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macroeconomics principles
Principles Of Macroeconomics 8th Edition Sayre, J.E.; Morris, A.J. - Solutions
(LO 1, 2, 3, 4, 5, 6) Table 5.6 shows AD and AS for the economy of Everton. Potential GDP (LAS) is currently 200.a) On Figure 5.28 draw in and label curves AS1, AD1, and LAS.b) What are the equilibrium values for the price level and real GDP?Price: Real GDP:c) Suppose that aggregate demand in
10. (LO 6) Suppose that the economy of Witland in Figure 5.27 is at full-employment equilibrium and the present nominal wage is $24 per hour.a) What is the real wage rate (in base year prices)?$b) Suppose that the aggregate demand increases by $400.Draw in the new AD curve in Figure 5.27.c) At the
9. (LO 5) Table 5.4 shows the aggregate demand for the economy of Zandu. Table 5.5 shows two aggregate supplies for the same economy.a) Which of the two aggregate supply schedules, (1) or (2), is the neoclassical aggregate supply? Which is the Keynesian aggregate supply?Neoclassical
8. (LO 1, 4) Villareal’s nominal GDP increased from $168 billion to $220 billion last year. During the year, its economy experienced inflation, with its price index increasing from 105 to 110, while the number of persons employed increased from 20 million to 23.5 million. By what percentage did
7. (LO 4) Table 5.3 shows the aggregate demand for the economy of Itera. Its potential GDP (LAS) is $800.a) Draw the aggregate demand curve and the Potential TABLE 5.4 GDP (LAS) curve on Figure 5.26.b) What is the equilibrium level of GDP and the price index?GDP: $ Price index:c) Is there a
6. (LO 1) Figure 5.25 depicts the economy of Altrua, which is presently in equilibrium.a) What is the size of its recessionary gap? $b) What is the size of this gap as a percentage of its actual GDP? %c) If the natural rate of unemployment is 6 percent, use Okun’s law to calculate the amount of
5. (LO 6) Use the graph in Figure 5.24 to calculate the growth rate of real GDP for a price increase of 20 percentage points under the following conditions.a) The present price index is 100.Growth rate: %b) The present price level is 120.Growth rate: %
4. (LO 2) Assuming that the economy shown in Figure 5.23 is in equilibrium, calculate the recessionary or inflationary gap under the following conditions:a) Potential GDP (LAS) is $500.b) Potential GDP (LAS) is $700.(Recessionary/inflationary)gap of $c) Potential GDP (LAS) is
3. (LO 2) Assume that the nominal wage rate increases from$18 to $20.80 per hour, and at the same time the price index increases from 120 to 130. By how much has the real wage rate changed?
2. (LO 4) Assume that the potential GDP (LAS) of the economy of Arion is $1000 and that the aggregate demand and the aggregate supply are as shown in Table 5.2a) What is the value of equilibrium real GDP and the price level? Is there a recessionary gap or an inflationary gap?Real GDP: Price
1. (LO 1) Suppose the real GDP of an economy is $480 billion dollars and its unemployment rate is 7 percent. If the natural rate of unemployment is estimated at 5 percent, what is the value of the country’s potential GDP (LAS) in billions of dollars? $
12. Using the accompanying graph, explain the effect on the levels of GDP and the price level if aggregate demand increases by $400 whena) the present aggregate demand curve is AD1b) the present aggregate demand curve is AD
11. Explain what will happen to nominal GDP and real GDP if there is an increase in aggregate demand according toa) Keynesians (if the economy is below full employment)b) Neoclassicists
10. Potential GDP (LAS) for the economy of Ithica is $1500. The aggregate demand and aggregate supply schedules are shown in the following table.Aggregate Aggregate Price Quantity Quantity Index Demanded ($) Supplied ($)90 1700 $950 95 1650 1150 100 1600 1300 105 1550 1420 110 1500 1500 115 1450
