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the macro economy
The Micro Economy Today 15th Edition Bradley R. Schiller, Karen Gebhardt - Solutions
If a PlayStation 4 costs 30,000 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?
Between 2014 and 2017, did the U.S. dollar appreciate or depreciate (see Figure 22.3)?
If a McDonald’s Big Mac meal sold for $6.00 in March 2017, how much would it cost in the currencies of(a) Brazil?(b) Japan?(c) Indonesia?(See World View “Foreign Exchange Rates.”)
How many Ukrainian hryvnia (see section Ukraine Crisis of 2014) could you buy with one U.S.dollar(a) Before the Russian invasion?(b) After the Russian invasion?
If a euro is worth $1.25, what is the euro price of a dollar?
According to World View “Foreign Exchange Rates,” which nation had(a) The cheapest currency?(b) The most expensive currency?
Why does World View “The Risks of China’s ForeignExchange Stockpile” say the undervalued yuan is “more bane than boom”? LO22-4
Who in Mexico is helped or hurt by a strong U.S. dollar?Redo World View “Who Gains, Who Loses from Strong Dollar” for Mexicans. LO22-4
How would each of these events affect the supply or demand for Japanese yen? LO22-3(a) Stronger U.S. economic growth.(b) A decline in Japanese interest rates.(c) Higher inflation in the United States.(d) A Japanese tsunami.
If a nation’s currency depreciates, are the reduced export prices that result “unfair”? LO22-4
Why did the value of the Ukrainian hryvnia depreciate so much when Russia invaded (see section Ukraine Crisis of 2014)? LO22-3
In what sense do fixed exchange rates permit a country to “export its inflation”? LO22-4
Under what conditions would a country welcome a balance-of-payments deficit? When would it not want a deficit? LO22-4
How would rapid inflation in Canada affect U.S. tourism travel to Canada? Does it make any difference whether the exchange rate between Canadian and U.S.dollars is fixed or flexible? LO22-3
How do changes in the value of the U.S. dollar affect foreign enrollments at U.S. colleges? LO22-4
Why would a rise in the value of the dollar prompt U.S.manufacturers to build production plants in Mexico?LO22-4
How changes in exchange rates affect prices, output, and trade flows.
How exchange rates are established.
The sources of foreign exchange demand and supply.
How the value of a currency is measured.
The Economy Tomorrow:(a) Which regional trade pact is among Canada, the United States, and Mexico?(b) Which industries have gained from this trade pact?(c) Which industries have lost from this trade pact?
Suppose the following table reflects the domestic supply and demand for Bluetooth headphones:Price ($) 60 55 50 45 40 35 30 25 Quantity supplied(in millions per year) 8 7 6 5 4 3 2 1 Quantity demanded(in millions per year) 2 4 6 8 10 12 14 16(a) Graph these market conditions and identify(i) The
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 produced 30 pearls and 8 pineapples before they decided to trade, how many pearls would each be producing after
(a) How much was the tariff on Chinese steel imposed in 2016 (World View “U.S. Slaps China with Huge Anti-Dumping Tariffs”)?(b) If China was selling its steel for $50 a ton, what would that steel cost American automakers?
(a) How much more are U.S. consumers paying for the 12 tons of sugar they consume each year as a result of the quotas on sugar imports? (See In the News “Sugar Quotas a Sour Deal”).(b) How much sales revenue are foreign sugar producers losing as a result of those same quotas?
Alpha and Beta, two tiny islands in the Pacific, produce pearls and pineapples. The following production possibilities schedules describe their potential output in tons per year:LO21-2 LO21-1 LO21-1 LO21-2 Alpha Beta Pearls Pineapples Pearls Pineapples 0 30 0 20 2 25 10 16 4 20 20 12 6 15 30 8 8 10
If it takes 10 farmworkers to harvest 1 ton of strawberries and 3 farmworkers to harvest 1 ton of wheat, what is the opportunity cost of 4 tons of strawberries?
Which countries are(a) The two largest export markets for the United States? (See Table 21.3.)(b) The two biggest sources of imports?
What are the potential benefits and risks of a borderadjustment tax? LO21-3
Who gains and who loses from nontariff barriers to Mexican trucks (World View “Mexico Retaliates for U.S. Trucking Roadblocks”)? What made President Obama offer renewed negotiations? LO21-3
According to the National Association of Home Builders, the 2017 tariff on Canadian lumber will result in the loss of 8,000 U.S. construction jobs. How does this happen? LO21-3
Who, besides Chinese steel producers, was hurt by the new tariffs on Chinese imports (World View “U.S. Slaps China with Huge Anti-Dumping Tariffs”)? LO21-3
Domestic producers often base their demands for import protection on the fact that workers in country X are paid substandard wages. Is this a valid argument for protection? LO21-1
Suppose we refused to sell goods to any country that reduced or halted its exports to us. Who would benefit and who would lose from such retaliation? LO21-2
How does international trade restrain the price behavior of domestic firms? LO21-3
If a nation exported much of its output but imported little, would it be better or worse off? How about the reverse—that is, exporting little but importing a lot? LO21-2
What would be the effects of a law requiring bilateral trade balances? LO21-2
Suppose a lawyer can type faster than any secretary.Should the lawyer do her own typing? Can you demonstrate the validity of your answer? LO21-1
How trade barriers affect prices, output, and incomes.
