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Macroeconomics 3rd Canadian Edition Paul Krugman, Robin Wells, Iris Au, Jack Parkinson - Solutions

. Access the Discovering Data exercise for Chapter 9 online to answer the following questions.a. What is the average annual growth rate of real GDP per capita for each of the following countries: India, Canada, China, the United States?b. Does this data provide evidence in support of the
. The accompanying table shows data from the World Bank, World Development Indicators for real GDP per capita (2010 U.S. dollars) for Argentina, Ghana, South Korea, and Canada in 1960 and 2015. Complete the table. Have these countries converged economically?
. The accompanying table shows data from the World Bank, World Development Indicators, for real GDP per capita (2010 U.S. dollars) in France, Japan, the United Kingdom, and Canada in 1960 and 2015. Complete the table. Have these countries converged economically?
. Over the next 100 years, real GDP per capita in Groland is expected to grow at an average annual rate of 2.0%. In Sloland, however, growth is expected to be somewhat slower, at an average annual growth rate of 1.5%. If both countries have a real GDP per capita today of $20,000, how will their
. How have Canadian policies and institutions influenced the country’s long-run economic growth?
. Statistics Canada regularly releases data on the country’s labour productivity and labour cost. Go to StatCan’s home page at www.statcan.gc.ca. Pick English or French. Go to the middle section of the home page and click on “Economic accounts” under “Browse by subject.” Then click
. The country of Androde is currently using Method 1 for its production function. By chance, scientists stumble onto a technological breakthrough that will enhance Androde’s productivity. This technological breakthrough is reflected in another production function, Method 2. The accompanying table
. The following table shows the average annual growth rate in real GDP per capita for Argentina, Ghana, and South Korea using data from the World Bank, World Development Indicators, for the past few decades.a. For each 10-year period and for each country, use the Rule of 70 where possible to
. The accompanying table shows data from the World Bank, World Development Indicators, for real GDP per capita in 2010 U.S. dollars for Argentina, Ghana, South Korea, and Canada for 1960, 1980, 2000, and 2015.a. Complete the table by expressing each year’s real GDP per capita as a percentage of
How do scarcity of natural resources and environmental degradation pose a challenge to sustainable long-run; economic growth?
Why does the convergence hypothesis apply to economically advanced countries?
How does growth vary among several important regions of the world?
Why do long-run growth rates differ so much among countries?
How is productivity driven by physical capital, human capital, and technological progress?
How has real GDP per capita changed over time in different countries? Why is productivity the key to long-run economic growth?
Why is long-run economic growth measured as the increase in real GDP per capita?
. In the following examples, is inflation creating winners and losers at no net cost to the economy or is inflation imposing a net cost on the economy? If a net cost is being imposed, which type of cost is involved?a. When inflation is expected to be high, workers get paid more frequently and make
1. The accompanying diagram shows the inflation rate in Canada from 1980 to 2017.Province/Territory Labour force (thousands) Unemployed (thousands) May 2016 May 2017 May 2016 May 2017 Alberta 2444.9 2484.2 194.5 193.1 British Columbia 2520.8 2612.9 153.4 146.3 Manitoba 675.7 678.6 40.0 35.9 New
9. The accompanying table provides the inflation rate in the year 2005 and the average inflation rate over the period 2006–2015 for eight different countries. Country Inflation rate in 2005 Average inflation rate in 2006–2015 Brazil 6.87% 5.70% Canada 2.23 1.70 China 1.82 2.89 France 1.90 1.47
8. With its tradition of a job for life for most citizens, Japan once had a much lower unemployment rate than that of Canada; from 1960 to 1995, the unemployment rate in Japan exceeded 3% only once. However, since the crash of its stock market in 1989 and slow economic growth in the 1990s, the
7. How will the following changes affect the natural rate of unemployment?a. The government reduces the time during which a worker can receive employment insurance.b. More teenagers focus on their studies and do not look for jobs until after college or university.c. Greater access to the Internet
5. The accompanying table provides data on the size of the labour force and the number of unemployed workers for the provinces and territories of Canada. Province/Territory Labour force (thousands) Unemployed (thousands) May 2016 May 2017 May 2016 May 2017 Alberta 2444.9 2484.2 194.5 193.1 British
4. Part of the information collected in the Labour Force Survey concerns how long individuals have been unemployed. Go to www.statcan.gc.ca to find the latest report.Click on the link on this main page labelled “CANSIM.” This will direct you to another page for CANSIM. Then in the “Search
3. In each of the following situations, what type of unemployment is Melanie facing?a. After completing a complex programming project, Melanie is laid off. Her prospects for a new job requiring similar skills are good, and she has signed up with a programmer placement service. She has passed up
2. In general, how do changes in the unemployment rate vary with changes in real GDP? After several quarters of a severe recession, explain why we might observe a decrease in the official unemployment rate. Explain why we could see an increase in the official unemployment rate after several
1. Each month, usually on the first Friday of the month, Statistics Canada releases the Labour Force Survey for the previous month. Go to StatCan’s home page at www.statcan.gc.ca. Pick English or French. Click on the “Unemployment rate” link under the “Key Indicators” heading. This will
Why do policy makers try to maintain a stable rate of inflation?