9. The following table shows the aggregate demand and aggregate supply schedules for the economy of Zee.Aggregate Aggregate Quantity Price Quantity Demanded ($) Index Supplied ($)1950 90 1620 1900 95 1700 1850 100 1760 1800 105 1800 1750 110 1830 1700 115 1850a) What are the equilibrium values of
8. Suppose the LAS (potential GDP) for the country of Taymar is$1100 and the aggregate supply is as shown in the table.a) Plot the aggregate supply curve, and draw in the LAS.b) Assume that the aggregate supply changed by $100 as a result of increased productivity. Plot the new AS curve, and show
7. What effect will the following changes have on aggregate supply and on potential GDP (LAS)?a) an increase in the price of imported crude oilb) an increase in the number of immigrants entering Canadac) the discovery of extensive oil deposits in northern Canadad) a substantial increase in wage
6. Which of the following factors will lead to an increase or decrease in aggregate demand (and a shift in the AD curve)?a) a decrease in the stock market indexb) an increase in interest ratesc) a decrease in government spendingd) an increase in foreign incomese) a decrease in the exchange rate
5. Given the following graph and assuming that the economy is in equilibrium, calculate the inflationary or recessionary gap ifa) potential GDP (LAS) is $600b) potential GDP (LAS) is $800 Pricec) potential GDP (LAS) is $900 Index Aggregate Quantity Demanded ($)Aggregate Quantity Supplied ($)90 1200
4. Following are the aggregate demand and supply schedules for the economy of Tagara.
3. Explain how a drop in the price level could affect consumption, investment, and net exports.
2. Using the accompanying graph, calculate the growth rate of real GDP for a price increase of 10 percenta) if the price level is currently 80b) if the price level is currently 100
1. Suppose the unemployment rate in Concordia is 8 percent and real GDP equals $600 billion. If the natural rate of unemployment is 5 percent, what is the amount of the GDP gap, and what is the value of potential GDP?
LO6 Explain the modern view of aggregate demand and aggregate supply.
LO5 Explain the main points of disagreement between neoclassical and Keynesian economics.
LO4 List the causes of recessions and inflationary booms.
LO3 Describe the factors that can affect aggregate demand and aggregate supply.
LO2 Explain the concepts of aggregate supply, aggregate demand, and macroeconomic equilibrium.
LO1 Explain the concepts of potential GDP, the business cycle, and the source of economic growth.
10. (LO 2) Explain how an increase in the rate of unemployment might suggest an improvement in economic conditions.
9. (LO 4) In times of deflation, is it better to buy now, or in the future? Why? Is it better to lend or to borrow? Why?
8. (LO 4) Give two examples of the output costs of inflation.Advanced (Problems 9–10)
7. (LO 1) How are the participation rate and the unemployment rate measured?
6. (LO 3) If the inflation rate unexpectedly rises from 2 to 5 percent, would each of the following individuals gain or lose as a result?a) Nigel, who borrowed $20 000 last year, repayable over three years, to buy a new boatb) Lars, an elderly man living on a fixed company pensionc) Yoko, who
3. (LO 3) Interest rates in Eturia are shown in Table 4.21.Calculate the real interest rate in each year.2013: 2014: 2015:
2. (LO 3) The population growth of Eturia is shown in Table 4.20.a) Calculate the percentage growth in population. 2014:2015:b) If the population continues to increase at this rate, how many years will it take for the population of Eturia to double?
