Macroeconomics 6th Edition Stephen D. Williamson - Solutions

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The Economics in Practice states that job applicants who have been unemployed for a long period of time have a more difficult time getting job interviews than do those applicants who have been unemployed for a shorter time period. Go to www.bls.gov and do a search for “Table A-12: Unemployed
The unemployment rate stood at 9.6 percent late in 2010. Despite the fact that the economy had been growing out of the recession for over a year (real GDP was up 3 percent by Q2 2010), there was only modest job growth during 2010. Although a fiscal stimulus package provided some help, labor was
Obtain data on “average hourly earnings of production workers” and the unemployment rate for your state or area over a recent 2-year period. Has unemployment increased or decreased? What has happened to wages? Does the pattern of unemployment help explain the movement of wages? Provide an
Economists and politicians have long debated the extent to which unemployment benefits affect the duration of unemployment. The table below represents unemployment and unemployment benefit data for five high-income countries. The unemployment rate and the duration of unemployment benefits for each
Paranoia, the largest country in central Antarctica, receives word of an imminent penguin attack. The news causes expectations about the future to be shaken. As a consequence, there is a sharp decline in investmentspending plans.a. Explain in detail the effects of such an event on the economy of
In a June 17, 2015, press conference, Fed Chair Janet Yellen indicated the possibility of the Fed raising interest rates by the end of the year. On this date, the federal funds rate target set by the Fed was 0.00 – 0.25 percent, where it had been since January 2009. What has happened to the
The United States entered a deep recession at the end of 2007. The Fed under Ben Bernanke used aggressive monetary policy to prevent the recession from becoming another Great Depression. The Fed Funds target rate was 5.25 percent in the fall of 2007; by mid-2008, it stood at 2 percent; and in
Go to www.commerce.gov. Click on “Bureau of Economic Analysis.” Click next on “National” and then on the latest GDP release. Look through the report.Which of the components of aggregate expenditure appear to be growing or falling the fastest? What story can you tell about the current
Go to www.bls.gov and click on the links for state and area employment and unemployment. Look at your home state and describe what changes have taken place in the workforce. Has the labor force participation rate gone up or down? Provide an explanation for the rate change. Are your state’s
What is the unemployment rate in your state today?What was it in 1970, 1975, 1982, and 2008? How has your state done relative to the national average? Do you know or can you determine why?
What was the rate of growth in real GDP during the most recent quarter? You can find the answer in publications such as the Survey of Current Business, The Economist, and Business Week. Has growth been increasing or decreasing? What policies might you suggest for increasing the economy’s
Look at a recent edition of The Economist. Go to the section on economic indicators. Go down the list of countries and make a list of the ones with the fastest and slowest GDP growth. Look also at the forecast rates of GDP growth. Go back to the table of contents at the beginning of the journal to
A World Bank brief entitled Natural Capital Accounting contains the following statement: “(A) major limitation of GDP is the limited representation of natural capital. The full contribution of natural capital like forests, wetlands, and agricultural land does not show up.” Identify some
Describe the economy of your state. What is the most recently reported unemployment rate? How has the number of payroll jobs changed over the last 3 months and over the last year? How does your state’s performance compare to the U.S. economy’s performance over the last year? What explanations
The Economics in Practice describes prosperity and recession as they are depicted in literature. In mid-2009, there was a debate about whether the U.S. economy had entered an economic expansion. Look at the data on real GDP growth and unemployment and describe the pattern since 2007. You can find
Most college students either currently have, or at one time have had, roommates or housemates. Think about a time when you have shared your living space with one or more students, and describe the effect this person (or people) had on your college experience, such as your study habits, the classes
In the summer of 2007, the housing market and the mortgage market were both in decline. Housing prices in most U.S. cities began to decline in mid-2006. With prices falling and the inventory of unsold houses rising, the production of new homes fell to around 1.5 million in 2007 from 2.3 million in
In the State Trade by Commodity and Country section, click on “Exports and Imports”, then click on “Exports” for your state. There you will find a list of the top 25 commodities produced in your state which are exported around the world. In looking over that list, are you surprised by
Suppose that the firm’s production technology is given by Y = zF(K, N) = zKα N1-α, where 0 < α < 1.Determine the firm’s demand forlabor as a function of z, K, α, and w, and interpret.
