Chapter 2:

1. What is the item, and how much did you pay for it? Please do not use a gift you received or something purchased with a gift card (these have confused students in the past).
2. What is a reasonable estimate of how long it would take you (not the actual producer) to make the item if you hadn't been able to buy it? You need to come up with a number of hours or days or years, or whatever time measurement you want, for how long it would take you. Don't try to avoid this. If you can't figure it out, you should pick another good.
3. Who worked to get the money to pay for the item, and how long did they have to work? It is essential that you state a specific amount of time that was worked to get the money to pay for the item. If your money came from the government, see and use the assumptions on the how the government gets money page.
4. Based on your answers to 2 and 3 above, was it rational to buy the good? Explain this by comparing the time it would take you to make the good (mentioned in part 2) and the amount of time that had to be worked to get the money (mentioned in part 3). It is only rational to buy something if you give up less resources working to earn money to pay, than you would have if you made the good yourself. If it turned out to be irrational, why did you buy it?

Chapter 3:

1. Please identify a price change you have observed in the last few years. Please state what the good or service is, and whether the price went up or down (let's just stick with one price change, as opposed to a price that goes up and down throughout the year). Please do not try to explain price changes in gasoline or cell phones.
2. Use the supply and demand model to explain the price change you identified in part 1. You do not need to make a graph, just be sure you talk about both the demand and supply curves, and what is happening to them to create the price change you observed. As you know, the curves can either shift right, shift left, or stay the same. Please try to justify why each curve is doing whatever you think it is doing.
3. Summarize your explanation with one sentence that mentions what you think has happened to both supply and demand (and why), and how this interaction has resulted in the price change you observed. If both curves are moving the same direction, you will need to comment on the relative size of each shift to justify the price change you observed.

Please do not try to explain price changes in gasoline or cell phones. Please pick something else. Helpful tip: be sure you discuss both supply AND demand, as they both play a role in determining the price.

Chapter 4a:

In our everyday lives as consumers we purchase many goods and services, and we derive consumers' surplus for most of them. With that in mind, please:

Identify 3 different goods or services you have purchased in the last year that gave you consumer's surplus, and estimate the amount of consumer's surplus you enjoy from those purchases. For each good, please write out a complete sentence which states specifically:

1. The highest amount you would have been willing to pay.
2. The price you actually paid.
3. The amount of consumers' surplus you received from each item.

Helpful tips: Be sure to state exactly the highest price you would have been willing to pay, and the price you actually paid. There are different phrases you can use to communicate the highest price you were willing to pay, but note that the following are incorrect:

• The price you were willing to pay. Just because you were willing to pay $20 for a good doesn't mean this is the highest you were willing to pay.
• The price you expected to pay. Again, this is not necessarily the highest price you were willing to pay. You get the idea.

Chapter 5:

This chapter focuses on externalities in the context of producing goods and services, but like many concepts in our course, these ideas are very applicable to our daily lives. In this discussion, please:

1. Identify and describe a situation where you have experienced either a positive or negative externality. Please see the "helpful tip" below to avoid making common mistakes.
2. State clearly what the external cost or benefit is.
3. Estimate the dollar value of the externality. You may not be sure how to do this, so consider asking yourself the following: If it's a positive externality, what is the highest price you would be willing to pay for the external benefit you received? If it's a negative externality, what is the lowest price you would be willing to accept as compensation for the external cost you are bearing?
4. How many people in total are affected by this externality? It is essential that you come up with a number of people that are affected; a rough estimate is fine. Recommend either a tax or subsidy amount that the externality creator should pay or receive (to "internalize the externality") based on the number of people affected. You can assume that everyone affected has the same valuation for the externality as you do. If you do not recommend a tax or a subsidy, and the dollar amount of the tax or subsidy, you will lose credit.

Helpful Tip: An externality is a cost or benefit that you experience that you had nothing to do with creating, that you did not pay for, and/or were not compensated for dealing with. Just to be safe, it is probably best if you assert in your writing that whatever your example is could not have been anticipated, you were not compensated for dealing with it, and you did not receive any discounts for dealing with it. Here are a few examples of situations that are not externalities:

• Problems at work, if they were remotely foreseeable. For example, if you work in a customer facing role, and you have an annoying customer... that is not an externality. You are being paid to deal with this. Also, encountering annoying people is foreseeable for a customer service job, so that potential cost is something you considered when taking the job.
• Noisy neighbors, if the noise was not predictable. For example, if you live in an apartment and you can hear your neighbors, that is probably not an externality unless the noise is really out of hand and violates the law (it is reasonable to expect people to follow the law, but not reasonable to expect to have silence while living with nearby neighbors). Since rent for apartments is lower than for single family homes, you are compensated for all of the annoyances that come with apartment living, and they are therefore not externalities. On the other hand, if you live in an area where you would reasonably expect peace and quite, then neighbor noise might be an externality.

