Macroeconomics 1st Edition Charles I. Jones - Solutions

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[elated to the Making the Connection on page 122]Since 1979, China has had a policy that allows couples to have only one child. This policy has caused a change in the demographics of China. Between 1980 and 2011, the share of the population under age 14 decreased from 36 percent to 19 percent. And,
[elated to the Making the Connection on page 121] Is it always possible to ascertain whether two goods are substitutes, complementary goods, or that they do not bear any relationship with each other? Briefly explain your answer.
With reference to the situation described in question 1.9, can you think of two additional examples or variables that would cause the demand curve for cappuccinos to shift leftward (i.e., a shift from D to D’ in the figure below)?
Suppose that the following table shows the quantity demanded of UGG boots at five different prices in 2014 and 2015:Quantity Demanded(thousands of pairs of boots)Price 2014 2015$160 5,000 4,000 170 4,500 3,500 180 4,000 3,000 190 3,500 2,500 200 3,000 2,000 Name two different variables that could
What is the difference between a movement along the demand curve, and a shift of the curve? Explain the two terms. State whether any of the following events in an Italian bar will result in either of the above.a. The barista offers a discount on cappuccinos for the entire dayb. The barista offers a
[elated to the Chapter Opener on page 117] Smart TVs, unlike traditional TVs, can connect directly to the Internet. Smart TVs made up 27 percent of all televisions sold worldwide in 2012.a. Should smart TVs be considered a substitute good for smartphones? Briefly explain.b. If smart TVs are a
[elated to the Chapter Opener on page 117] When smartphones based on the Android operating system were first introduced, there were relatively few applications, or “apps,”available for them. Now, there are many more apps available for Android-based smartphones. Are these apps substitutes or
Are cappuccinos and croissants complementary goods?Briefly explain your reasons. Define the relationship between the following four pairs of products:a. Cappuccinos and black coffeesb. Cappuccinos and Swedish trucksc. Cappuccinos and cocoa powderd. Cappuccinos and orange juice
Suppose the price of white plain flour goes up by 50%.Ceteris paribus, will this affect the demand of brown plain flour?roblems and pplications
What is the law of demand? Use the substitution effect and the income effect to explain why an increase in the price of a product causes a decrease in the quantity demanded.
[elated to the Making the Connection on page 105]The British historian Thomas Macaulay once remarked that copyrights are “a tax on readers.” In what sense are copyrights a tax on readers? If copyrights are a tax on readers, why do governments enact them?
According to an article on Phillyburbs.com, some farmers in rural Pennsylvania are causing a “stink” by using pig manure for fertilizer. The farmers purchase the pig manure, which is an organic fertilizer, from a nearby pork processing plant and spread it across the fields where they grow corn
The 2009 International Property Rights Index study states:[T]hose developing countries that respect property rights grow on average faster than those that fail to provide sound legal and political environments and protection for physical property rights.Why would the protection of property rights
Some economists have been puzzled that although entrepreneurs take on the risk of losing money by starting new businesses, on average their incomes are lower than those of people with similar characteristics who go to work at large firms. Economist William Baumol believes part of the explanation
Writing in the New York Times, Michael Lewis argued that“a market economy is premised on a system of incentives designed to encourage an ignoble human trait: self-interest.” Do you agree that self-interest is an “ignoble human trait”? What incentives does a market system provide to
According to Adam Smith, individuals usually act in a rational way, motivated by self-interest. With this in mind, how do you think Adam Smith would explain charity?
In a speech at the New York University Law School, Federal Reserve Chairman Ben Bernanke stated:Writing in the eighteenth century, Adam Smith conceived of the free-market system as an “invisible hand” that harnesses the pursuit of private interest to promote the public good. Smith’s
In many parts of Europe during the mid-1770s, governments gave guilds, or organizations of producers, the authority to control who was allowed to produce a good, the amount of the good produced, and the price charged for the good. Would you expect more competition among producers in a guild system
[elated to the Making the Connection on page 101]According to an article in the Wall Street Journal, the parts contained in the BlackBerry Torch smartphone include a power management chip made by Texas Instruments(United States); a memory chip made by Samsung (South Korea); a GPS receiver made by
[elated to the Making the Connection on page 101]Think about the comparative advantage framework explained earlier in this Chapter. In this context, how can you explain the fact that iPad components are produced by different firms in various parts of the world?
