14.02 Principles of Macroeconomics Problem Set 1 Fall 2005 ***Solution***

Size: px
Start display at page:

Transcription

1 Part I. True/False/Uncertain Justify your answer with a short argument Principles of Macroeconomics Problem Set 1 Fall 2005 ***Solution*** Posted: Monday, September 12, 2005 Due: Wednesday, September 21, Because of a natural disaster, the government purchases \$100 million worth of bottled water and blankets. This increases GDP by \$100 million. UNCERTAIN. When the government purchases goods or services, it counts as a part of G. Therefore, in the goods market model, when G increases by \$100, GDP increases by at least \$100 million. It increases by \$100 million only if the multiplier is equal to one, meaning that the marginal propensity to consume is 0. If the marginal propensity to consumer is bigger than 0, which is a more realistic situation, then the multiplier is bigger than one and GDP increases by multiplier*\$100 million. 2. Because of a natural disaster, the government increases unemployment insurance benefits payments to those who are affected. This increases GDP. TRUE. In the goods market model, an increase in unemployment insurance benefits amounts to a decrease in T (since T is taxes paid minus government transfers received by consumers). Thus, disposable income increases, which implies that consumption goes up and that GDP increases (with a multiplier effect). 3. The multiplier (Keynesian multiplier) is always less than 1 if T = 0, G = 0, and NX = 0. FALSE. Goods Market Eqm Y = C + I + G Y = [c 0 + c 1 Y - c 1 T] + I + G 1 Y = [ ] [c 0 + I + G - c 1 T ] multiplier 1 [ ] 1 If 0 < c 1 < 1 [ ] >1 If the marginal propensity to consume is less than 1, it means that people consume less than 100% of their disposable income. It also implies that the multiplier is greater 1. The fact that T = 0, G = 0, and NX=0 is irrelevant.

2 4. It is impossible for real GDP increase to be coupled by a decrease of nominal GDP. FALSE. Real GDP changes only when the quantity of final goods and services produced changes. Nominal GDP changes when either the quantity and/or the price of final goods and services produced changes. So, it is possible for an economy to experience an increase of real GDP (if the quantity of final goods and services increase) but experience a decrease of nominal GDP (if the decrease in prices offsets the increase in quantity of goods and services). 5. Inflation is bad for the economy because goods and services are more expensive. Uncertain. Inflation usually leads to distortions because all prices and wages do not rise proportionately during inflationary periods. So, inflation affects income distribution and may lead to uncertainties about the future which is considered not good. (If all prices rise proportionally it is called pure inflation and it would just be a minor inconvenience.) 6. The growth rate of nominal GDP per capita is the best summary measure of changes in material living standards in a country over time. FALSE. Growth in nominal GDP per capita is not the best way of measuring changes in material living standards because it does not adjust for inflation. In an economy with a high inflation will experience an increase in nominal GDP even if the real amount of goods and services produced decreases. Real GDP per capital is a better measure of material living standards. 7. GDP deflator is the best measure of inflation. FALSE. GDP Deflator = CPI = PPI = gives the average price of output (final goods produced in the economy) Consumer Price Index Average price of consumption (goods people consume) Producer Price Index Prices of domestically produced goods in manufacturing, mining, agriculture, fishing, forestry, and electric utility industries. It is hard to say which one is better or more correct in measuring inflation. Each index gives us different information. It depends mostly on what you are interested in knowing. If one wants to know how the price level of goods produced in the US is changing, then the GDP deflator would give the most accurate picture. On the other hand, if one was interested in knowing how the price level of consumer goods was changing over time, then CPI would be the best.

3 II. UNEMPLOYMENT Total population: 1,000,000 Number of adults employed: 450,000 Number of unemployed adults: 90,000 Labor force: 500, Calculate the unemployment rate. L = N + U L = labor force N = number of employed U = number of unemployed (but who are looking) As many of you realized, the numbers of unemployed and employed adults don t add up to the labor force, implying that some of the unemployed are not counted as unemployed and in the labor force in the official statistics since these people are not looking for a job. (Sorry, the wording was not quite clear here it would have been clearer to say that Number of adults without a job is 90,000). L = 500,000 N = 450,000 U = 50,000 Unemployment rate = 100 * (U/L) Unemployment rate = 100* (50,000/500,000) = 10% 2. If 200,000 migrate to a neighboring country, what happens to the unemployment rate? Depends on who migrated. If those not in the labor forces were the only ones who migrated, then the unemployment rate will not change. However, if either current employed or currently unemployed but who are looking for work migrated, then the rate will change. 3. If this country s unemployment rate decreases, what do we know about its real GDP? Not much. When somebody who is unemployed (but looking for work) gives up job search, that person drops out of the labor force. (We call them discouraged workers.) So, even if N and L stay the same, we could have a lower unemployment rate. In this case, real GDP is the same since the same number of people are working. If the drop in unemployment was caused by an in crease in N or decrease in U (unemployed finding work, so moving from U group to N group), then real GDP should increase since more people are working.