What the gains from trade are.
What comparative advantage is.
The Economy Tomorrow: Social Security tax revenue comes from taxes on current workers’wages up to a cap. Social Security benefits go out to current retirees and are based on age and past earnings. In The Economy Tomorrow, it is discussed how in the near future tax revenue will be less than the
Suppose the benefit formulas for various welfare programs are Food stamps: $400 per month − 0.30(Wages)Housing assistance: $1,000 per month − 0.25(Wages)Cash welfare: $400 per month − 0.67(Wages above $500)(a) How much will someone earning $800 a month receive in(i) Food stamps?(ii) Housing
If older workers have a tax elasticity of labor supply equal to 0.20, by how much will their work activity decline when they reach the Social Security earnings test limit? (Assume explicit taxes of 20 percent below that limit.)
(a) On the following graph, depict the wages, income, and Social Security benefits at different hours of work for a worker aged 62–64 who earns $15 per hour and is eligible for $15,000 in Social Security benefits.(b) What is the total income if the person works 1,000 hours per year?(c) What is
How large a monthly Social Security check will a retiree get if her maximum benefit is$1,600 per month and she continues working for wages of $2,000 per month?
According to the benefit formula in Table 20.2, how large will the Social Security benefit be for a worker who had prior earnings of(a) $36,000 a year?(b) $96,000 a year?What is the marginal wage replacement rate for(c) The $36,000-per-year worker?(d) The $96,000-per-year worker?
What is the breakeven level of income for Social Security as depicted in Figure 20.6?
Draw a graph showing how benefits, total income, and wages change under the following conditions:Wage rate = $10 per hour Welfare benefit = $5,000 − 0.5(Wages > $3,000)Identify here and label on the graph the following points:A—welfare benefit when wages = 0 (a) How much is that
A welfare recipient can receive food stamps as well as cash welfare benefits. If the food stamp allotment is set as follows, Food stamps = $6,000 − 0.30(Wages)(a) How high can wages rise before all food stamps are eliminated?(b) If the welfare benefit formula in Problem 1 applies, what is the
Suppose the annual welfare benefit formula is Benefit = $8000 − 0.67(Wages > $2,000)(a) What is the marginal tax rate on(i) The first $2,000 of wages?(ii) Wages above $2,000?(b) How large is the benefit if wages equal(i) $0?(ii) $2,000?(iii) $6,000?(c) What is the breakeven level of income in
Why is the increasing ratio of older people to younger people a problem for Social Security? Is there any way to mitigate this demographic problem? LO20-3
Why don’t we give poor people more cash welfare instead of in-kind transfers like food stamps, housing assistance, and Medicaid? LO20-3
Who pays the economic cost of Social Security? In what ways? LO20-2
How would the distribution of income change if Social Security were privatized? LO20-1
Should the Social Security earnings test be eliminated?What are the benefits and costs of doing so? LO20-2
In what ways do younger workers pay for Social Security benefits received by retired workers? LO20-2
Once someone has received TANF welfare benefits for a total of five years, he or she is permanently ineligible for more TANF benefits. Should this person receive any further assistance? How will work incentives be affected? LO20-2
If poor people don’t want to work, should they get welfare? What about their children? LO20-3
What’s so hard about guaranteeing everyone a minimal level of income support? What problems arise? LO20-2
If we have to choose between compassion and incentives, which should we choose? Do the terms of the trade-off matter? LO20-3
The trade-offs between equity and efficiency
How transfer programs affect labor supply and total output.
The major income transfer programs.
The Economy Tomorrow: What is the effective tax rate with Dick Armey’s proposed flat tax for a family of four with earnings of(a) $30,000?(b) $50,000?(c) $100,000?
(a) On the graph shown below, draw the supply and demand for labor represented by the following data:Wage 12 11 10 9 8 7 6 5 4 3 2 $1 Quantity of labor Supplied 20 17 14 12 10 8 6 5 4 3 2 1 Demanded 2 3 4 5 6 8 10 12 14 16 18 20(b) How many workers are employed in equilibrium?(c) What wage are they
Following are hypothetical data on the size distribution of income and wealth for each quintile(one-fifth) of a population:Quintile Lowest Second Third Fourth Highest Income 5% 10% 15% 25% 45%Wealth 2% 8% 12% 20% 58%(a) On the a graph, draw the line of absolute equity; then draw a Lorenz curve for
What percentage of income is paid in Social Security taxes by a worker with wage earnings of(a) $30,000?(b) $70,000?(c) $200,000?(d) Is this a progressive, regressive, or proportional tax?
