Questions and Answers of The Macro Economy

According to the World View on page 463, (a) How much money is spent annually to combat baldness?(b) How much medical care would that money buy for each child who dies from malaria each year?
How does microfinance alter prospects for economic growth? The distribution of political power?
Suppose it’s an election year and that aggregate demand is growing so fast that it threatens to set off an inflationary movement. Why might Congress and the president hesitate to cut back on
What policies would Keynesian, monetarists, and supply-siders advocate for (a) restraining inflation and (b) reducing unemployment?
What policies would Keynesian, monetarists, and supply-siders advocate for (a) restraining inflation and (b) reducing unemployment?
How much would Obama’s $800 billion fiscal stimulus the Fed have to reduce interest rates to get the same stimulus as President?
Why do banks want to maintain as little excess reserves as possible? Under what circumstances might banks want to hold excess reserves?
If the AD excess is $300 billion and the MPC is 0.75,(a) How much fiscal restraint is desired?(b) By how much do income taxes have to be increased to get that restraint?
If the AD excess is $300 billion and the MPC is 0.75,(a) How much fiscal restraint is desired?(b) By how much do income taxes have to be increased to get that restraint?
Suppose the government decides to increase taxes by $30 billion to increase Social Security benefits by the same amount. How will this combined tax transfer policy effect aggregate demand at current
Suppose you have $5,000 in savings when the price level index is at 100.(a) If inflation pushes the price level up by 10 percent, what will be the real value of your savings?(b) What is the real
If a basic input like oil goes up in price by 20 percent and accounts for 3 percent of total costs in the economy, how much cost-push inflation results?
On the accompanying graph, illustrate for each year (A) the nominal interest rate (use the prime rate of interest), (B) the CPI inflation rate, and (C) the real interest rate (adjusted for same-year
According to Table 7.3, what happened during the period shown to the(a) Nominal price of gold?(b) Real price of gold
Use the GDP deflator data on the inside cover of this book to compute real GDP in 2000 at 2013 prices.
Use the item weights in Figure 7.2 to determine the percentage change in the CPI that would result from a(a) 20 percent increase in entertainment prices.(b) 8 percent decrease in transportation
Assuming that the following table describes a typical consumer’s complete budget, compute the item weights for each product.
Suppose the prices listed in the table for Problem 8 changed from one year to the next, as shown here. Use the rest of the table to compute the average inflation rate.Table From Problem 8:
Suppose the prices listed in the table for Problem 8 changed from one year to the next, as shown here. Use the rest of the table to compute the average inflation rate.Price List From Problem 8:
Assuming that the following table describes a typical consumer’s complete budget, compute the item weights for each product.ItemQuantityUnit PriceCoffee20 pounds$6 / lb.Tuition1 year4,000 /
Use the table below to answer the following question:Prices That Rose (%) in 2013 Prices That Fell (%) in 2013Oranges +10%
Suppose you borrow $100 of principal that must be repaid at the end of two years, along with interest of 4 percent a year. If the annual inflation rate turns out to be 8 percent,(a) What is the real
Suppose you’ll have an annual nominal income of $30,000 for each of the next three years, and the inflation rate is 5 percent per year.(a) Find the real value of your $30,000 salary for each of the
If tuition keeps increasing at the same rate as in 2013–2014 (see News, p. 132), how much will it cost to complete a degree at a private college in four years?
If tuition was $10,000 in 2010–2011, how much was it in2011–2012?2012–2013?2013–2014?
By how much did the pace of tuition hikes (News, p. 132) exceed the 2013 rate of inflation (Table 7.2)? Prices That Rose (%) Train fares Apples Textbooks. Cable TV Cigarettes College tuition Oranges
According to the World View on page 136, what was the price of a loaf of bread in Zimbabwe, measured inU.S. dollars?Zimbabwe dollars?
How do higher gasoline prices contribute to inflation?
Could demand-pull inflation occur before an economy was producing at capacity? How?
Identify two groups that benefit from deflation and two that lose.
Are people worse off when the price level rises as fast as their income? Why do people often feel worse off in such circumstances?