In the consumer’s choice problem, show that at least one good must be normal.
Suppose that the consumer’s preferences are given by the utility function U(C, l) = ln C + α ln l,where α > 0. Determine the consumer’s choice of consumption and leisure and interpret your solutions.
Does purchasing power parity hold in practice in the short run? Why or why not? Does it hold in the long run? Why or why not?
What happens in the long run in the New Keynesian model?
What causes output to fluctuate in the real business cycle model?
In the New Keynesian model, does a liquidity trap imply that no economic policy can close a positive output gap?
What happens when the money supply increases in a liquidity trap?
How does monetary policy stabilization differ from fiscal policy stabilization?
How do Keynesians justify intervention in the economy through monetary and fiscal policy?
Why is monetary policy not neutral in the New Keynesian model? What are the effects of a change in the central bank’s target interest rate?
How is monetary policy determined in the New Keynesian model? What is the central bank’s target, and what does the central bank control directly?
Which markets clear in the New Keynesian model, and which do not?
Are Keynesian business cycle models currently being used? If so, what for?
What are the faults of the New Keynesian model?
Explain why the Phillips curve relationship in the basic New Keynesian model takes the form it does.
What three factors have been suggested for the decline in real interest rates in the world?
What countries in the world have flexible exchange rates? Which have fixed exchange rates?
What are the different systems for fixing the exchange rate? Describe how each works.
Suppose that the firm’s production technology is given by Y = z min(K, αN), where α > 0. As in Problem 3, determine the firm’s demand for labor as a function of z, K, α, and w, and interpret.
Suppose that U(c, c′) = ln c + β ln c,where β > 0. Determine consumption in the current and future periods for the consumer, and interpret your solutions in terms of income and substitution effects.
In the optimal growth model, suppose that U(Ct) = ln Ct and F(Kt, Nt) = Ktα Nt1–α, with d = 1(100% depreciation).(a) Guess that the value function takes the form v(Kt) = A + B ln Kt, where A and B are undetermined constants.(b) Substitute your guess for the value function on the right
Suppose in the Solow growth model that there is government spending financed by lump-sum taxes, with total government spending G = gY, where 0 < g < 1. Solve for steady state capital per worker, consumption per worker, and output per worker, and determine how each depends on g. Can g be set
Determine the effects of an increase in matching efficiency, e, on w, j, u, and v.
Show that, if U(c) = ln c,then there is no need for a bank in the Diamond – Dybvig economy, and explain this result.
Suppose that consumers can meet and trade in period 1 instead of going to the bank in sequence. Show that, given the banking contract (d1, d2),there could be Pareto-improving trades that early and late consumers could make in period 1 that would undo the banking contract, so that this would not
Suppose a search economy with the possibility of double coincidences; that is, assume that when an agent produces a good, that she cannot consume it herself. In a random match where two agents meet and each has the good that they produced, the first agent has what the second consumes with
Suppose in the monetary intertemporal model that U(C) = 2C1/2 and V(N) = (1/2)N2. Determine closed-form solutions for consumption, employment, output, the nominal interest rate, and the real interest rate. What are the effects of changes in z and α in equilibrium? Explain your results.
Suppose that the firm produces output only from capital. Current output is given by Y = zKα, and future output is given by Y′ = z′(K′)α, where 0 < α < 1. Determine investment for the firm, and show how investment depends on the real interest rate, future total factor productivity,
Suppose that U(c, c′) = ln c + β ln c, where β > 0, and assume that the consumer lends at the real interest rate r1 and borrows at the interest rate r2, where r1 < r2. Under what conditions is the consumer (a) a borrower, (b) a lender, and (c) neither a borrower nor a lender? Explain your
Determine the effects of an increase in the separation rate δ on w, j, u, and v.