How do inflation and deflation create winners and losers?
What are the economic costs of inflation?
What factors determine the natural rate of unemployment?
What is the relationship between the unemployment rate and economic growth?
What is the significance of the unemployment rate for the economy?
How is unemployment measured and how is the unemployment rate calculated?
15. The economy of Britannica produces three goods: computers, pens, and pizza. The accompanying table shows the prices and output of the three goods for the years 2014, 2015, and 2016.a. What is the percent change in production of each of the goods from 2014 to 2015 and from 2015 to 2016?b. What
14. The cost of undergraduate (university) education in Canada has risen in recent years. These tables show the average cost of tuition for Canadian full-time students for the academic years that began in 2015 and 2016, measured in current dollars, and the consumer price index (CPI) in 2010 and
13. The accompanying table contains two price indexes for the years 2014, 2015, and 2016: the GDP deflator and the CPI. For each price index, calculate the inflation rate from 2014 to 2015 and from 2015 to 2016. (Note: The GDP deflator has a base year of 2007 and the CPI has a base year of 2002.)
12. The accompanying table provides the annual real GDP (in billions of 2007 dollars) and nominal GDP (in billions of dollars) for Canada.a. Calculate the GDP deflator for each year.b. Use the GDP deflator to calculate the inflation rate for all years except 2007. 2007 2012 2013 2014 2015 2016 Real
11 Each month, Statistics Canada releases the Consumer Price Index (CPI) estimates for the previous month. Go to StatCan’s home page at www.statcan.gc.ca. Choose English or French. Click on the “CPI annual inflation” link under the “Key Indicators” heading. This will open the latest CPI
10 The consumer price index, or CPI, measures the cost of living for a typical urban household by multiplying the price for each category of expenditure (housing, food, and so on) times a measure of the importance of that expenditure in the average consumer’s market basket and summing over all
9. Eastland College is concerned about the rising price of textbooks that students must purchase. To better identify the increase in the price of textbooks, the dean asks you, the Economics Department’s star student, to create an index of textbook prices. The average student purchases three
8. The accompanying table shows data on nominal GDP (in billions of dollars), real GDP (in billions of 2007 dollars), and population (in thousands) of Canada in 1966, 1976, 1986, 1996, 2006, and 2016. The Canadian price level rose consistently over the period 1966–2016. Year Nominal GDP (billions
7. Access the Discovering Data exercise for Chapter 7 online to answer the following questions.a. What was GDP for the Canada last year?b. Calculate the absolute change in Canadian GDP between last year and the year before.c. Which component of GDP was the largest last year? Which was the smallest?