4 Part III. NATIONAL ACCOUNTS (GDP, GDP DEFLATOR & CPI) For part II, assume the following: 1. MIT is a closed economy. 2. The only good/service produced at MIT is undergrad (freshmen) education. 1. Fill in the following: year # of MIT freshmen Price nominal GDP real GDP real GDP (quantity) (Tuition) (1950\$) (2000\$) \$1,000 \$100,000 \$100,000 \$2,000, \$20,000 \$16,000,000 \$800,000 \$16,000, \$21,000 \$21,000,000 \$1,000,000 \$20,000, \$22,000 \$24,200,000 \$1,100,000 \$22,000, \$24,000 \$24,000,000 \$1,000,000 \$20,000, \$31,000 \$37,200,000 \$1,200,000 \$24,000,000 How to calculate nominal GDP: nominal GDP t = quantity t * price t How to calculate real GDP: real GDP t = quantity t * price baseyear 2. Find the growth rate of nominal GDP for 2001, 2002, 2003, Find the growth rates of real GDP (using 2000\$) and (using 1950\$) for 2001, 2002, 2003 and year nominal GDP real GDP real GDP growth growth (1950\$) growth (2000\$) ( % ) ( % ) ( % ) X ( t) X ( How to calculate the growth rate: Growth rate of X t = * 100 X (

5 4. In this example, is the choice of base year important for calculating the growth rate of real GDP? Would your answer to this question change if the economy in this example produced more than one good? No, the choice of base year is not important here. See answers to part 4. Real GDP is constructed as the sum of the quantities of final goods times *constant* prices. (A base year is chosen). So, it tells us how the quantity of finals goods changes over time and not price. Only the change in quantity affects real GDP. The base year chosen is sort of like a choice of unit of measurement. For example, whether one measures one s weight in pounds or kilograms does not affect one s actual weight. Therefore, the choice of base year, does not affect the growth of real GDP. If there is only one good, the price drops out of the formula for the growth rate of real GDP: Pb * Q( t) Pb * Q( Q( t) Q( Growth rate of X t = *100 = * 100, where X * t = P b *Q t Pb Q( Q( This is why the choice of base year doesn t matter. However, if there are two goods in the economy, real GDP is calculated as X t = P 1b *Q 1t + P 2b *Q 2t, which implies that the prices don t drop out of the growth formula since P 1b and P 2b can of course be different. Thus, if there are more than two goods, the choice of base year does matter. 5. Compute inflation using GDP deflator (using 2000\$) for 2001, 2002, 2003, Inflation GDP deflator rate (%) (page 30-31) GDP deflator = ngdpt realgdp t = P t P ( t) P( Inflation rate = * 100 P(

6 Part IV. THE GOODS MARKET (Closed Economy) (All units are millions of US dollars) C = 220 +(0.6)Y D I = 50 T = 200 G = 250 NX = 0 1. Solve for the good market equilibrium. (Find equilibrium Y, Z, C, and Y D.) Total demand: Z = C + I + G Y D = Y T (Y D = disposable income) Z = 220 +(0.6)Y D Z = (0.6)*(Y 200) Z = Y Good market equilibrium: Y = Z or Y = C + I + G Substituting in: Y = Y 0.4Y = 400 Y = 1000 (equilibrium output) Y D = Y D = 800 (disposable income) C = (0.6) (800) C = 700 (equilibrium consumption) 2. Graph (with correct labels) equilibrium Y and Z. Z Y = Z (slope = 1) 1000 ZZ curve slope = 0.6 Z = Y autonomous spending 400 Y * 1000 Y

7 3. Solve for private saving and public saving. Private Saving : S = Y D C = = 100 Public Saving : (T G ) = ( ) = -50 (Budget Deficit of \$50 million) Investment : I = S + (T G ) = sum of private and public saving I = = 50 (Consumers can either lend to the government or the private sector (companies). When the government runs a budget deficit, it must borrow from consumers, so the budget deficit crowds out Investment. Here, consumers saved a total of \$100 million, but \$50 million was lend to the government, leaving only \$50 million for the private sector.) 4. What is the value of marginal propensity to consume (mpc)? What does it mean? mpc = marginal propensity to consume gives the effect of an additional dollar of disposable income on consumption. For example, if mpc = c 1 = 0.3, this means that \$0.30 of an additional \$1 of disposable income will be consumed, and \$0.70 will be saved. mpc = coefficient on Y D. In this problem, mpc = c 1 = 0.6. For every \$1 additional disposable income increase, \$0.60 will be consumed. Disposable income is the income after taxes. 5. What is the value of marginal propensity to save (mps)? mps = (1 c 1 ) = marginal propensity to save mps = = What is the relationship between mpc and mps? mpc + mps = 1 For another \$1 income, you either save or consume. mpc = proportion you consume mps = the proportion you save Must add up to 1 (or 100%) 7. Find the multiplier and autonomous spending. Explain what they mean. Goods Market Eqm Y = C + I + G Y = [c 0 + c 1 Y - c 1 T] + I + G 1 Y = [ ] [c 0 + I + G - c 1 T ] Multiplier 1 1 [ ] = ( ) = Autonomous Spending [c 0 + I + G - c 1 T ] = 400