Suppose in the one-sided search model that an unemployed worker receives a wage offer with probability π.Then, conditional on receiving a wage offer, the offer is w2 with probability α2, w3 with probability α3, and zero with probability 1 – α2 – α3, where 0 < w2 < w3. Determine
For the closed-economy, one-period model, suppose that U(C, l) = min (C, βl), and F(K, N) = αK + δN, where β > 0, α > 0, and δ > 0. Determine consumption, employment, output, leisure, and the real wage in a competitive equilibrium, and explain your solutions. Also draw a diagram with
For the closed-economy, one-period model, suppose that U(C, l) = ln C + βl, and F(K, N) = zKα N1 – α, where β > 0 and 0 < α < 1. Determine consumption, employment, output, leisure, and the real wage in a competitive equilibrium, and explain your solutions.
How does an absence of double coincidence of wants make money socially useful?
What do Yap stones and the playing card money of New France have in common? What is different about these two forms of money?
What are five forms that money has taken historically?
In the model, is money neutral under a flexible exchange rate? Explain why or why not. Can we say that money is neutral under a fixed exchange rate? Explain.
In the model in this chapter, what are the effects on the domestic economy of an increase in the world real interest rate under a flexible exchange rate and under a fixed exchange rate?
What is a small open economy?
Explain what moral hazard is and why and how deposit insurance and the too-big-to-fail doctrine induce a moral hazard problem.
How can bank runs be prevented?
Why are there two equilibria in the Diamond–Dybvig banking model? How do the two equilibria compare?
What features of real-world banks does a Diamond–Dybvig bank have?
In the Diamond–Dybvig banking model, why does a consumer do better by depositing in a bank rather than investing on his or her own?
What is unusual about depository institutions relative to other financial intermediaries?
What are three types of financial intermediaries?
What are the four defining characteristics of a financial intermediary?
List four properties of assets, and explain why these properties are important.
Why don’t real-world central banks want to follow the Friedman rule?
Should the monetary authority manipulate the money supply to hold the price level constant over time?
What are the costs of anticipated inflation?
What are the effects of an increase in the money supply growth rate in the monetary intertemporal model?
What is the effect of an increase in anticipated future inflation in the basic New Keynesian model?
What is the effect of an increase in the central bank’s nominal interest rate target in the basic New Keynesian model?
How does the exchange rate regime matter for stabilization policy in the New Keynesian model?
Why is money nonneutral in the New Keynesian open-economy model?
Are capital controls effective in practice? Explain.
Are capital controls a good idea? Why or why not?
What do capital controls imply for the response of the economy to shocks?
Give two examples of countries where capital controls were imposed.
If the capital account surplus is positive, what can we say about the current account surplus?
What are the advantages and disadvantages of a common currency area or currency union?
Give two examples of fixed exchange rates within the United States.
List the key pros and cons of fixed versus flexible exchange rate regimes.
What are the effects of a devaluation of the domestic currency under a fixed exchange rate?
Explain why domestic monetary policy is not independent under a fixed exchange rate.
In the model constructed in this chapter, what are the effects on the domestic economy of an increase in the foreign price level under a flexible exchange rate and under a fixed exchange rate?
Describe the role of the International Monetary Fund.
How do we explain the post–1990 behavior of investment expenditures and the current account surplus in the United States?
What are the effects of an increase in current and future total factor productivity on output, absorption, and the current account surplus?
What are the effects of a temporary increase in government expenditure on output, absorption, and the current account surplus?
What are the effects of an increase in the world real interest rate on output, absorption, and the current account surplus?
What makes a country more likely to default on its international debt?
What can constrain borrowing in world markets by an individual country?
Why could it be a good thing for a country to run a current account deficit?
In the first model in this chapter, what are the determinants of the current account surplus, and how does each of these determinants affect it?
Why is it appropriate to use a small open-economy model to explain events in the United States?
Explain how the neo-Fisherian monetary policy rule acts to achieve good economic results.
What is the Taylor principle, and how does the Taylor principle go awry?
What is the form of the standard Taylor rule?
If the nominal interest rate increases permanently, what effect does this have in the NKRE model in the long run?

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Macroeconomics 6th Edition Stephen D. Williamson - Solutions

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