6. Which of the following transactions will be included in GDP for Canada?a. Coca-Cola builds a new bottling plant in Canada.b. Air Canada sells one of its existing airplanes to Korean Air.c. Ms. Moneybags buys an existing share of Telus Corporation stock.d. A softwood lumber firm in British
5. In the economy of Pizzania (from Problem 4), bread and cheese produced are sold both to the pizza company for inputs in the production of pizzas and to consumers as final goods. The accompanying table summarizes the activities of the three companies.Bread company Cheese company Pizza company
4. The small economy of Pizzania produces three goods (bread, cheese, and pizza), each produced by a separate company. The bread and cheese companies produce all the inputs they need to make bread and cheese, respectively. The pizza company uses the bread and cheese from the other companies to make
3. Consider the following table for Canada’s GDP in 2016.Category Components of GDP in 2016 (billions of dollars) Personal expenditure on consumer goods and services Durable goods 231.2 Non-durable goods 273.4 Services 648.9 Non-profit institutions serving households’ final consumption
2. A more complex circular-flow diagram for the economy of Macronia is shown at right.a. What is the value of GDP in Macronia?b. What is the value of net exports?c. What is the value of disposable income?d. Does the total flow of money out of households—the sum of taxes paid, consumer spending,
1. At right is a simplified circular-flow diagram for the economy of Micronia. (Note that there is no investment and no transfers in Micronia.)a. What is the value of GDP in Micronia?b. What is the value of net exports?c. What is the value of disposable income?d. Does the total flow of money out of
20. Assume Saudi Arabia and Canada face the production possibilities for oil and cars shown in the accompanying table. Saudi Arabia United States Quantity of oil (millions of barrels) Quantity of cars (millions) Quantity of oil (millions of barrels) Quantity of cars (millions) 0 4 0 10.0 200 3 100
19. Producers in import-competing industries often make the following argument: “Other countries have an advantage in production of certain goods purely because workers abroad are paid lower wages. In fact, North American workers are much more productive than foreign workers. So import-competing
18. In World Trade Organization (WTO) negotiations, if a country agrees to reduce trade barriers (tariffs or quotas), it usually refers to this as a concession to other countries. Do you think that this terminology is appropriate?
17. Canada is highly protective of its agricultural (food) industry, imposing import tariffs, and sometimes quotas, on imports of agricultural goods. This chapter presented three arguments for trade protection. For each argument, discuss whether it is a valid justification for trade protection of
16. As Canada has opened up to trade, it has lost many of its low-skill manufacturing jobs, but it has gained jobs in high-skill industries, such as the software industry. Explain whether Canada as a whole has been made better off by trade.
15. The accompanying diagram illustrates the Canadian domestic demand curve and domestic supply curve for beef.The world price of beef is PW. Canada currently imposes an import tariff on beef, so the price of beef is PT . Parliament decides to eliminate the tariff. In terms of the areas marked in
14. In Canada, producers of milk, poultry, and eggs are protected by government imposed supply management rules. This supply management system is made up of a combination of import controls, production planning quotas, and minimum prices for these products.a. Suppose the goal of the government is
13. Over the past five years the United States has become the world’s largest producer of natural gas. But gas producers have struggled to find methods to liquefy natural gas so that it can be exported across the Atlantic. Enter Cheniere Energy, a Houston- based natural gas company that has
12. Once again, using the OEC website from Problems 10 and 11, identify which country has a comparative advantage for each of the following goods. For each good, include the country’s share of global exports and the total dollar value of that share.a. Computersb. Maple syrupc. Soybeansd. Cocoa
11. Comparative advantage creates an opportunity for less productive economies like Bangladesh to trade with more productive economies like Canada. Using the OEC website from Problem 10, how much did Bangladesh export to Canada? What was its largest export to Canada? In general, what type of goods
10 The Observatory of Economic Complexity (OEC) is a data visualization that models international trade data among countries. Go to the website at atlas.media.mit.edu to answer the following questions.a. Start by selecting “Countries” and enter “Canada” in the search bar. In 2015, what was
9. The Canadian domestic demand schedule and domestic supply schedule for oranges was given in Problem 8. Suppose that the world price of oranges is $0.30. Canada introduces an import quota of 3 000 oranges and assigns the quota rents to foreign orange exporters.a. Draw the domestic demand and
8. The accompanying table shows the Canadian domestic demand schedule and domestic supply schedule for oranges. Suppose that the world price of apples is $0.30 per orange. Price of orange Quantity of oranges demanded (thousands) Quantity of oranges supplied (thousands) $1.00 2 11 0.90 4 10 0.80 6 9
7. The accompanying table indicates the Canadian domestic demand schedule and domestic supply schedule for commercial jet airplanes. Suppose that the world price of a commercial jet airplane is $100 million.Price of jet (millions) Quantity of jets demanded Quantity of jets supplied $120 100 1,000
6. Before the North American Free Trade Agreement (NAFTA) gradually eliminated import tariffs on goods, the autarky price of tomatoes in Mexico was below the world price and in Canada was above the world price. Similarly, the autarky price of poultry in Mexico was above the world price and in
5. Shoes are labour-intensive and satellites are capital-intensive to produce. Canada has abundant capital. China has abundant labour. According to the Heckscher–Ohlin model, which good will China export? Which good will Canada export? In Canada, what will happen to the price of labour (the wage)
4. According to data from Statistics Canada, since 2000, the value of Canadian imports of men’s and boy’s apparel from China has increased from $382 million in 2000 to $976 million in 2016. What prediction does the Heckscher–Ohlin model make about the wages received by labour in China?
