we spend a much greater percentage on now than in 1965? L-P82
✷ What are some shortcomings of GDP data?
✷ How is GDP computed? L-P82
✷ What does GDP tell us about the economy? L-P82
✷ How is macroeconomics different from microeconomics?
4. Suppose that a group of die-hard sports fans are upset about the high price of tickets to many games. As a result of their lobbying efforts, a new law caps the maximum ticket price to any sporting event at $50. Will more people be able to attend the games? Explain your answer. Will certain teams
3. Suppose that the federal government places a binding price floor on chocolate. To help support the price floor, the government purchases all of the leftover chocolate that consumers do not buy. If the price floor remains in place for a number of years, what do you expect to happen to each of the
2. Imagine that the community you live in decides to enact a rent control of $700 per month on every one-bedroom apartment. Using the following table, determine the market price and equilibrium quantity without rent control. How many one-bedroom apartments will be rented after the rent control law
1. In the song “Minimum Wage,” the punk band Fenix TX comments on the inadequacy of the minimum wage for making ends meet. Using the poverty thresholds provided by the Census Bureau,* determine whether the federal minimum wage of $7.25 an hour provides enough income for a single full-time
4. Are price gouging laws an example of a price floor or a price ceiling? L-P82
3. Will a surplus or a shortage caused by a price control become smaller or larger over time? Explain. L-P82
2. Does a nonbinding price floor cause a shortage or a surplus? Provide an example to support your answer. L-P82
1. Does a binding price ceiling cause a shortage or a surplus? Provide an example to support your answer. L-P82
Suppose you live in Arkansas and are looking for a job. The state minimum wage rate is $7.50/hour, the federal minimum wage rate is$7.25/hour, and the market equilibrium wage for the job is $8.00/hour.What wage will you be paid? Are the state and national minimum wages binding or non-binding price
✷ What effects do price floors have on economic activity? L-P82
✷ When do price floors matter? L-P82
✷ What effects do price ceilings have on economic activity? L-P82
✷ When do price ceilings matter? L-P82
1. A college student enjoys eating pizza. Her willingness to pay for each slice is shown in the following table:Number of pizza Willingness to pay slices (per slice)1 $6 2 5 3 4 4 3 5 2 6 1 7 0a. If pizza slices cost $3 each, how many slices will she buy? How much consumer surplus will she enjoy?b.
7. What happens to tax revenues as tax rates increase? L-P82
6. Suppose that the government taxes a good that has very elastic demand. Illustrate what will happen to consumer surplus, producer surplus, tax revenue, and deadweight loss on a supply and demand graph. L-P82
5. What type of goods should be taxed in order to minimize deadweight loss? L-P82
3. Why do economists focus on consumer and producer surplus and not on the possibility of consumer and producer loss? Illustrate your answer on a supply and demand graph. L-P82
2. Explain how producer surplus is derived from the difference between the willingness to sell and the market equilibrium price. L-P82
1. Explain how consumer surplus is derived from the difference between the willingness to pay and the market equilibrium price. L-P82
Do you think the New York bagel tax is an effective tool to raise government revenue?Think about how the tax may or may not affect the purchasing behavior of New Yorkers. L-P82
Suppose that because of Alabama’s playing card tax, fewer consumers purchase cards and fewer store owners sell them. What is this loss of economic activity called? L-P82