2. (LO 3) The population growth of Eturia is shown in Table 4.20.Population (millions) 16 16.56 17.14 TABLE 4.20 2013 2014 2015 Nominal interest rate 8% 6% 5.2%Inflation rate 6.8% 4.3% 5.9%TABLE 4.21
1. (LO 3) The CPI in Eturia is as shown in Table 4.19. What are the annual inflation rates? 2014: 2015:CPI (2010 = 100) 116 121 128
(LO 3) The data in Table 4.18 shows the total output (a mixture of consumer, capital, and government services)and the prices of each product for the distant country of Vindaloo. (All figures are in billions of dollars, and the base year is 2013.)a) Complete the table, and answer the following
12. (LO 3) The economy of Sumer produces only three products: rice, pajamas, and beer. The base year is 2013. The quantities and prices of these products in 2013 and 2014 are shown in Table 4.16.a) Complete Table 4.16.b) What is the value of the GDP deflator in 2014?c) Suppose the average
11. (LO 2) Suppose the actual real GDP in Merryland is$400 billion and its potential GDP is $450 billion. If the natural rate of unemployment is 6 percent, what is its present unemployment rate?
10. (LO 3) Suppose that James’s income in year 1 is $36 000.Over the next four years, his income increases by 3 percent per year. At the same time, the economy experiences an inflation rate of 1.5 percent per year.a) Complete Table 4.15.b) What will be James’s real income in year 5?$
9. (LO 2) Suppose that the labour force is currently 5 million and the unemployment rate is 11 percent.On August 1, government announces that it will create 40 000 new jobs to be filled over the next three months.Only people who were unemployed on August 1 will be hired. As a result, 120 000 people
8. (LO 2) The data in Table 4.14 are for the economy of Merton, which has a natural rate of unemployment of 5 percent Calculate the size of the GDP gap. 2013: 2014:2015:Advanced (Problems 9–12)
7. (LO 1, 2) Table 4.13 shows national data (in billions of dollars) for the economy of Westfall. Answer the questions to one decimal point.a) Fill in the blanks in the table.b) What is the inflation rate in 2014?c) What is the growth rate of real GDP per capita in 2015?
6. (LO 1) The information in Table 4.12 is for the economy of Mensk.Working-age population 20.0 Number of people in full-time employment 11.5 Number of people in part-time employment 2.0 Number of people unemployed 1.5 Number of discouraged workers 1.5 TABLE 4.12 2013 2014 2015 Nominal GDP ($) 850
5. (LO 3) Terana’s nominal GDP rose from $200 billion in 2013 to $224 billion in 2014. During the same period, the inflation rate was 7%. (Calculate answers to one decimal place.)a) By what percentage did nominal GDP increase between 2013 and 2014?b) By what percentage did real GDP increase
4. (LO 3) The data for three countries (all with the same base year, with figures converted to Canadian dollars)are shown in Table 4.11.Calculate the real GDPs per capita for each country and rank them in size.Country Real GDP per Capita 1. $2. $3. $
3. (LO 3) The average nominal incomes earned in Eturia and the CPI are shown in Table 4.10.Connect Study Problems Please see the Answer Key (on Connect) for solutions to the Connect Study Problems. Algorithmic versions of these problems are available to instructors on Connect.2013 2014 2015 Nominal
3. (LO 3) The average nominal incomes earned in Eturia and the CPI are shown in Table 4.10.Connect Study Problems Please see the Answer Key (on Connect) for solutions to the Connect Study Problems. Algorithmic versions of these problems are available to instructors on Connect.2013 2014 2015 Nominal
2. (LO 1) The labour force data for Eturia (in millions) are shown in Table 4.9.d) Calculate the percentage increase in population.2014: 2015:e) If the population continues to increase at this rate, how long will it take for the population to double?Number of years:
1. (LO 3) The data in Table 4.8 are for the country of Eturia.Answer questions (a) and (c) to one decimal place.a) Calculate the GDP deflator. 2013:2014: 2015:b) Calculate real GDP per capita. 2013:2014: 2015:c) Calculate the growth rate of real GDP per capita.2014: 2015:
11.a) If you borrowed a sum of money for one year at a nominal rate of interest of 11 percent, and during that same year the inflation rate was 4 percent, what real rate of interest did you pay?b) Assume that you retire with a pension fixed at $12 000 per year, and that in each of the two years
10.a) If the inflation rate is 7 percent, how long will it take for prices to double?b) If a sum of money invested in the bank doubles in seven years, what rate of interest is it earning?
