The Macroeconomy Today 12th Edition Bradley Schiller - Solutions

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Which of the following describes the theory behind the demand curve?(A) Decreasing marginal utility as consumption rises(B) Increasing marginal cost as consumption rises(C) Decreasing marginal cost as consumption rises(D) Increasing total utility at an increasing rate as consumption rises(E) The
Professor Peach spends her entire budget on tea and biscuits to maximize her utility. The price of tea is $2 per cup and the price of each biscuit is $3. At her current consumption levels, the marginal utility of tea is 22 utils and the marginal utility of biscuits is 33 utils, and she has used her
An excise tax of $T is imposed on the sellers of a product exchanged in a competitive market. Which of the following statements accurately describes the outcome?(A) If the supply curve is less elastic than the demand curve, consumers pay a higher share of the tax and there is deadweight loss.(B) If
A binding price floor is imposed in a competitive market. How will this change consumer surplus and producer surplus, and will there be a shortage or surplus of the product exchanged? CONSUMER PRODUCER SHORTAGE SURPLUS SURPLUS OR SURPLUS? (A) Decreases Increases Surplus (B) Decreases Increases
If the price of firm A’s cell phone service rises by 5 percent and the quantity demanded for firm B’s cell phone service increases by 10 percent, we can say that(A) demand for firm B is price elastic.(B) supply for firm B is price elastic.(C) firms A and B are substitutes because the
Suppose the price of beef rises by 10 percent and the quantity of beef demanded falls by 20 percent. We can conclude that(A) demand for beef is price elastic and consumer spending on beef is falling.(B) demand for beef is price elastic and consumer spending on beef is rising.(C) demand for beef is
In Figure D.2, identify the area of consumer surplus.(A) 0ACB(B) 0FCB(C) AFC(D) ACE(E) FCE
In Figure D.2, identify the area that corresponds to total dollars spent on this product.(A) 0ACB(B) 0FCB(C) AFC(D) ACE(E) FCE E LL Price F C A S D 0 B Quantity Figure D.2
In the competitive market for cherry pie, we observe the equilibrium price has risen and the equilibrium quantity has fallen. Which of the following could explain this?(A) Income has increased, and cherry pie is a normal good.(B) The price of raw cherries has increased.(C) The technology used to
If the demand for grapes increases simultaneously with an increase in the supply of grapes, we can say that(A) equilibrium quantity rises, but the price change is ambiguous.(B) equilibrium quantity falls, but the price change is ambiguous.(C) equilibrium quantity rises, and the price rises.(D)
The competitive market for gasoline, a normal good, is currently in a state of equilibrium. Which of the following would most likely increase the price of gasoline?(A) Household income falls.(B) Technology used to produce gasoline improves.(C) The price of subway tickets and other public
Which of the following is true of equilibrium in a purely (or perfectly)competitive market for good X?(A) A shortage of good X exists.(B) The quantity demanded equals the quantity supplied of good X.(C) A surplus of good X exists.(D) The government regulates the quantity of good X produced at the
Theo and Eliza can both paint the fence and wax the car after school.For every hour of waxing the car, Theo can paint eight sections of fence and Eliza can paint two sections of fence. Based on this information, the most efficient division of labor would be(A) Theo should paint the fence because he
Felipe wants to go see a concert next month. He knows that the concert, including his drive to and from the arena, will take five hours.Which of the following is the best example of an implicit cost that Felipe should consider before deciding whether to attend the concert?(A) The price of the
A small bakery has been so busy that they have hired two part-time employees. This is an example of a business changing its _____ resource.(A) capital(B) profit(C) land(D) entrepreneurial(E) labor
Jess likes to purchase $1 tacos from the taco truck near her school. If Jess uses marginal analysis, how many tacos will she consume on a given day?(A) Jess will stop consuming tacos when the marginal benefit of the next taco is equal to zero.(B) Jess will stop consuming tacos when the marginal
The graph in Figure D.1 shows a nation’s production possibilities curve (PPC) to produce bread and butter. Suppose that production technology in butter production improves. All else being equal, how will this affect the PPC and the opportunity cost of producing bread?(A) The vertical intercept of
The graph in Figure D.1 shows a nation’s production possibilities curve (PPC) for the production of bread and butter. Which of the following is true?(A) The opportunity cost of producing more butter is a decreasing amount of bread.(B) Point X represents unemployed economic resources.(C) The