8 Autonomous spending is the part of demand for goods that does not depend on output. The multiplier tells us how much equilibrium output will change for a given change in autonomous spending. For example, if investment increases by 500, then the equilibrium output will rise by 1,250 (500 *2.5). Why? First, investment increases by 500. Then, this increase in I increases Z (total demand). When demand increases, production must also increase to maintain equilibrium. This means that Y increases. When Y increases, Y d will increase. When disposable income increases, C increases. C increase will result in yet a higher Z since C is a part of Z (total demand). But, when Z increases, Y must also increase to match it if in equilibrium, and so on. This process continues. (Please see textbook for detailed description) 8. Now, in order to deal with a natural disaster, the government purchases \$100 million worth of supplies. Find the new equilibrium demand, output, consumption, and disposable income, then graph. (Instead of calculating from scratch, try to reason out your answer from the original equilibrium calculations followed by a discussion of multiplier.) When G increases by 100, then autonomous spending increases by 100. Since the multiplier is 2.5, the equilibrium output will increase by 250. (ZZ and the 45 0 line will now intersect at 1250) Y* = Therefore, disposable income will rise by 250 since Y D = (Y-T). Consumption will rise by 150 since mpc is = 0.6 * (250) Z Y = Z (slope = 1) Z = 0.6Y new autonomous spending 500 Z = 0.6 Y autonomous spending 400 Y * Y * new Y

14.02 Principles of Macroeconomics Problem Set 1 *Solution* Fall 2004

4.02 Principles of Macroeconomics Problem Set *Solution* Fall 2004 Part I. True/False/Uncertain Justify your answer with a short argument.. From 960 to 2000, the US, EU, and Japan all have experienced

The level of price and inflation Real GDP: the values of goods and services measured using a constant set of prices

Chapter 2: Key Macroeconomics Variables ECON2 (Spring 20) 2 & 4.3.20 (Tutorial ) National income accounting Gross domestic product (GDP): The market value of all final goods and services produced within

1. Firms react to unplanned inventory investment by increasing output.

Macro Exam 2 Self Test -- T/F questions Dr. McGahagan Fill in your answer (T/F) in the blank in front of the question. If false, provide a brief explanation of why it is false, and state what is true.

Professor Christina Romer. LECTURE 17 MACROECONOMIC VARIABLES AND ISSUES March 17, 2016

Economics 2 Spring 2016 Professor Christina Romer Professor David Romer LECTURE 17 MACROECONOMIC VARIABLES AND ISSUES March 17, 2016 I. MACROECONOMICS VERSUS MICROECONOMICS II. REAL GDP A. Definition B.

FISCAL POLICY* Chapter. Key Concepts

Chapter 11 FISCAL POLICY* Key Concepts The Federal Budget The federal budget is an annual statement of the government s expenditures and tax revenues. Using the federal budget to achieve macroeconomic

Econ 202 Final Exam. Table 3-1 Labor Hours Needed to Make 1 Pound of: Meat Potatoes Farmer 8 2 Rancher 4 5

Econ 202 Final Exam 1. If inflation expectations rise, the short-run Phillips curve shifts a. right, so that at any inflation rate unemployment is higher. b. left, so that at any inflation rate unemployment

Government Budget and Fiscal Policy CHAPTER

Government Budget and Fiscal Policy 11 CHAPTER The National Budget The national budget is the annual statement of the government s expenditures and tax revenues. Fiscal policy is the use of the federal

CHAPTER 7: AGGREGATE DEMAND AND AGGREGATE SUPPLY

CHAPTER 7: AGGREGATE DEMAND AND AGGREGATE SUPPLY Learning goals of this chapter: What forces bring persistent and rapid expansion of real GDP? What causes inflation? Why do we have business cycles? How

7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Key Concepts

Chapter 7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Key Concepts Aggregate Supply The aggregate production function shows that the quantity of real GDP (Y ) supplied depends on the quantity of labor (L ),

Answers to Text Questions and Problems. Chapter 22. Answers to Review Questions

Answers to Text Questions and Problems Chapter 22 Answers to Review Questions 3. In general, producers of durable goods are affected most by recessions while producers of nondurables (like food) and services