What is the difference in the top marginal tax rate between Japan and Hong Kong (World View“Top Tax Rates”)?
By how much might the quantity of labor supplied decrease if the tax elasticity of supply were 0.20 and the marginal tax rate increased from 35 to 45 percent?
If the tax elasticity of supply is 0.15, by how much will the quantity supplied increase when the marginal tax rate decreases from 40 to 36 percent?
Using Table 19.1, compute the taxable income and taxes for the following taxpayers:Gross Exemptions Taxable Taxpayer Income and Deductions Income Tax A $ 20,000 $ 4,000 B 40,000 16,000 C 80,000 34,000 D 200,000 110,000 Which taxpayer has(a) The highest nominal tax rate?(b) The highest effective tax
Use Table 19.1 to compute the taxes on a taxable income of $200,000.(a) What is the marginal tax rate?(b) What is the average tax rate?
According to In the News “Taxes: The Pences vs. the Clintons,” in 2015 what was the Pences’(a) Nominal tax rate?(b) Effective tax rate?
If there were no deduction for charitable contributions, how much more tax would the Clintons have paid in 2015 (In the News “Taxes: The Pences vs. the Clintons”)?
How much tax did the Clintons pay in 2015 (In the News “Taxes: The Pences vs.the Clintons”) on:(a) The first $9,000 of taxable income?(b) The last $9,000 of taxable income?How much tax did the Pences pay in 2015 on:(c) The first $9,000 of taxable income?(d) The last $9,000 of taxable income?
How would President Trump’s proposed changes in the tax system affect efficiency and equity? Should they have been adopted? LO19-3
What share of taxes should the rich pay (see Figure 19.4)? Should the poor pay any taxes? LO19-3
Is a tax deduction for tuition likely to increase college enrollments? How will it affect horizontal and vertical equities? LO19-3
If the tax elasticity of supply were zero, how high could the tax rate go before people reduced their work effort?How do families vary the quantity of labor supplied when tax rates change? LO19-3
If a new tax system encouraged more output but also created greater inequality, would it be desirable? LO19-3
How might a flat tax affect efficiency? Fairness? LO19-3
What loopholes reduced the Pences’ and the Clintons’2015 tax bill (see In the News “Taxes: The Pences vs.the Clintons”)? What’s the purpose of those loopholes?LO19-1
Do inequalities stimulate productivity? In what ways?Provide two specific examples. LO19-3
Why are incomes distributed so unevenly? Identify and explain three major causes of inequality. LO19-3
What goods or services do you and your family receive without directly paying for them? How do these goods affect the distribution of economic welfare? LO19-2
The nature of the equity–efficiency trade-off.
What makes taxes more or less progressive.
How the U.S. tax system is structured.
The Economy Tomorrow: What are the three most important sources of funding for financing a start-up?
Which investment has a higher rate of annual cash return? Investment A: $1,000 bond with a coupon rate of 4 percent selling for $1,200 or Investment B: $1,000 stock with a P/E ratio of 10 that pays out half its profits in dividends.
Illustrate with demand and supply shifts the impact of the following events on stock prices:(a) A federal court finds Google guilty of antitrust violations. Which way (right or left) did(i) Demand shift?(ii) Supply shift?(b) Intel announces a new and faster processor. Which way did(i) Demand
How much interest accrued each day on the immediate cash payoff of the MegaMillions jackpot? (See Table 18.1.)
What is the current yield on a $1,000 bond with a 4 percent coupon if its market price is(a) $900?(b) $1,000?(c) $1,100?
Compute the market price of the GM bonds described in Table 18.5 if the yield falls to 20 percent.
What was the expected return on Columbus’s expedition, assuming that he had a 50 percent chance of discovering valuables worth $1 million, a 25 percent chance of bringing home only$100,000, and a 25 percent chance of sinking?
What is the present discounted value of $10,000 that is to be received in 2 years if the market rate of interest is(a) 0 percent?(b) 4 percent?(c) 8 percent?
If the market rate of interest is 5 percent, what is the present discounted value of $1,000 that will be paid in(a) 1 year?(b) 5 years?(c) 10 years?
According to the data in Table 18.3,(a) How much profit per share did Intel earn?(b) How much of that profit did it pay out in dividends?
According to the data in Table 18.3,(a) How much profit per share did Google earn?(b) How much of that profit did it pay out in dividends?
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