✷ Why do taxes create deadweight loss in otherwise efficient markets? L-P82
✷ When is a market efficient? L-P82
2. Is there more than one potential equilibrium point when supply and demand change at the same time? Explain. L-P82
1. What happens to price and quantity when supply and demand change at the same time? L-P82
9. What roles do shortages and surpluses play in the market? L-P82
8. What happens in a competitive market when the price is above the equilibrium price? Below the equilibrium price?
7. Describe the process that leads a market toward equilibrium. L-P82
6. Does a price change cause a movement along a supply curve or a shift of the entire curve?What factors cause the entire supply curve to shift? L-P82
5. Why does the supply curve slope upward? L-P82
4. Describe the difference between inferior goods and normal goods. Give an example of each type of good. L-P82
3. Does a price change cause a movement along a demand curve or a shift of the entire curve?What factors cause the entire demand curve to shift? L-P82
2. Why does the demand curve slope downward? L-P82
1. What is a competitive market, and why does it depend on the existence of many buyers and sellers? L-P82
✷ How do supply and demand interact to create equilibrium? L-P82
✷ What determines supply? L-P82
✷ What determines demand? L-P82
✷ What are the fundamentals of markets? L-P82
11. Suppose that you must decide between attending a Taylor Swift concert or a Maroon 5 concert. The concerts are at the same time on the same evening, so you cannot see both. You love Taylor Swift and would pay as much as$200 to see her perform. Tickets to her concert are $135. You are not as big
10. Read the poem “The Road Not Taken,” by Robert Frost. What line(s) in the poem capture the opportunity cost of decision-making? L-P82
9. Where would you plot unemployment on a production possibilities frontier? Where would you plot full employment on a production possibilities frontier? Now suppose that in a time of crisis everyone pitches in and works much harder than usual. What happens to the production possibilities frontier?
8. Two friends, Rachel and Joey, enjoy baking bread and making apple pie. Rachel takes 2 hours to bake a loaf of bread and 1 hour to make a pie. Joey takes 4 hours to bake a loaf of bread and 4 hours to make a pie.a. What are Joey’s and Rachel’s opportunity costs of baking bread?b. Who has the
7. Suppose that a politician tells you about a plan to create two expensive but necessary programs to build more production facilities for solar power and wind power. At the same time, the politician is unwilling to cut any ? L-P82
6. Suppose that an amazing new fertilizer doubles the production of potatoes. How would this invention affect the production possibilities frontier for an economy that produces only potatoes and carrots? Would it now be possible to produce more potatoes and more carrots or only more potatoes? L-P82
5. How does your decision to invest in a college degree add to your human capital? Use a projected production possibilities frontier for 10 years from now to compare your life with and without the college degree. L-P82
4. Are the following statements positive or normative?a. My dog weighs 75 pounds.b. Dogs are required by law to have rabies shots.c. You should take your dog to the veterinarian once a year for a checkup.d. Chihuahuas are cuter than bulldogs.e. Leash laws for dogs are a good idea because they
3. Think about comparative advantage when answering this question: Should your professor, who has highly specialized training in economics, take time out of his or her teaching schedule to mow the lawn? Defend your answer. L-P82
2. The following table shows scores that a student can earn on two upcoming exams according to the amount of time devoted to study: L-P82
1. Michael and Angelo live in a small town in Italy. They work as artists. Michael is the more productive artist. He can produce 10 small sculptures each day but only 5 paintings.Angelo can produce 6 sculptures each day but only 2 paintings. L-P82
8. What factors are most important for economic growth? L-P82
7. Why does comparative advantage matter more than absolute advantage for trade? L-P82
6. What criteria would you use to determine which of two workers has a comparative advantage in performing a task? L-P82
5. Does having an absolute advantage mean that you should undertake to produce everything on your own? Why or why not? L-P82
4. Why does the production possibilities frontier bow out? Give an example of two goods for which this would be the case. L-P82
3. Draw a production possibilities frontier curve.Illustrate the set of points that is feasible, the set of points that is efficient, the set of points that is inefficient, and the set of points that is not feasible. L-P82
2. Is it important to build completely realistic economic models? Explain your response. L-P82
1. What is a positive economic statement? What is a normative economic statement? Provide an example of each (other than those given in the chapter). L-P82
✷ What is the trade-off between having more now and having more later? L-P82
✷ What are the benefits of specialization and trade? L-P82
✷ What is a production possibilities frontier? L-P82
✷ How do economists study the economy? L-P82