Identify whether each of the following transactions will take place in the factor market or in the product market and whether households or firms are supplying the good or service or demanding the good or service:a. George buys a Tesla Model S.b. Tesla increases employment at its Fremont plant.c.
What are private property rights? What role do they play in the working of a market system? Why are independent courts important for a well-functioning economy?roblems and pplications
Explain why people like Larry Page, co-founder of Google, play a fundamental role in market economies.
The Tableau économique by François Quesnay can be considered as the first model of a whole economy, similar to the circular-flow diagram. Why was the latter considered a ground-breaking contribution?
[elated to the Making the Connection on page 97]It has recently been observed that women now spend less time doing housework than in the past, and the opposite holds true for men. Do you think that economics can provide an explanation for this, or would sociology be more appropriate?
[elated to the Making the Connection on page 97] In discussing dividing up household chores, Emily Oster, an economist at the University of Chicago, advises that: “No, you shouldn’t always unload the dishwasher because you’re better at it.” If you are better at unloading the dishwasher, why
In the past some governments have praised the ability of their countries to be self-sufficient, i.e. to live in autarky(e.g. Italy in the thirties). Do you find it a sound economic strategy?
In colonial America, the population was spread thinly over a large area, and transportation costs were very high because it was difficult to ship products by road for more than short distances. As a result, most of the free population lived on small farms, where they not only grew their own food
Is specialization and trade between individuals and countries more about having a job or about obtaining a higher standard of living? Individually, if you go from a situation of not trading with others (you produce everything yourself) to a situation of trading with others, do you still have a job?
Imagine that the next time the Indianapolis Colts play the New England Patriots at Lucas Oil Stadium in Indianapolis, Colts star quarterback Andrew Luck has a temporary lack of judgment and plans to sell Colts memorabilia during the game because he realizes that he can sell five times more Colts
If Nicaragua can produce with the same amount of resources twice as much coffee as Columbia, explain how Columbia could have a comparative advantage in producing coffee.
Refer to the data provided in exercise 2.4. Now suppose once Britain and Ireland start trading, the price of 1 kg of grain is equal to 2 kg of cheese. Show how both countries can consume beyond their production possibility frontiers.
[elated to Solved Problem 2.2 on page 95] Suppose that France and Germany both produce schnitzel and wine. The following table shows combinations of the goods that each country can produce in a day:France Germany Wine(bottles)Schnitzel(pounds)Wine(bottles)Schnitzel(pounds)0 8 0 15 1 6 1 12 2 4 2 9
[elated to Solved Problem 2.2 on page 95] Suppose Iran and Iraq both produce oil and olive oil, which are sold for the same prices in both countries. The following table shows the combinations of both goods that each country can produce in a day, measured in thousands of barrels, using the same
[elated to Don’t Let This Happen to You on page 95] In the 1950s, the economist Bela Balassa compared 28 manufacturing industries in the United States and Britain. In every one of the 28 industries, Balassa found that the United States had an absolute advantage. In these circumstances, would
By putting in one hour of labor, Britain can produce either 10 kg of cheese or 10 kg of grain. With the same amount of labor, Ireland can produce either 6 kg of cheese or 2 kg of grain. Supposing that 10 hours of labor are available in each country, draw the production possibility frontiers for
Look again at the information in Figure 2.4 on page 92.Choose a rate of trading cherries for apples different from the rate used in the text (15 pounds of cherries for 10 pounds of apples) that will allow you and your neighbor to benefit from trading. Prepare a table like Table 2.1 on page 94 to
David Ricardo was the first economist suggesting that two countries could benefit from trade, even if one of the two was less productive than the other in all sectors of the economy. Explain this reasoning using the concepts of absolute and comparative advantage.roblems and pplications
In The Wonderful Wizard of Oz and his other books about the Land of Oz, L. Frank Baum observed that if people’s wants were limited enough, most goods would not be scarce. According to Baum, this was the case in Oz:There were no poor people in the Land of Oz, because there was no such thing as
In 2005, Tony Blair said that global warming is too serious an issue for the world to ignore it any longer. Al Gore supported this view by adding that there is scientific evidence that states that the world will face a string of terrible catastrophes, unless actions are taken to deal with the