9. If Kerri’s nominal income increased during the year from$40 000 to $42 800, and the inflation rate for the year was 4 percent, by what percentage has her real income increased?
8. Etruria’s nominal GDP rose from $42 billion in 2013 to $45 billion in 2014. During the same period, its inflation rate was 5 percent (calculate answers to one decimal place).a) By what percentage did nominal GDP increase between 2013 and 2014?b) By what percentage did real GDP increase between
7. Fill in the blanks (to one decimal place)in the table of Etruria’s GDP statistics. 2013 2014 2015 Nominal GDP ($billion) 443 507 Real GDP ($billion) 374 389 GDP deflator (2010 = 100) 121.9 126.1 Population (millions) 26.1 26.4 27 Real GDP per capita
6. Given a natural rate of unemployment of 8 percent, an actual rate of 10 percent, and real GDP of $800 billion, calculate potential GDP.
5. What would happen to the size of the labour force if 100 000 unemployed people became discouraged workers? What effect, if any, would this have on the unemployment rate?
4. Categorize each of the following sets of circumstances as frictional, structural, or cyclical unemployment.a) Sanjit, a pulp-mill worker, is laid off because the mill’s inventories are at an all-time high.b) Five weeks ago, Alison left a job she did not like and is still looking for another
3.a) If a person is categorized as retired, would that person be included in the working-age population?b) What types of people are categorized as “not in the labour force”?c) Is it possible for the total number of people employed and the total number of people unemployed to rise at the same
2. The working-age population of Cortina is 32 million, its participation rate is 75 percent, and there are 20 million employed workers.a) What is the size of the labour force?b) How many workers are unemployed?c) What is the unemployment rate?
1. Suppose the population of Etrusca is 20 million, the workingage population is 15 million, the number of employed is 9 million, and the number of unemployed is 1 million.a) What is the size of the labour force?b) What is the participation rate?c) What is the unemployment rate?
LO4 Explain the two types of inflation and describe the costs of inflation.
LO3 Explain what inflation is and how it is measured.
LO2 Explain the different types of unemployment and the costs of unemployment.
LO1 Describe what unemployment is and how it is measured.
12. (LO 5) Explain why a high economic growth rate does not necessarily mean an improvement in economic welfare.
11. (LO 3) Explain why transfer payments are excluded from the measurement of GDP.
10. (LO 3) Suppose that new automobile purchases were treated like new housing purchases in national income accounts. How would that affect savings, consumption, investment, GDP, and DI? (Hint: This question is about reclassification, not about cause and effect.)
9. (LO 3) Are all productive activities that are not included in the measurement of GDP illegal?
8. (LO 2) What two things are true when an economy is in equilibrium?
7. (LO 1) Explain the difference between the stock of money and the flow of income.
6. (LO 3) Compare the expenditures approach to GDP measurement to the incomes approach.
5. (LO 4) Define economic growth.Intermediate (Problems 6–9)
4. (LO 1) Distinguish between savings and investment.
3. (LO 1) In Figure 3.6, replace each “*” with the appropriate term(s).
2. (LO 3) Indicate which of the following are productive activities (P) and which are nonproductive (N). Then indicate which of them are included (I) in national income statistics and which are excluded (Ex).a) the sale of 100 shares of EA Sportsb) child care at homec) a person employed by the
1. (LO 3) Identify the items in the statements below (from the point of view of the Canadian economy) according to the following code:C = consumption S = savings G = government spending T = taxes X = exports IM = imports I = investment N = not applicablea) A Canadian tourist visits Athens.b) A
1. (LO 3) Identify the items in the statements below (from the point of view of the Canadian economy) according to the following code:C = consumption S = savings G = government spending T = taxes X = exports IM = imports I = investment N = not applicable Rent $100 Savings $100 Wages 400 Government
(LO 1, 2, 3) Figure 3.5 is the circular flow diagram for the economy of Argos.a) Place the numbers below in the appropriate blanks on the diagram in Figure 3.5.Basic (Problems 1–5)
11. (LO 3) Table 3.17 shows some of the national income accounts for the economy of Elmwood (all figures are in billions of dollars).From this information, calculate the value ofa) consumptionb) net exportsc) gross investmentd) GDP at market pricese) gross mixed income f ) NDP at basic prices g)
10. (LO 3) Table 3.16 shows the data for the country of Magnolia. Complete the national income accounting framework by filling in the missing data.