Macroeconomia Capitolo 7. Seguire l andamento della macroeconomia. What you will learn in this chapter:

Macroeconomia Capitolo 7 Seguire l andamento della macroeconomia PowerPoint Slides by Can Erbil 2006 Worth Publishers, all rights reserved What you will learn in this chapter: How economists use aggregate

Study Questions 8 (Keynesian Model) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Study Questions 8 (Keynesian Model) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In the Keynesian model of aggregate expenditure, real GDP is

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Econ 111 Summer 2007 Final Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The classical dichotomy allows us to explore economic growth

EC2105, Professor Laury EXAM 2, FORM A (3/13/02)

EC2105, Professor Laury EXAM 2, FORM A (3/13/02) Print Your Name: ID Number: Multiple Choice (32 questions, 2.5 points each; 80 points total). Clearly indicate (by circling) the ONE BEST response to each

Econ 102 Aggregate Supply and Demand

Econ 102 ggregate Supply and Demand 1. s on previous homework assignments, turn in a news article together with your summary and explanation of why it is relevant to this week s topic, ggregate Supply

1. a. Interest-bearing checking accounts make holding money more attractive. This increases the demand for money.

Macroeconomics ECON 2204 Prof. Murphy Problem Set 4 Answers Chapter 10 #1, 2, and 3 (on pages 308-309) 1. a. Interest-bearing checking accounts make holding money more attractive. This increases the demand

Households Wages, profit, interest, rent = \$750. Factor markets. Wages, profit, interest, rent = \$750

KrugmanMacro_SM_Ch07.qxp 11/9/05 4:47 PM Page 87 Tracking the Macroeconomy 1. Below is a simplified circular-flow diagram for the economy of Micronia. a. What is the value of GDP in Micronia? b. What is

Lesson 7 - The Aggregate Expenditure Model

Lesson 7 - The Aggregate Expenditure Model Acknowledgement: Ed Sexton and Kerry Webb were the primary authors of the material contained in this lesson. Section : The Aggregate Expenditures Model Aggregate

Chapter 12. Aggregate Expenditure and Output in the Short Run

Chapter 12. Aggregate Expenditure and Output in the Short Run Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 203 502 Principles of Macroeconomics Aggregate Expenditure (AE)

CHAPTER 23 FISCAL POLICY: COPING WITH INFLATION AND UNEMPLOYMENT

CHAPTER 23 FISCAL POLICY: COPING WITH INFLATION AND UNEMPLOYMENT Chapter in a Nutshell To say that an economy is in equilibrium tells us very little about the general state of the economy. The model showing

EC201 Intermediate Macroeconomics. EC201 Intermediate Macroeconomics Problem Set 1 Solution

EC201 Intermediate Macroeconomics EC201 Intermediate Macroeconomics Problem Set 1 Solution 1) Given the difference between Gross Domestic Product and Gross National Product for a given economy: a) Provide

The Multiplier Effect of Fiscal Policy

We analyze the multiplier effect of fiscal policy changes in government expenditure and taxation. The key result is that an increase in the government budget deficit causes a proportional increase in consumption.

2. With an MPS of.4, the MPC will be: A) 1.0 minus.4. B).4 minus 1.0. C) the reciprocal of the MPS. D).4. Answer: A

1. If Carol's disposable income increases from \$1,200 to \$1,700 and her level of saving increases from minus \$100 to a plus \$100, her marginal propensity to: A) save is three-fifths. B) consume is one-half.

2.If actual investment is greater than planned investment, inventories increase more than planned. TRUE.

Macro final exam study guide True/False questions - Solutions Case, Fair, Oster Chapter 8 Aggregate Expenditure and Equilibrium Output 1.Firms react to unplanned inventory investment by reducing output.

NATIONAL INCOME AND PRODUCT ACCOUNTING MEASURING THE MACROECONOMY

NATIONAL INCOME AND PRODUCT ACCOUNTING MEASURING THE MACROECONOMY 1. NIPA: GNP and GDP 2. Saving and Wealth 3. Prices and Inflation 4. Unemployment 5. Problems with Measuring the Macroeconomy There are

(1) A reduction in the lump sum tax (2) A rise in the marginal propensity to import (3) A decrease in the marginal propensity to consume

S.7 Economics On 3 & 4-Sector Simple Keynesian Models S.7 Economics/3 & 4-sector Keynesian Models/p.1 95 #4 Which of the following would reduce the multiplier effect of investment on national income? (1)

Practice Problems on NIPA and Key Prices

Practice Problems on NIPA and Key Prices 1- What are the three approaches to measuring economic activity? Why do they give the same answer? The three approaches to national income accounting are the product

ANSWERS TO END-OF-CHAPTER QUESTIONS 9-1 Explain what relationships are shown by (a) the consumption schedule, (b) the saving schedule, (c) the investment-demand curve, and (d) the investment schedule.