Which of the following statements is most consistent with a capitalist market economy?(A) Economic resources are allocated according to the decisions of the central bank.(B) Private property is fundamental to innovation, growth, and trade.(C) A central government plans the production and
Scarcity is best defined as(A) the difference between limited wants and limited economic resources.(B) the difference between the total benefit of an action and the total cost of that action.(C) the difference between unlimited wants and limited economic resources.(D) the opportunity cost of
What market failure does Bill Gates (World View, p. 454)cite as the motivation for global philanthropy? LO3
If economic growth reduced poverty but widened inequalities, would it still be desirable? LO3
How do nations expect nationalization of basic industries to foster economic growth? LO3
Why do economists put so much emphasis on entrepreneurship?How can poor nations encourage it? LO3
How might Bolivia match China’s investment rate?(See Table 21.4.) LO2
Would you invest in Cambodia or Kenya on the basis of the information in Figure 21.6? LO3
Can poor nations develop without substantial increases in agricultural productivity? (See Figure 21.3.)How? LO3
How does microfinance alter prospects for economic growth? The distribution of political power? LO3
Could a nation reorder Rostow’s five stages of development and still grow? Explain. LO3
Identify “inequality traps” that might inhibit economic growth. LO3
How do unequal rights for women affect economic growth? LO3
Are property rights a perquisite for economic growth?Explain. LO3
How do more children per family either restrain or expand income-earning potential? LO3
Why are incomes so much more unequal in poor nations than in developed ones? (See World View, p. 452.) LO1
If a poor nation must choose between building an airport, some schools, or a steel plant, which one should it choose? Why? LO3
Why should Americans care about extreme poverty in Haiti, Ethiopia, or Bangladesh? LO2
What can China do with its U.S. dollar reserves? What impact will that have? LO3
Is a stronger dollar good or bad for America?Explain. LO3
In the World View on page 434, who is Farshad Shahabadi referring to as “everyone else”? LO1
Who gains and who loses from nontariff barriers to Mexican trucks (World View, p. 421)? LO3
Why did President Obama pursue “Buy American”rules if they actually hurt the economy? LO3
On the basis of News on page 423, how do U.S. furniture manufacturers feel about NAFTA? How about farmers? LO3
Why are the dimensions of the consumption and investment functions so important for policy design? LO2
What are the pros and cons of tax cuts or increased government spending as stimulative tools (News, p. 392)? LO3
Why is the multiplier higher for unemployment benefits than infrastructure spending (News, p. 392)? Which occurs faster? LO2
Should military spending be subject to macroeconomic constraints? What programs should be expanded or contracted to bring about needed changes in the budget?Is this feasible? LO2
Why did Fed Chairman Bernanke expect there would be no recession in 2008 (see News, p. 389)? Why was he wrong? LO3
Why do some nations grow and prosper while others stagnate? LO1
Is limitless growth really possible? What forces do you think will be most important in slowing or halting economic growth? LO3
Should fiscal policy encourage more consumption or more saving? Does it matter? LO2
How would a growing federal budget surplus affect the prospects for long-run economic growth? Why might a growing surplus not be desirable? LO2
Should we grant immigration rights based on potential con tributions to economic growth as Canada does? LO2
Why don’t we consume all our current output instead of sacrificing some present consumption for investment? LO1
Why do productivity gains slow down in recessions?(See Figure 17.5 .) LO1
In what specific ways (if any) does a college education increase a worker’s productivity? LO1
Why would anyone object to President Obama’s proposed infrastructure spending? LO2
How might the inflationary flashpoint affect policy decisions? How would you represent the flashpoint on the Phillips curve? LO2
How would the volume and timing of capital investments be affected by ( a ) a permanent cut in the capital-gains tax, and ( b ) a temporary 10-percent tax credit? LO3
How do each of the following infrastructure items affect aggregate supply? ( a ) highways, ( b ) schools, ( c ) sewage systems, and ( d ) courts and prisons. LO3
If all workplace-safety regulations both ( a ) improve workers’ well-being and ( b ) raise production costs, how should the line between “good” regulations and “bad”regulations be drawn? LO3
OSHA predicted that its proposed ergonomics rules(text, p. 349) would have cut repetitive-stress injuries by 50 percent. Was Congress correct in repealing those rules? LO1