9. (LO 4) The data in Table 3.14 show the total output (a mixture of consumer, capital, and government services)and the prices of each product for the distant country of Vindaloo. All figures are in billions of dollars, and the base year is 2013.a) Complete the table, and answer the questions that
8. (LO 3) Table 3.13 shows actual 2010 data for Canada.Using these data, fill in the blanks.
7. (LO 3) In Table 3.12, fill in the missing data for the country of Birchwood.
6. (LO 5) Table 3.11 shows labour data for Eturia.a) Calculate the productivity rates for each year., , andb) In which year was labour productivity highest?
5. (LO 4) The economy of Turista produces only two products, protein bars and snowboards. In 2013 it produced 20 million protein bars and 100 000 snowboards. In 2014,production of protein bars rose to 24 million, and snowboards to 105 000. The price of protein bars rose from $2.50 to $2.80 over
4. (LO 4) In 2012 the country of Vertigo had a real GDP of $500 billion and a population of 20 million. In 2013, real GDP rose by 5 percent while its population grew by 2 percent. What are the values of GDP per capita in 2012 and 2013 (to the nearest dollar)? 2012 $2013 $
3. (LO 3) In Table 3.9, you are given data for the country of Spruce.TABLE 3.7 Exports 130 Government spending 198 Consumption 430 Imports 118 Gross investment 126 Net foreign factor income −22 Depreciation 64 Indirect taxes 80 National income 600 Personal income taxes 140 Other income not paid
2. (LO 3) In Table 3.8, you are given data for the country of Hemlock.a) What is the value of personal income?b) What is the value of disposable income?
1. (LO 3) In Table 3.7, you are given data for the country of Sequoia.a) What is the value of GDP at market prices?b) What is the value of NDP at basic prices?c) What is the value of net national product at basic prices (national income)?
10. Use the following information to calculate labour productivity (to one decimal place) per unit in both years. Approximately what percentage increase in labour productivity has occurred? Year Output Labour Input 2013 12 400 tonnes 80 units 2014 14 400 tonnes 90 units
9. The economy of Rustica produces only two products, carrots and tractors. In 2012, it produced 5 million kilos of carrots and 2000 tractors. In 2013, production of carrots increased to 6 million and tractors to 2200. If the price of carrots increased from $2 to $2.50 per kilo and the price of
8. How could reported GDP remain constant while real production rose?
7. Forty years ago, few households employed a housekeeper and almost no one had a nanny. Today, more and more households employ part-time housekeepers and nannies are not uncommon. What has this change in employment pattern done to GDP? Is more produced as a result of this change?
6. Given the following data for the country of Seymour, determine the value of national income.Personal income 589 Undistributed corporate profits 42 Corporate profit taxes 41 Other income not paid out 52 Government transfer payments 172
5. Given the following data for the country of Hemlock, determine the value of XN.Net foreign factor income −10 National income 600 Government spending on goods and services 175 Indirect taxes (net of subsidies) 50 Gross investment 60 Consumption 420 Depreciation 20
4. If personal income is $986, personal income taxes are $227, and consumption is $686, what is the value of savings?
3. Identify the items in the statements below (from the point of view of the Canadian economy) according to the following codes:C = consumption S = savings I = investment IM = imports G = government spending T = taxes on goods and services X = exports N = not applicablea) A student gets her haircut
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