_FALSE 1. Firms react to unplanned inventory investment by increasing output.

Macro Exam 2 Self Test -- ANSWERS Dr. McGahagan WARNING -- Be sure to take the self-test before peeking at the answers. Chapter 8 -- Aggregate Expenditure and Equilibrium Output _FALSE 1. Firms react to

Chapter 9 Aggregate Demand and Economic Fluctuations Macroeconomics In Context (Goodwin, et al.)

Chapter 9 Aggregate Demand and Economic Fluctuations Macroeconomics In Context (Goodwin, et al.) Chapter Overview This chapter first introduces the analysis of business cycles, and introduces you to the

The Keynesian Cross. A Fixed Price Level. The Simplest Keynesian-Cross Model: Autonomous Consumption Only

The Keynesian Cross Some instructors like to develop a more detailed macroeconomic model than is presented in the textbook. This supplemental material provides a concise description of the Keynesian-cross

Business Conditions Analysis Prof. Yamin Ahmad ECON 736 Sample Final Exam Name Id # Instructions: There are two parts to this midterm. Part A consists of multiple choice questions. Please mark the answers

Extra Problems #3. ECON 410.502 Macroeconomic Theory Spring 2010 Instructor: Guangyi Ma. Notice:

ECON 410.502 Macroeconomic Theory Spring 2010 Instructor: Guangyi Ma Extra Problems #3 Notice: (1) There are 25 multiple-choice problems covering Chapter 6, 9, 10, 11. These problems are not homework and

Answers to Text Questions and Problems in Chapter 8

Answers to Text Questions and Problems in Chapter 8 Answers to Review Questions 1. The key assumption is that, in the short run, firms meet demand at pre-set prices. The fact that firms produce to meet

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Suvey of Macroeconomics, MBA 641 Fall 2006, Final Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Modern macroeconomics emerged from

3 Macroeconomics LESSON 1

3 Macroeconomics LESSON 1 nesian Model Introduction and Description This lesson establishes fundamental macro concepts. The nesian model is the simplest macro model and is the starting point from the national

= C + I + G + NX ECON 302. Lecture 4: Aggregate Expenditures/Keynesian Model: Equilibrium in the Goods Market/Loanable Funds Market

Intermediate Macroeconomics Lecture 4: Introduction to the Goods Market Review of the Aggregate Expenditures model and the Keynesian Cross ECON 302 Professor Yamin Ahmad Components of Aggregate Demand

Name: Date: 3. Variables that a model tries to explain are called: A. endogenous. B. exogenous. C. market clearing. D. fixed.

Name: Date: 1 A measure of how fast prices are rising is called the: A growth rate of real GDP B inflation rate C unemployment rate D market-clearing rate 2 Compared with a recession, real GDP during a

BADM 527, Fall 2013. Midterm Exam 2. Multiple Choice: 3 points each. Answer the questions on the separate bubble sheet. NAME

BADM 527, Fall 2013 Name: Midterm Exam 2 November 7, 2013 Multiple Choice: 3 points each. Answer the questions on the separate bubble sheet. NAME 1. According to classical theory, national income (Real

Macroeconomics 2301 Potential questions and study guide for exam 2. Any 6 of these questions could be on your exam!

Macroeconomics 2301 Potential questions and study guide for exam 2 Any 6 of these questions could be on your exam! 1. GDP is a key concept in Macroeconomics. a. What is the definition of GDP? b. List and

Use the following to answer question 9: Exhibit: Keynesian Cross

1. Leading economic indicators are: A) the most popular economic statistics. B) data that are used to construct the consumer price index and the unemployment rate. C) variables that tend to fluctuate in

Introduction to Macroeconomics. TOPIC 1: Introduction, definition, measures

TOPIC 1: Introduction, definitions, measures Annaïg Morin CBS - Department of Economics August 2013 What is macroeconomics about? Understanding the behavior of an economy as a whole. studying aggregated

Using an appropriately labeled money market graph, show the effects of an open market purchase of government securities by the FED on :

Using an appropriately labeled money market graph, show the effects of an open market purchase of government securities by the FED on : The money supply Interest rates Nominal Interest rates i1 i2 Sm1

Study Questions for Chapter 9 (Answer Sheet)

DEREE COLLEGE DEPARTMENT OF ECONOMICS EC 1101 PRINCIPLES OF ECONOMICS II FALL SEMESTER 2002 M-W-F 13:00-13:50 Dr. Andreas Kontoleon Office hours: Contact: a.kontoleon@ucl.ac.uk Wednesdays 15:00-17:00 Study