How is the aggregate supply curve affected by ( a ) minimum wage laws, and ( b ) Social Security payroll taxes and retirement benefits? LO3
Why would a Gulf Coast hurricane have national impact on aggregate supply? (News, p. 342). LO1
What were the unemployment and inflation rates last year? Where would they lie on Figure 16.6 ? Can you explain the implied shift from curve PC 2 ? LO2
Does inflation targeting resolve uncertainties about Fed policy? LO1
If mortgage rates fell to 0 percent (“free money”), why might consumers still hesitate to borrow money to buy a home? LO2
Why were banks reluctant to use their lending capacity in 2008? (See News, p. 316.) What did they do with their increased reserves? LO2
In the News on p. 314, what starts the multiplier process?When will it stop? LO1
Could long-term interest rates rise when short-term rates are falling? What would cause such a pattern? LO3
When prices started doubling (see News, p. 323), why didn’t the Continental Congress print even more money so Washington’s army could continue to buy supplies?What brings an end to such “inflation financing”? LO3
Can there be any inflation without an increase in the money supply? How? LO3
If bondholders expect the Fed to raise interest rates, what action might they take? How would this affect the Fed’s goal? LO3
Why did bond prices decline at the February 2009 auction?(See News, p. 298.) LO3
Why might the Fed want to decrease the money supply? LO2
Why did China raise reserve requirements in 2007? How did they expect consumers and businesses to respond?(See World View, p. 303.) LO2
What is the current price and yield of 10-year U.S. Treasury bonds? Of General Motors bonds? (Check the financial section of your daily newspaper.) What accounts for the difference? LO3
Why do banks want to maintain as little excess reserves as possible? Under what circumstances might banks want to hold excess reserves? ( Hint: See Figure 14.2 .) LO2
Why is the failure of a major bank (News, p. 286) so frightening? LO3
How does federal deposit insurance encourage greater risk-taking by banks? Could the banking system function without government deposit insurance? How? LO2
If all banks heeded Shakespeare’s admonition “Neither a borrower nor a lender be,” what would happen to the circular flow? LO2
If people never withdrew cash from banks, how much money could the banking system potentially create?Could this really happen? What might limit deposit creation in this case? LO3
How are an economy’s production possibilities affected when workers are paid in bras and coffins rather than cash? (See World View, p. 271, about bartering in Russia.) LO1
In what respects are modern forms of money superior to the colonial use of wampum as money? LO1
How long would it take to pay off the national debt?How would the economy be affected? LO3
By how much did defense spending increase in 1940 to 1944? (See back endpapers of this book.) What was crowded out? LO2
A constitutional amendment has been proposed that would require Congress to balance the budget each year. Is it possible to balance the budget each year? Is it desirable? LO1
What’s considered “too much” debt or “too large” a deficit? Are you able to provide any guidelines for deficit or debt ceilings? LO2
In what ways do future generations benefit from this generation’s deficit spending? Cite three examples. LO3
Can you forecast next year’s deficit without knowing how fast GDP will grow? LO1
When are larger deficits desirable? LO2
Who paid for the Revolutionary War? Did the deficit financing initiated by the Continental Congress pass the cost of the war on to future generations? LO3
What were the differences in size, content, and expected impact between the U.S.’s and China’s 2009 stimulus packages? (World View, p. 230; News, p. 231, and Table 11.2 .) LO2
Why do critics charge that fiscal policy has a “biggovernment bias”? LO2
How quickly should Congress act to remedy an AD excess or AD shortfall? What are the risks of quick fiscal policy responses? LO2, LO3
According to the World View on page 230, what prompted China’s fiscal stimulus in 2008? Had the government not intervened, what might have happened? LO1
Will consumers always spend the same percentage of any tax cut? Why might they spend more or less than usual? LO2
Why are the AD shortfall and AD excess larger than their respective GDP gaps? Are they ever the same size as the GDP gap? LO1
What happens to aggregate demand when transfer payments and the taxes to pay them both rise by the same amount? LO3
How did consumers spend their 2008 tax cut (News, p. 233)? Does it matter what they spend it on?Explain. LO3
Will the price level always rise when AD increases?Why or why not? LO2

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The Macroeconomy Today 12th Edition Bradley Schiller - Solutions

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