3. Industry Canada provides statistics on Canada’s imports and exports on its website. The following steps will take you to the foreign trade statistics. Use them to answer the questions below. i. Go to Industry Canada’s website at www.ic.gc.ca. ii. At the top of the page, under Just for
2. For each of the following trade relationships, explain the likely source of the comparative advantage of each of the exporting countries.a. Canada exports software to Venezuela, and Venezuela exports oil to Canada.b. Canada exports airplanes to China, and China exports clothing to Canada.c.
1. Both Canada and the United States produce lumber and footballs with constant opportunity costs. The United States can produce either 10 tonnes of lumber and no footballs, or 1 000 footballs and no lumber, or any combination in between. Canada can produce either 8 tonnes of lumber and no
What are the sources of comparative advantage? Who gains and who loses from international trade?
15. Suppose it is decided that rent control in a city will be abolished and that market rents will now prevail. Assume that all rental units are identical and so are offered at the same rent. To address the plight of residents who may be unable to pay the market rent, an income supplement will be
14. This question uses the algebraic method of determining equilibrium from Appendix 3A. In Canada, producers of milk, poultry, and eggs are protected by governmentimposed supply management rules. This supply management system is made up of a combination of import controls, production planning
13. In Canada, all provinces except Alberta have a minimum legal retail price for beer (a price floor). Part of the rationale for this policy is to discourage immoderate consumption of alcohol. Suppose the fictitious province of Beerlandia has the following annual demand and supply schedule for
12. Many university and college students attempt to land internships before graduation to burnish their resumes, gain experience in a chosen field, or try out possible careers. The hope shared by all of these prospective interns is that they will find internships that pay more than typical summer
11. The accompanying diagram shows data from the U.S. Bureau of Labor Statistics on the average price of an airline ticket in the United States from 1975 until 1985, adjusted to eliminate the effect of inflation (the general increase in the prices of all goods over time). In 1978, the United States
10. The Venezuelan government has imposed a price ceiling on the retail price of roasted coffee beans. The accompanying diagram shows the market for coffee beans. In the absence of price controls, the equilibrium is at point E, with an equilibrium price of PE and an equilibrium quantity bought and
9. In the Atlantic provinces and Quebec, you must have a licence to harvest lobster commercially; these licences are issued yearly. The federal Department of Fisheries and Oceans Canada is concerned about the dwindling supplies of lobsters found off its coast. This department has decided to place a
8. The waters off the North Atlantic coast were once teeming with fish. But because of overfishing by the commercial fishing industry, the stocks of fish became seriously depleted. In 1991, the International Commission for the Conservation of Atlantic Tunas (ICCAT) implemented a quota to allow
7. For the last 70 years the Canadian government has used price supports to provide income assistance to Canadian farmers. To implement these price supports, at times the government has used price floors, which it maintains by buying up the surplus farm products. At other times, it has used target
6. In many European countries high minimum wages have led to high levels of unemployment and under-employment, and a two-tier labour system. In the formal labour market, workers have good jobs that pay at least the minimum wage. In the informal, or black market for labour, workers have poor jobs
5. European governments tend to make greater use of price controls than the Canadian government. For example, the French government sets minimum starting yearly wages for new hires who have completed le bac, certification roughly equivalent to a high school diploma. The demand schedule for new
4. The accompanying table shows hypothetical demand and supply schedules for milk per year. The Canadian government decides that the incomes of dairy farmers should be maintained at a level that allows the traditional family dairy farm to survive. So it implements a price floor of $1 per pint by
3. The Canadian Dairy Commission (CDC) administers the price floor for butter, which was set at $7.40 per kilogram in 2015. At that price, according to data from the CDC, the quantity of butter supplied in 2015 was 109.41 million kilograms, and the quantity demanded was 101.09 million kilograms. To
2. In the mid-eighteenth century, the government of New France (modern-day Quebec) controlled the price of bread, which was set at a predetermined price below the free market price.a. Draw a diagram showing the effect of the policy. Did the policy act as a price ceiling or a price floor?b. What
1. In order to ingratiate himself with voters, the mayor of Gotham City decides to lower the price of taxi rides. Assume, for simplicity, that all taxi rides are the same distance and therefore cost the same. The accompanying table shows the demand and supply schedules for taxi rides. Fare (per
And why do governments undertake market interventions even though they create losses to society?