8.a. In this example, Patrick is better off by $0.50 because he was willing to pay $2.50 but paid just $2.00. Jill is better off by $0.75 because she would have accepted $1.25 but Patrick paid her $2.00. So the total value created is the additional value to Patrick ($0.50) plus the additional value
6. The women have a direct positive incentive to wait in line. They will save $200 when they buy the TV. There are many trade-offs that they face: missed sleep, time they could have spent with family members and friends, and the time they could be working instead of waiting in line, to name just a
4. If Colombia decided to specialize in the production of coffee, it could trade coffee to Canada in exchange for computer software.This process illustrates gains from specialization and trade. Both countries have a comparative advantage in producing one particular good. Colombia has ideal
1.a. Because your tickets are worth more than you paid for them, you have a direct positive incentive to resell them.b. The “sales tax holiday” is a direct positive incentive to buy more clothes during the back-to-school period. An unintended consequence of this policy is that fewer purchases
8. We have talked about how trade creates value.Use the information in each example below to compute the total value created in each exchange:a. Patrick bought an orange pen from Jill for$2.00. Patrick would have been willing to pay $2.50 for the pen, and Jill would have been willing to sell the
7. Whiplash (2014) is about an aspiring collegeage drummer who wants to become the best drummer in the world. He is willing to sacrifice personal relationships, practices tens of thousands of hours, and suffers mental and physical abuse from his teacher in order to achieve his goal and earn the
6. Would you wait in line three weeks to be the first customer at Best Buy on Black Friday (the day after Thanksgiving, the “official start” of the holiday shopping season)? Two women from California did just that, taking turns holding their positions in line around the clock for over 500
5. After some consideration, you decide to hire someone to help you move from one apartment to another. Wouldn’t it be cheaper to move yourself? Do you think the choice to hire someone is a rational choice? Explain your response.
4. Suppose that Colombia is good at growing coffee but not very good at making computer software and that Canada is good at making computer software but not very good at growing coffee. If Colombia decided only to grow coffee and Canada only to make computer software, would both countries be better
3. By referencing events in the news or something from your personal experiences, describe one example of each of the five foundations of economics discussed in this chapter.
2. Compare your standard of living with that of your parents when they were the age you are now. Ask them or somebody you know around their age to recall where they were living and what they owned. How has the well-being of the typical person changed over the last 25 years? Explain your answer.
1. What role do incentives play in each of the following situations? Are there any unintended consequences?a. You learn that you can resell a ticket to next week’s homecoming game for twice what you paid.b. A state government announces a “sales tax holiday” for back-to-school shopping during
1. How would you respond if your instructor gave daily quizzes on the course readings? Are these quizzes a positive incentive or a negative incentive?
✷ What are five foundations of economics?
✷ What is economics?
11. (LO 5) What three arguments were brought forward to support the idea that the stimulus packages of 2009–2010 should be abandoned in favour of policy aimed at reducing deficits?
10. (LO 5) Why was Canada the first of the G20 nations to recover from the recession of 2008–2010?
9. (LO 2) How do Keynesians see the economy adjusting to a reduction in aggregate demand?
8. (LO 2) Explain the circumstances in which economic policy might increase real GDP without affecting the price level.
7. (LO 2) If you were a Keynesian, how would you explain the effect of an increase in savings on the economy?What if you were a neoclassicist?
6. (LO 1) Why is unemployment voluntary, according to neoclassical theory?
5. (LO 5) Why have many argued that Canada’s Action Plan of fiscal stimulus in 2009–2010 was a success?
4. (LO 2) Assume that Figure 13.12 refers to the 1930s.Describe in words what actually occurred that enabled the economy to return to full-employment equilibrium.
3. (LO 1, 4) In what way were economic conditions in the first decade of the twenty-first century similar to those in the 1920s?
2. (LO 1) What is Say’s Law?
1. (LO 1, 2, 3) Match each item in the left-hand column with a related idea or event in the right-hand column by writing the appropriate letter in each blank.A. laissez-faire 1. Keynesians B. demand 2. OPEC-induced management oil price increases C. tax cuts as 3. supply-siders a stimulus to
Independent economic research has also determined that every 1 percent cut in tax rates in Copland will increase aggregate supply by $5 billion because it stimulates productivity.d) For the same 6 percent cut in taxes, draw and label the new aggregate supply curve, AS2 and the new potential GDP

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Principles Of Macroeconomics 8th Edition Sayre, J.E.; Morris, A.J. - Solutions

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