Would it be advantageous to borrow money if you expected prices to rise? Would you want a fixed-rate loan or one with an adjustable interest rate?
If all prices increased at the same rate (i.e., no relative price changes), would inflation have any redistributive effects?
Whose real wealth (see Table 7.3) declined in the 1990s? Who else might have lost real income or wealth? Who gained as a result of inflation? TABLE 7.3 The Real Story of Wealth Households hold
Who gained and who lost from the price changes in Table 7.2? What happened to the price of breakfast?
Who gains and who loses from rising house prices?
How might rapid inflation affect college enrollments?
Why would farmers rather store their output than sell it during periods of hyperinflation? How does this behavior affect prices?
In the previous problem’s market equilibrium, what is(a) What is the market value of the good?(b) What is the social value of the good?Data from the Previous Problem:Assume that the product
The government now spends over $700 billion a year on Social Security benefits. Why don’t we leave it to individuals to save for their own retirement?
According to the News on page 61(a) What was the initial price of a ticket to the NCAA finals?(b) At that price was there (A) an equilibrium, (B) a shortage, or (C) a surplus?
In Figure 3.8, why is the organ demand curve downward-sloping rather than vertical?Figure 3.8: Price Demand- Quantity
According to Figure 1.4,(a) At which point(s) is this society producing some of each type of output but still producing inefficiently?(b) At which point(s) is this society producing the most output
According to Figure 1.4,(a) At which point(s) is this society producing some of each type of output but still producing inefficiently?(b) At which point(s) is this society producing the most output
According to Figure 1.2, what is the opportunity cost of North Korea moving from point P to point N (in terms of food output)?
According to Figure 1.2, what is the opportunity cost of North Korea moving from point P to point N (in terms of food output)?
According to Table 1.1 (or Figure 1.1), what is the opportunity cost of the first truck produced?
The U.S. farm population has shrunk by over 25 million people since 1900. Where did all the people go? Why did they move?
According to Table 2.1, how fast does total output (GDP) have to grow in order to raise per capita GDP inChina?Ethiopia? High-income countries United States Canada Japan France Low-income countries
How might a nation’s production possibilities be affected by the following?a. New solar technology.b. An increase in immigration.c. An increase in military spending.d. An increase in college
Foreign aid to poor nations amounted to $19 per year per person. What percentage did this aid cover of(a) The extreme poverty budget?(b) The severe poverty budget?
According to the World View,(a) How much money is spent annually to combat baldness?(b) How much medical care would that money buy for each child who dies from malaria each year?
(a) Which low-income nation in Table 21.3 has a GDP growth rate closest to that of the United States? (b) How much faster is that nation’s population growth? (c) How much lower is its per
According to Table 21.3, how many years will it take for per capita GDP to double in (a) China? (b) Madagascar? (c) Zimbabwe?
If the industrialized nations were to satisfy the UN’s Millennium Aid Goal, how much more foreign aid would they give annually?
(a) How much foreign aid does the United States now provide?(b) Is the U.S. gives $30 billion in foreign aid, how much more is required to satisfy the UN’s Millennium Aid Goal if U.S. GDP = $18
In Namibia, (a) What percentage of total output is received by the richest 10 percent of households?(b) How much output did this share amount to in 2014, when Namibia’s GDP was $14 billion?(c)
There are 2.4 billion people are in “severe” poverty with less than $2 of income per day. (a) What is the maximum combined income of this “severely” poor population? (b) What
The World Bank’s threshold for “extreme” poverty is $1.25 per person per day. (a) How much annual income does this imply for a family of four? (b) What portion of the official U.S.
What market failure does Bill Gates (World View) cite as the motivation for global philanthropy?
If economic growth reduced poverty but widened inequalities, would it still be desirable?
How do nations expect nationalization of basic industries to foster economic growth?
Why do economists put so much emphasis on entrepreneurship? How can poor nations encourage it?
Would you invest in Cambodia or Kenya on the basis of the information in Figure 21.5?
Can poor nations develop without substantial increases in agricultural productivity? (See Figure 21.2) How?
How does micro-finance alter prospects for economic growth? The distribution of political power?