Who benefits and who loses from market interventions? Why are economists often skeptical of market interventions?
4. The accompanying diagram illustrates a taxi driver’s individual supply curve (assume that each taxi ride is the same distance).a. Suppose the city sets the price of taxi rides at $4 per ride, and at $4 the taxi driver is able to sell as many taxi rides as he desires. What is this taxi
3. You are the manager of Fun World, a small amusement park. The accompanying diagram shows the demand curve of a typical customer at Fun World.a. Suppose that the price of each ride is $5. At that price, how much consumer surplus does an individual consumer get? (Recall that the area of a right
2. Determine the amount of producer surplus generated in each of the following situations.a. Gordon lists his old Lionel electric trains on eBay. He sets a minimum acceptable price, known as his reserve price, of $75. After five days of bidding, the final high bid is exactly $75. He accepts the
1. Determine the amount of consumer surplus generated in each of the following situations.a. Leon goes to the clothing store to buy a new T-shirt, for which he is willing to pay up to $10. He picks out one he likes with a price tag of exactly $10. When he is paying for it, he learns that the
10. Studies have found a relationship between a country’s yearly rate of economic growth and the yearly rate of increase in airborne pollutants. It is believed that a higher rate of economic growth allows a country’s residents to have more cars and travel more, thereby releasing more airborne
9. The accompanying table illustrates annual salaries and income tax owed by five individuals. Apart from the fact that they receive different salaries and owe different amounts of income tax, these five individuals are otherwise identical.a. If you were to plot these points on a graph, what would
8. An insurance company has found that the severity of property damage in a fire is positively related to the number of firefighters arriving at the scene.a. Draw a diagram that depicts this finding with number of firefighters on the horizontal axis and amount of property damage on the vertical
7. The accompanying table shows the relationship between workers' hours of work per week and their hourly wage rate. Apart from the fact that they receive a different hourly wage rate and work different hours, these five workers are otherwise identical.a. Which variable is the independent variable?
5. For each of the accompanying diagrams, calculate the area of the shaded right triangle.
4. Answer each of the following questions by drawing a schematic diagram.a. Taking measurements of the slope of a curve at three points farther and farther to the right along the horizontal axis, the slope of the curve changes from −0.3, to−0.8, to −2.5, measured by the point method. Draw a
3. In the accompanying figures, the numbers on the axes have been lost. All you know is that the units shown on the vertical axis are the same as the units on the horizontal axis.a. In panel (a), what is the slope of the line? Show that the slope is constant along the line.b. In panel (b), what is
2. In the early 1980s, economist Arthur Laffer argued in favour of lowering income tax rates in order to increase tax revenues. Like most economists, he believed that at tax rates above a certain level, tax revenue would fall because high taxes would discourage some people from working and that
1. Study the four accompanying diagrams. Consider the following statements and indicate which diagram matches each statement. Which variable would appear on the horizontal and which on the vertical axis? In each of these statements, is the slope positive, negative, zero, or infinity?a. If the price
12. In each of the following situations, explain how government intervention could improve society’s welfare by changing people’s incentives. In what sense is the market going wrong?a. Pollution from auto emissions has reached unhealthy levels.b. Everyone in Woodville would be better off if

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