Economic growth is widely thought to be the solution to many of the problems that are currently afflicting the world economies, such as poverty and economic inequality. With this in mind define economic growth, and show how it may affect the framework that you studied in this chapter. Do you think
Suppose the U.S. president is attempting to decide whether the federal government should spend more on research to find a cure for heart disease. He asks you, one of his economic advisors, to prepare a report discussing the relevant factors he should consider. Use the concepts of opportunity cost
on page 88] You have exams in economics and chemistry coming up, and you have 5 hours available for studying. The following table shows the trade-offs you face in allocating the time you will spend in studying each subject:Hours Spent Studying Midterm Score Choice Economics Chemistry Economics
[elated to Solved Problem
Use the following production possibilities frontier for a country to answer the questions.a. Which point or points are unattainable? Briefly explain why.b. Which point or points are efficient? Briefly explain why.c. Which point or points are inefficient? Briefly explain why.d. At which point is the
Suppose we can divide all the goods produced by an economy into two types: consumption goods and capital goods.Capital goods, such as machinery, equipment, and computers, are goods used to produce other goods.a. Use a production possibilities frontier graph to illustrate the trade-off to an economy
Do you think it would be more realistic to assume that the PPF is a straight line rather than a curved one? Briefly explain your answer.
[elated to Chapter Opener on page 85] According to an article on CNNMoney, in May 2013 CEO Elon Musk of Tesla Motors announced plans for a large expansion of Tesla’s network of supercharger stations by the end of the year. The network of supercharger stations will stretch from Los Angeles to New
[elated to the Chapter Opener on page 85] One of the trade-offs Tesla faces is between safety and the maximum range someone can drive an all-electric car before having to recharge it. For example, adding steel to a car makes it safer but also heavier, which results in fewer miles between recharges.
Draw a production possibilities frontier that shows the trade-off between the production of cotton and the production of soybeans.a. Show the effect that a prolonged drought would have on the initial production possibilities frontier.b. Suppose genetic modification makes soybeans resistant to
Think about two different PPFs. One is a straight line, and the other one is curved. Why does this difference occur?roblems and pplications
Could you think of a reason leading some economists to state that there is no such concept as macroeconomics?
Briefly explain whether each of the following is primarily a microeconomic issue or a macroeconomic issue.a. The effect of higher cigarette taxes on the quantity of cigarettes sold.b. The effect of higher income taxes on the total amount of consumer spending.c. The reasons the economies of East
Would the term investment be regarded as a microeconomic or a macroeconomic issue? Explain.roblems and pplications
In the United States, to receive a medical license, a doctor must complete a residency program at a hospital. Hospitals are not free to expand their residency programs in a particular medical specialty without approval from a Residency Review Committee (RRC), which is made up of physicians in that
[elated to the Don’t Let his Happen to You on page 62] Explain which of the following statements represent positive analysis and which represent normative analysis.a. A 50-cent-per-pack tax on cigarettes will lead to a 12 percent reduction in smoking by teenagers.b. The federal government should
[elated to the hapter Opener on page 51] According to an article in the New York Times, hospitals sometimes complain that doctors do not work as hard when they become hospital employees as they do when they operate a private practice. How do the economic incentives a doctor faces to work hard
[elated to the hapter Opener on page 51] In recent years, many doctors have decided to give up running their private practices as small businesses and have become salaried employees of hospitals.a. What important differences exist between doctors’private practices and other small businesses, such
[elated to the Making the onnection on page 62]This feature explains that there are both positive and normative elements to the debate over whether medical schools should charge tuition and whether hospitals should continue to pay residents who pursue primary care but not residents who specialize.
Dr. Strangelove’s theory is that the price of mushrooms is determined by the activity of subatomic particles that exist in another universe parallel to ours. When the subatomic particles are emitted in profusion, the price of mushrooms is high. When subatomic particle emissions are low, the price
Suppose an economist develops an economic model and finds that “it works great in theory, but it fails in practice.”What should the economist do next?