BUSINESS ECONOMICS CEC2 532-751 & 761

BUSINESS ECONOMICS CEC2 532-751 & 761 PRACTICE MACROECONOMICS MULTIPLE CHOICE QUESTIONS Warning: These questions have been posted to give you an opportunity to practice with the multiple choice format

1 Multiple Choice - 50 Points

Econ 201 Final Winter 2008 SOLUTIONS 1 Multiple Choice - 50 Points (In this section each question is worth 1 point) 1. Suppose a waiter deposits his cash tips into his savings account. As a result of only

The Short-Run Macro Model. The Short-Run Macro Model. The Short-Run Macro Model

The Short-Run Macro Model In the short run, spending depends on income, and income depends on spending. The Short-Run Macro Model Short-Run Macro Model A macroeconomic model that explains how changes in

Assessment Schedule 2014 Economics: Demonstrate understanding of macro-economic influences on the New Zealand economy (91403)

NCEA Level 3 Economics (91403) 2014 page 1 of 10 Assessment Schedule 2014 Economics: Demonstrate understanding of macro-economic influences on the New Zealand economy (91403) Assessment criteria with Merit

Economics 101 Multiple Choice Questions for Final Examination Miller

Economics 101 Multiple Choice Questions for Final Examination Miller PLEASE DO NOT WRITE ON THIS EXAMINATION FORM. 1. Which of the following statements is correct? a. Real GDP is the total market value

Chapter 30 Fiscal Policy, Deficits, and Debt QUESTIONS

Chapter 30 Fiscal Policy, Deficits, and Debt QUESTIONS 1. What is the role of the Council of Economic Advisers (CEA) as it relates to fiscal policy? Use an Internet search to find the names and university

Chapter 20. The Measurement of National Income. In this chapter you will learn to. National Output and Value Added

Chapter 20 The Measurement of National Income In this chapter you will learn to 1. Use the concept of value added to solve the problem of double counting when measuring national income. 2. Describe the

I. Introduction to Aggregate Demand/Aggregate Supply Model

University of California-Davis Economics 1B-Intro to Macro Handout 8 TA: Jason Lee Email: jawlee@ucdavis.edu I. Introduction to Aggregate Demand/Aggregate Supply Model In this chapter we develop a model

INTRODUCTION AGGREGATE DEMAND MACRO EQUILIBRIUM MACRO EQUILIBRIUM THE DESIRED ADJUSTMENT THE DESIRED ADJUSTMENT

Chapter 9 AGGREGATE DEMAND INTRODUCTION The Great Depression was a springboard for the Keynesian approach to economic policy. Keynes asked: What are the components of aggregate demand? What determines

GDP: The market value of final goods and services, newly produced WITHIN a nation during a fixed period.

GDP: The market value of final goods and services, newly produced WITHIN a nation during a fixed period. Value added: Value of output (market value) purchased inputs (e.g. intermediate goods) GDP is a

CHAPTER 9 Building the Aggregate Expenditures Model

CHAPTER 9 Building the Aggregate Expenditures Model Topic Question numbers 1. Consumption function/apc/mpc 1-42 2. Saving function/aps/mps 43-56 3. Shifts in consumption and saving functions 57-72 4 Graphs/tables:

0 100 200 300 Real income (Y)

Lecture 11-1 6.1 The open economy, the multiplier, and the IS curve Assume that the economy is either closed (no foreign trade) or open. Assume that the exchange rates are either fixed or flexible. Assume

The Data of Macroeconomics

CHAPTER 2 The Data of Macroeconomics Modified for ECON 2204 by Bob Murphy 2016 Worth Publishers, all rights reserved IN THIS CHAPTER, YOU WILL LEARN:... the meaning and measurement of the most important

Page 1 of 6 Economics 10: Problem Set 6 The mythical kingdom of Philhill is ruled by a philosopher-king who donates his time as mediator of all domestic disputes. Since there are no external enemies, there

In this chapter we learn the potential causes of fluctuations in national income. We focus on demand shocks other than supply shocks.

Chapter 11: Applying IS-LM Model In this chapter we learn the potential causes of fluctuations in national income. We focus on demand shocks other than supply shocks. We also learn how the IS-LM model

TRADE AND INVESTMENT IN THE NATIONAL ACCOUNTS This text accompanies the material covered in class.

TRADE AND INVESTMENT IN THE NATIONAL ACCOUNTS This text accompanies the material covered in class. 1 Definition of some core variables Imports (flow): Q t Exports (flow): X t Net exports (or Trade balance)

Econ 202 H01 Final Exam Spring 2005

Econ202Final Spring 2005 1 Econ 202 H01 Final Exam Spring 2005 1. Which of the following tends to reduce the size of a shift in aggregate demand? a. the multiplier effect b. the crowding-out effect c.