How do unequal rights for women affect economic growth?
Are property rights a prerequisite for economic growth? Explain.
How do more children per family either restrain or expand income-earning potential?
If a poor nation must choose between building an airport, some schools, or a steel plant, which one should it choose? Why?
If you had only $14 to spend per day (the U.S. poverty threshold), how would you spend it? What if you had only $2 a day (the World Bank “severe poverty” threshold)?
Why should Americans care about extreme poverty in Haiti, Ethiopia, or Bangladesh?
The following exchange rates were taken from ExchangeRate.com. On August 1, 2014, by how much did the dollar appreciate or depreciate against the(a) Argentine peso?(b) European euro? Currency Rates
As shown in Table 20.1, in 2013 the United States was running a current account deficit. Would each of the following events increase (I) or decrease (D) the current account deficit?(a) U.S.
The following schedules summarize the supply and demand for trifflings, the national currency of Tricoli:Use these schedules for the following: (a) Graph the supply and demand curves on the next
For each of the following possible events, indicate whether the global value of the U.S. dollar will A: rise or B: fall. (a) American cars become suddenly more popular abroad. (b) Inflation
According to the World View, what was the peso price of a euro in August 2014?
If inflation raises U.S. prices by 2 percent and the U.S. dollar appreciates by 5 percent, by how much does the foreign price of U.S. exports change?
Between 1997 and 2000, by how much did the dollar appreciate (Figure 20.3)?
If a PlayStation 3 costs 20,000 yen in Japan, how much will it cost in U.S. dollars if the exchange rate is (a) 110 yen = $1? (b) 1 yen = $0.009? (c) 100 yen = $1?
If a pound of U.S. pork cost 40 baht in Thailand before the Asian crisis (p. 444), how much did it cost after the devaluation?
If a McDonald’s Big Mac sells for $4.00, how much will it cost in the currencies of(a) Brazil?(b) Japan?(c) Indonesia?
How many Ukrainian hryvnia (see p. 444) could you buy with one U.S. dollar(a) Before the Russian invasion?(b) After the Russian invasion?
If a euro is worth $1.20, what is the euro price of a dollar?
According to the World View on page 440, which nation had (a) The cheapest currency? (b) The most expensive currency?
Why does the World View on page 449 say the undervalued yuan is “more bane than boom”?
Who in Mexico is helped or hurt by a strong U.S. dollar? Redo the World View on for Mexicans.
How would each of these events affect the supply or demand for Japanese yen? (a) Stronger U.S. economic growth.(b) A decline in Japanese interest rates.(c) Higher inflation in the United
If a nation’s currency depreciates, are the reduced export prices that result “unfair”?
Why did the value of the Ukrainian hryvnia depreciate so much when Russia invaded (p.444)?
In what sense do fixed exchange rates permit a country to “export its inflation”?
Under what conditions would a country welcome a balance-of-payments deficit? When would it not want a deficit?
How would rapid inflation in Canada affect U.S. tourism travel to Canada? Does it make any difference whether the exchange rate between Canadian and U.S. dollars is fixed or flexible?
How do changes in the value of the U.S. dollar affect foreign enrollments at U.S. colleges?
Why would a decline in the value of the dollar prompt foreign manufacturers such as BMW to build production plants in the United States?
Suppose the following table reflects the domestic supply and demand for compact discs (CDs):(a) Graph these market conditions and identify (i) The equilibrium price. (ii) The equilibrium
Suppose the two islands in Problem 4 agree that the terms of trade will be one for one and exchange 10 pearls for 10 pineapples. (a) If Alpha produced 6 pearls and 15 pineapples while Beta
(a) What was the price difference between U.S. and Chinese solar panels in 2013?(b) How much money did U.S. consumers save as a result of this price difference if they purchased 2,000 megawatts of
(a) How much more are U.S. consumers paying for the 24 billion pounds of sugar they consume each year as a result of the quotas on sugar imports?(b) How much sales revenue are foreign sugar producers
Alpha and Beta, two tiny islands off the east coast of Tricoli, produce pearls and pineapples. The following production possibilities schedules describe their potential output in tons per year:(a)

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