What is the difference between normative analysis and positive analysis? Is economics concerned mainly with normative analysis or positive analysis? Briefly explain.roblems and pplications
Explain why it is important for an economic model to yield testable hypotheses.
It is the last game of the season of the English Premier League of football. Manchester United and Chelsea will play against each other in the match that will determine the winner of the League.The match will be played in Manchester, where the local stadium has a maximum capacity of 60,000 people.
Leonard Fleck, a philosophy professor at Michigan State University, has written:When it comes to health care in America, we have limited resources for unlimited health care needs.We want everything contemporary medical technology can offer that will improve the length or quality of our lives as we
Would you expect a centrally planned economy to be better at productive efficiency or allocative efficiency? Briefly explain.
Centrally planned economies have been less efficient than market economies.a. Has this difference in efficiency happened by chance, or is there some underlying reason?b. If market economies are more economically efficient than centrally planned economies, would there ever be a reason to prefer
Explain why most modern economies can be labeled as mixed economies. Provide examples.
In a market economy, why does a firm have a strong incentive to be productively efficient and allocatively efficient?What does the firm earn if it is productively and allocatively efficient, and what happens if it is not?
Consider an organization that exists to help the poor.The members of the organization are discussing alternative methods of aiding the poor, when a proponent of one particular method asserts that: “If even one poor person is helped with this method, then all our time and money would have been
When the price of Microsoft stock increased more than 27 percent in the first part of 2013, Bill Gates, who owns 436 million shares of Microsoft stock, once again became the world’s richest person. Does Bill Gates face scarcity?Does everyone? Are there any exceptions?Source: “Bill Gates
What is the difference between efficiency and equity? Why do government policymakers often face a trade-off between efficiency and equity?roblems and pplications
In a mixed economy, does the government decide what goods and services should be produced? Briefly discuss the reasons for your answer.
In a paper written by Bentley College economists Patricia M. Flynn and Michael A. Quinn, the authors state:We find evidence that Economics is a good choice of major for those aspiring to become a CEO [chief executive officer]. When adjusting for size of the pool of graduates, those with
[elated to Solved Problem 1.1 on page 55] Yoko is supposed to participate at a gala dinner later this week, and she has already made a 500 yen non-refundable deposit to secure her place at the table. However, on the day of the dinner she wakes up with a cold. A doctor advises her to stay in bed,
[elated to Solved Problem 1.1 on page 55] Two students are discussing Solved Problem 1.1:Joe: I think the key additional information you need to know in deciding whether the doctor should keep the medical practice open 9 hours per day rather than 8 hours is the amount of profit she is currently
[elated to Solved Problem 1.1 on page 55] In 2013, the president and chief executive officer of McDonald’s, Don Thompson, said that McDonald’s was considering serving breakfast all day, instead of stopping at 10:30 a.m. on weekdays and 11:00 a.m. on weekends. Several owners of McDonald’s
[elated to the Making the onnection on page 53]Jay Bhattacharya and Kate Bundorf of Stanford University have found evidence that people who are obese and who work for firms that provide health insurance receive lower wages than workers at those firms who are not obese. At firms that do not provide
[elated to the Making the onnection on page 53]Many universities and corporations offer a health wellness program that helps their employees improve or maintain their health and get paid (a relatively small amount) for doing so. The programs vary but typically consist of employees completing a
The grading system plays an important role in student learning. In their book Effective Grading: A Tool for Learning and Assessment in College, Barbara Walvoord and Virginia Anderson state that “grading infuses everything that happens in the classroom.” They also argue that grading “needs to
Miguel works as a waiter in a restaurant in Madrid: 8 hours per day, 5 days a week. His hourly wage is €5. His manager asks him if he is willing to work 9 hours per day during summer: a lot of tourists choose to visit Madrid in that period, and as a result there are more customers. He keeps
Comment on the assumption common to most economic models that all individuals are rational, and make optimal decisions responding to economic incentives.