. In this case the leakage effect of tax increases is mitigated because some of the reduction in disposable income would have otherwise been saved.

Chapter 4 Review Questions. Explain how an increase in government spending and an equal increase in lump sum taxes can generate an increase in equilibrium output. Under what conditions will a balanced

Reference: Gregory Mankiw s Principles of Macroeconomics, 2 nd edition, Chapters 10 and 11. Gross Domestic Product

Macroeconomics Topic 1: Define and calculate GDP. Understand the difference between real and nominal variables (e.g., GDP, wages, interest rates) and know how to construct a price index. Reference: Gregory

Chapter 8. GDP : Measuring Total Production and Income

Chapter 8. GDP : Measuring Total Production and Income Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 203 502 Principles of Macroeconomics Related Economic Terms Macroeconomics:

April 4th, 2014. Flow C was 9 trillion dollars, Flow G was 2 trillion dollars, Flow I was 3 trillion dollars, Flow (X-M) was -0.7 trillion dollars.

Problem Session I April 4th, 2014 Reference: Parkin, Introduction to economics, 2011 1. The rm that printed your Introduction to economics textbook bought the paper from XYZ Paper Mills. Was this purchase

13 EXPENDITURE MULTIPLIERS: THE KEYNESIAN MODEL* Chapter. Key Concepts

Chapter 3 EXPENDITURE MULTIPLIERS: THE KEYNESIAN MODEL* Key Concepts Fixed Prices and Expenditure Plans In the very short run, firms do not change their prices and they sell the amount that is demanded.

Chapter 11: Activity

Economics for Managers by Paul Farnham Chapter 11: Measuring Macroeconomic Activity 11.1 Measuring Gross Domestic Product (GDP) GDP: the market value of all currently yproduced final goods and services

Preparation course Msc Business & Econonomics

Preparation course Msc Business & Econonomics The simple Keynesian model Tom-Reiel Heggedal BI August 2014 TRH (BI) Keynes model August 2014 1 / 19 Assumptions Keynes model Outline for this lecture: Go

13. If Y = AK 0.5 L 0.5 and A, K, and L are all 100, the marginal product of capital is: A) 50. B) 100. C) 200. D) 1,000.

Name: Date: 1. In the long run, the level of national income in an economy is determined by its: A) factors of production and production function. B) real and nominal interest rate. C) government budget

MICROECONOMICS AND POLICY ANALYSIS - U8213 Professor Rajeev H. Dehejia Class Notes - Spring 2001

MICROECONOMICS AND POLICY ANALYSIS - U8213 Professor Rajeev H. Dehejia Class Notes - Spring 2001 General Equilibrium and welfare with production Wednesday, January 24 th and Monday, January 29 th Reading:

AP Microeconomics Chapter 12 Outline

I. Learning Objectives In this chapter students will learn: A. The significance of resource pricing. B. How the marginal revenue productivity of a resource relates to a firm s demand for that resource.

2 0 0 0 E D I T I O N CLEP O F F I C I A L S T U D Y G U I D E. The College Board. College Level Examination Program

2 0 0 0 E D I T I O N CLEP O F F I C I A L S T U D Y G U I D E College Level Examination Program The College Board Principles of Macroeconomics Description of the Examination The Subject Examination in

Microeconomics Instructor Miller Practice Problems Labor Market

Microeconomics Instructor Miller Practice Problems Labor Market 1. What is a factor market? A) It is a market where financial instruments are traded. B) It is a market where stocks and bonds are traded.

CHAPTER 8. Practise Problems

CHAPTER 8 Practise Problems 1. The labor force is: A) the total of people employed. B) the total population. C) the total of the population of working age. D) the total of people employed and unemployed.

SRAS. is less than Y P

KrugmanMacro_SM_Ch12.qxp 11/15/05 3:18 PM Page 141 Fiscal Policy 1. The accompanying diagram shows the current macroeconomic situation for the economy of Albernia. You have been hired as an economic consultant

Economics 152 Solution to Sample Midterm 2

Economics 152 Solution to Sample Midterm 2 N. Das PART 1 (84 POINTS): Answer the following 28 multiple choice questions on the scan sheet. Each question is worth 3 points. 1. If Congress passes legislation

Thinkwell s Homeschool Economics Course Lesson Plan: 36 weeks

Thinkwell s Homeschool Economics Course Lesson Plan: 36 weeks Welcome to Thinkwell s Homeschool Economics! We re thrilled that you ve decided to make us part of your homeschool curriculum. This lesson

THE MARKET OF FACTORS OF PRODUCTION

THE MARKET OF FACTORS OF PRODUCTION The basis of the economy is the production of goods and services. Economics distinguishes between 3 factors of production which are used in the production of goods:

Macroeconomics: GDP, GDP Deflator, CPI, & Inflation

HOSP 2207 (Economics) Learning Centre Macroeconomics: GDP, GDP Deflator, CPI, & Inflation Macroeconomics is the big picture view of an economy. Microeconomics looks at the market for a specific good, like

Miami Dade College ECO 2013.003 Principles of Macroeconomics - Fall 2014 Practice Test #2

Miami Dade College ECO 2013.003 Principles of Macroeconomics - Fall 2014 Practice Test #2 1. Whose analysis serves as the foundation of modern macroeconomics? A) Milton Friedman B) John Maynard Keynes

3. a. If all money is held as currency, then the money supply is equal to the monetary base. The money supply will be \$1,000.