Chapter 18 and 19:

In chapters 18 and 19 we learn about how aggregate economic activity is measured. use the "datamapper" provided by the International Monetary Fund to gather data from the last few years.

• We are going to start by looking at growth rates of GDP. This link goes to the International Monetary Fund's data mapping website
• Links to an external site.
• .

There is a bar at the top of the page that says "Datasets". Click on Datasets, then select "World Economic Outlook". On the World Economic Outlook page, find "Real GDP Growth" and select it. You will now be taken to a page that will give you the data on GDP growth rates for different countries and groups of countries.

On the GDP growth rates page, you will see 4 different areas -a map, a list of countries/regions, a graph, and and area marked "selection" which shows what is being graphed. On the list of countries, scroll down and select United States (by clicking on it) so that it appears in the "selection" area, and you can see a graph of our GDP growth rates. You might want to delete whatever else appears in the "selection" area to make the graph easier to read. Please play around with the graph and write down the annual rates of real GDP growth for the United States for the last 4 years.

Next we will now look at changes in the unemployment rate over this same time period. We can make this change by going back to the "World Economic Outlook" data set, and locating and selecting the "Unemployment Rate". You will then be taken back to the "data mapper page" you were on when we looked at real GDP growth rates, but now we have data on the unemployment rate. Please use the same approach described above, and write down the unemployment rates for the United States for the last 4 years.

1. Please make a table to display the data you have gathered.
2. In your estimation, how do you think the economy is doing? Have things gotten better, worse, or stayed the same? Please discuss.
3. Please repeat parts 1 and 2 for another country of your choice.

Chapter 22:

Whenever the economy goes into recession, consumption in the United States decreases.

1. If the economy went into a recession, but you were not directly affected, do you think you might change your consumption patterns/choices?
2. Following the recession of 2008, the rate of savings in the United States doubled. Why do you think this is? How do you think the increase in savings affected overall consumption? Since, on average, 70% economic activity in the United States is based on consumers (just like you) purchasing goods and services for consumption, how do you think the increase in savings affected the economy overall?

Chapter 24:

Please respond to A)

1. In this section we learned about the concept of money, which can be an odd thing to think about a new at this point in your life. Thinking about the functions of money, do you think any of the crypto currencies qualify as money? Please explain.

Chapter 25:

Choose your own monetary policy adventure!

1. Imagine that either the economy is in an expansion or a recession. In the next few prompts you will talk about responding to this situation, so choose wisely. This choice is yours to make, so please now state what is going on with the economy you are pretending to observe.
2. Would you use expansionary or contractionary policy to help the economy?
3. Why would you use the policy you mentioned in 2 above (i.e. what are you trying to affect or prevent)?
4. What changes could you make to reserve requirements, the discount rate, and in open market operations that could help you pursue the policy that is appropriate for the situation the economy is in?
5. How will the changes mentioned in 4 actually help the economy? In other words, how will the changes you want to make translate into real people making different decisions that will ultimately help the overall economy? You probably want to mention how the market for money is affected, how the interest rate might change, how people respond to changes in the interest rate, and how this behavioral change in many people can change the overall economy.

Helpful Tip: This assignment is about monetary policy, so you should not be recommending any fiscal policy measures. If you talk about fiscal policy measures you will be graded lower since I will assume that you are conflating the two and therefore have not yet mastered the topics.

Chapter 26:

In this section we learned that when government spending exceeds tax revenues in a given year we will have a deficit, and that the accumulation of all prior years deficits (and surpluses) is called the debt. Please use this link to the debt clock

Links to an external site.

and write down (as best you can) the US National Debt, and the debt per citizen.

1. Please write the estimate of the debt and debt per citizen.
2. Do you think the amount of debt we have is a problem?
3. Assuming the debt is a problem, what do you think is/are the best way(s) to deal with it?