The policy trilemma: One could make a reasonable case that the United States in the last decade has been able to achieve all three goals of the pol-icy trilemma: it sets its own monetary policy, it has open capital markets, and it has experienced a relatively stable exchange rate. Yet the chapter
The unwinding of the U.S. trade deficit: Suppose some shock occurs to the U.S. economy that makes foreign investors more reluctant to hold U.S. as-sets. Use the AS/AD framework to explain the effects of this shock on the U.S. economy. Note: There are several possible answers to this question,
Currency crises and the demand for dollars: Suppose there is a currency crisis in the rest of the world, leading to an increase in demand for U.S.dollars (a "flight to safety"). Use the AS/AD framework to explain the ef-fects of this shock on the U.S. economy. Be sure to explain carefully how and
Imports and short-run output: In addition to depending on the exchange rate (and therefore on the interest rate), imports may depend on short-run output: when the economy is booming, consumers tend to demand more for-eign goods. To incorporate this result into our short-run model, suppose the new
Expansionary monetary policy in Europe: Suppose the European Central Bank decides to stimulate the European economy by reducing interest rates there. Use the AS/AD model to explain how and why this affects the U.S.economy in the short run. How does the economy return to steady state?
Fixed versus floating exchange rates: Suppose Mexico wishes to fix its ex-change rate relative to the U.S. dollar.(a) If the Federal Reserve raises interest rates, what would happen to the peso-dollar exchange rate in the absence of any change in Mexican in-terest rates?(b) Suppose Mexico wants to
The depreciation of the dollar versus the yen: Look back at equation (15.3)in Section 15.2.(a) Apply our growth rates rules (from Chapter 3) to this equation to ex-press the growth rate of the exchange rate as a function of the inflation rate at home and abroad.(b) Between 1971 and 1995, U.S.
Net exports and the IS curve: Consider the way in which net exports de-pend on the real exchange rate. Does the dependence of net exports on the real exchange rate make the IS curve steeper or flatter? What is the eco-nomic interpretation of this result?
The Big Mac: Look back at the Big Mac Index in Table 15.1. Compute the level of the exchange rate that would be needed to equalize the dollar price of the Big Mac across all countries. State whether each cur-rency appears to be currently overvalued or undervalued relative to the dollar, and
Between 1970 and 1995, the dollar depreciated sharply versus the Japanese yen, while the average value of this exchange rate did not change much be-tween 1995 and 2005. What might explain these facts?
Politics and trade: Suppose you are the economic adviser to a candidate run-ning for the U.S. Congress. The candidate's district is historically a major producer of steel, and several steel mills have been shut down in recent years because of foreign competition. Hundreds of workers have lost their
Migration in the apple and computer economy: In the apple-computer ex-ample, suppose people in the North have the right to charge an "entrance fee" to immigrants. Assume the world starts from the position of free trade and considers moving from free trade to free migration. Find an entrance fee (a
Trade in the apple and computer economy (hard): Let's redo the trade prob-lem with algebra instead of numbers. Suppose that one unit of labor pro-duces x ,, apples in the North and x, apples in the South; one unit of labor can also produce z ,, computers in the North and z, computers in the
An improvement in Southern computers:13 Now suppose that the techno-logical innovation occurs in the computer sector in the South: one unit of Southern labor can now produce 10 computers instead of 2. (Other parame-ters take their original values.)(a) Does the North still have a comparative
An improvement in Southern apples: In the same apple-computer trade ex-ample given in Section 14.5, suppose that because of technology transfer, the South becomes just as productive as the North at producing apples: one unit of Southern labor can now produce 160 apples instead of 100.(a) Autarky:
Trade in the apple and computer economy: Consider the apple-computer trade example given in Section 14.5. Now suppose that because of a new technology, the North becomes even more productive at producing comput-ers: one unit of labor can now produce 20 computers instead of 16.(a) Autarky: Redo
Comparative advantage and trade: Suppose there are two goods in the world, beer and chips. The world consists of four economies: Elbonia, Genovia, Ki-nakuta, and Sodor. Labor is the only input into production, and one unit of labor can produce beer and chips in each of these economies according to
The large trade surplus after World War II: In the years following World War II, the United States briefly ran a trade surplus that peaked at about 5% of GDP in 1947. Use the national income identity (the investment = savings version) to provide a hypothesis that could explain what was going on.

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Macroeconomics 1st Edition Charles I. Jones - Solutions

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