Macroeconomics ECON 2204 Prof. Murphy Problem Set 2 Answers Chapter 4 #2, 3, 4, 5, 6, 7, and 9 (on pages 102-103) 2. a. When the Fed buys bonds, the dollars that it pays to the public for the bonds increase

Real vs. Nominal GDP Practice

Name: Real vs. Nominal GDP Practice Period: Real verse Nominal Values Prices in an economy do not stay the same. Over time the price level changes (i.e., there is inflation or deflation). A change in the

Market Supply in the Short Run

Equilibrium in Perfectly Competitive Markets (Assume for simplicity that all firms have access to the same technology and input markets, so they all have the same cost curves.) Market Supply in the Short

You may use a calculator to do all of the calculations. Round all decimals to the nearest hundredth if necessary.

Economics 102 Fall 2015 Answers to Homework #3 Due Monday, October 26, 2015 Directions: The homework will be collected in a box before the large lecture. Please place your name, TA name and section number

Chapter 24. What will you learn in this chapter? Valuing an economy. Measuring the Wealth of Nations

Chapter 24 Measuring the Wealth of Nations 2014 by McGraw-Hill Education 1 What will you learn in this chapter? How to calculate gross domestic product (GDP). Why each component of GDP is important. What

Summer 2014 Week 3 Tutorial Questions (Ch2) Solutions

Chapter 2: Q1: Macroeconomics P.52 Numerical Problems #3 Q2: Macroeconomics P.52 Numerical Problems #6 Q3: Macroeconomics P.53 Numerical Problems #7 Q4: Macroeconomics P.53 Numerical Problems #9 Q5: Macroeconomics

real r = nominal r inflation rate (25)

3 The price of Loanable Funds Definition 19 INTEREST RATE:(r) Charge per dollar per period that borrowers pay or lenders receive. What affects the interest rate: inflation. risk. taxes. The real interest

Unit 4: Measuring GDP and Prices

Unit 4: Measuring GDP and Prices ECO 120 Global Macroeconomics 1 1.1 Reading Reading Module 10 - pages 106-110 Module 11 1.2 Goals Goals Specific Goals: Understand how to measure a country s output. Learn

Econ 303: Intermediate Macroeconomics I Dr. Sauer Sample Questions for Exam #3

Econ 303: Intermediate Macroeconomics I Dr. Sauer Sample Questions for Exam #3 1. When firms experience unplanned inventory accumulation, they typically: A) build new plants. B) lay off workers and reduce

Lesson 8 - Aggregate Demand and Aggregate Supply

Lesson 8 - Aggregate Demand and Aggregate Supply Acknowledgement: Ed Sexton and Kerry Webb were the primary authors of the material contained in this lesson. Section 1: Aggregate Demand The second macroeconomic

Keynesian Economics I. The Keynesian System (I): The Role of Aggregate Demand

Keynesian Economics I The Keynesian System (I): The Role of Aggregate Demand Labor Market Excess supply and excess demand are not equally strong forces in the labor market. The supply of workers is such

Learning Objectives. After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to:

Learning Objectives After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to: Discuss three characteristics of perfectly competitive

Tracking the Macroeconomy

chapter 7(23) Tracking the Macroeconomy Chapter Objectives Students will learn in this chapter: How economists use aggregate measures to track the performance of the economy. What gross domestic product,

Chapter 10 Fiscal Policy Macroeconomics In Context (Goodwin, et al.)

Chapter 10 Fiscal Policy Macroeconomics In Context (Goodwin, et al.) Chapter Overview This chapter introduces you to a formal analysis of fiscal policy, and puts it in context with real-world data and

S.Y.B.COM. (SEM-III) ECONOMICS

Fill in the Blanks. Module 1 S.Y.B.COM. (SEM-III) ECONOMICS 1. The continuous flow of money and goods and services between firms and households is called the Circular Flow. 2. Saving constitute a leakage

Chapter 12 Unemployment and Inflation

Chapter 12 Unemployment and Inflation Multiple Choice Questions 1. The origin of the idea of a trade-off between inflation and unemployment was a 1958 article by (a) A.W. Phillips. (b) Edmund Phelps. (c)