Six million persons are unemployed, and 60 million persons are employed. If the natural unemployment rate is 5 percent, what does the cyclical unemployment rate equal?
> Pinnacle Paper Products Inc. can produce books or rolls of paper towels. Here is its PPF for the resources and technology it has available: Does the law of increasing opportunity costs hold for book production at Pinnacle Paper Products? How do you k
> Pinnacle Paper Products Inc. can produce books or rolls of paper towels. Here is its PPF for the resources and technology it has available: What is the pattern of opportunity costs as one chooses to move down this PPF from point A to B to C to D and
> Pinnacle Paper Products Inc. can produce books or rolls of paper towels. Here is its PPF for the resources and technology it has available: Continue moving point by point down the PPF. What is the pattern of gains as one chooses to move down this PPF
> Pinnacle Paper Products Inc. can produce books or rolls of paper towels. Here is its PPF for the resources and technology it has available: What is the opportunity cost of choosing to produce at point C, instead of at point B?
> Pinnacle Paper Products Inc. can produce books or rolls of paper towels. Here is its PPF for the resources and technology it has available: What is gained by choosing to produce at point C, instead of at point B?
> Pinnacle Paper Products Inc. can produce books or rolls of paper towels. Here is its PPF for the resources and technology it has available: What is the opportunity cost of choosing to produce at point B, instead of at point A?
> Wilson walks into his class 10 minutes late because he couldn’t find a place to park. Because of his tardiness, he doesn’t hear the professor tell the class there will be a quiz at the next session. At the next session, Wilson is unprepared for the quiz
> Pinnacle Paper Products Inc. can produce books or rolls of paper towels. Here is its PPF for the resources and technology it has available: What is gained by choosing to produce at point B, instead of at point A?
> Which of the following should be included in the U.S. GDP for 2013? Explain how they will be handled when computing GDP using the expenditure approach. Explain why they should or should not be included. 1. Property taxes paid in 2013 to the city of Anch
> Which of the following should be included in the U.S. GDP for 2013? Explain how they will be handled when computing GDP using the expenditure approach. Explain why they should or should not be included. 1. A federal courthouse built in Utah in 2013. 2.
> What is the difference between the discount rate and the federal funds rate?
> Suppose the Fed lowers the federal funds rate target. How will this action likely affect both the federal funds rate and the money supply?
> A person takes $4,000 and places it into a checking account in a bank. Does the composition of the money supply change? Does the size of the money supply change? Explain your answers.
> What does it mean to say that a bank is reserve deficient?
> What is the relationship between the required reserve ratio and the money supply? What is the relationship between the simple deposit multiplier and the money supply?
> The required reserve ratio is 10 percent, a bank has checkable deposits of $200 million and excess reserves of $100 million. Assuming the bank is meeting its reserve requirement, what amount is the bank holding in reserves?
> Money economies are likely to be richer than barter economies in both output and leisure. Do you agree or disagree? Explain your answer.
> Explain how lower lending standards and lower interest rates can lead to higher house prices.
> If checkable deposits are $100 million and the required reserve ratio is 7 percent, then what do required reserves equal?
> Explain how money emerged out of a barter economy.
> If $4 million is transferred from checkable deposits into money market mutual funds (retail), what happens to both M1 and M2?
> Give a numerical example to illustrate the difference between a progressive and proportional income tax structure. Taxable income Progressive tax rate Proportional tax rate 0-$10,000 10% 10% $10,001-$11,000 12% 10% $11,001-$12,000 14%
> Explain how, under certain conditions, expansionary fiscal policy can remove an economy from a recessionary gap. LRAS SRAS 2 AD2 AD, Real GDP
> Give a numerical example to illustrate the difference between the marginal tax rate and the average tax rate. Taxable income Tax payment $100 $10 $110 $12
> Tax cuts may either decrease or increase tax revenues. Do you agree or disagree? Explain your answer.
> Explain the difference between zero, incomplete, and complete crowding out. If crowding out is complete, does it call into question the effectiveness of a rise in government purchases in order to remove an economy from a recessionary gap? Explain and dia
> In the simple Keynesian model, an economy can be in equilibrium and in a recessionary gap too. Do you agree or disagree? Explain and diagrammatically represent your answer in terms of the AD-AS framework.
> Diagrammatically represent and explain the equilibrating process in the simple Keynesian model in the TE-TP framework.
> What is the difference between a price ceiling and a price floor? What effect is the same for both a price ceiling and a price floor?
> The shape of the aggregate supply curve matters to changes in the price level and Real GDP, given a change in aggregate demand. Do you agree or disagree with this statement? Explain your answer.
> Outline the differences between Keynes and the classical economists when it comes to; (a) Say’s Law in a money economy (b) Investment
> According to Keynesian economists, what is the explanation of why an economy may not be able to remove itself from a recessionary gap?
> Explain the classical view of the credit market. 1 $100,000 $120,000 Dollars Saved or Invested Interestrates 3.
> If the economy is in an inflationary gap, where is it located with respect to both the institutional PPF and the physical PPF? LRAS Physical PPF SRAS, Institutional PPF D AD. Real GDP Real GDP Good X Price Level All Oth er Goods
> Flexible wages play a critical role in removing an economy from a recessionary gap. Do you agree or disagree? Explain your answer.
> Explain and diagrammatically represent how a self-regulating economy removes itself from an inflationary gap.
> Explain and diagrammatically represent how a self-regulating economy removes itself from a recessionary gap.
> Explain what happens to U.S. net exports and to U.S. aggregate demand as the dollar depreciates.
> Explain and diagrammatically represent the difference between equilibrium in the short run and in the long run using the AD-SRAS-LRAS model.
> Buyers always prefer lower prices to higher prices. Do you agree or disagree with this statement? Explain your answer.
> How will either the AD curve or SRAS curve shift as a result of each of the following changes: a. A rise in the interest rate b. An adverse supply shock c. A rise in wealth Price Price Price SRAS, SRAS, -> AD2 AD, AD, AD, Real GDP (b) Real GDP (a)
> Suppose that business taxes and wage rates decline and that any change in aggregate demand is greater than any change in short-run aggregate supply. Explain and diagrammatically represent the changes in the price level and Real GDP in the short run.
> Explain how the real balance effect works? Price $170 $150 AD Q, Q: Real GDP
> A good that is produced but not sold is still counted in GDP using the expenditure approach to computing GDP. Do you agree or disagree with this statement? Explain your answer.
> Explain the expenditure approach to computing GDP.
> If country A’s GDP is higher than country B’s GDP, does it follow that country A has a higher per-capita GDP than country B? Why or why not?
> Why are the sales of used goods omitted from GDP?
> Give an example that illustrates double counting.
> Is the sum of the unemployment rate and the employment rate equal to 100 percent? Why or why not?
> Explain why fewer exchanges are made when a disequilibrium price (below equilibrium price) exists than when the equilibrium price exists.
> What is the difference between a person who is frictionally unemployed and one who is structurally unemployed?
> If nominal income is $55,000 in the current year and the CPI in the current year is 120, then what does real income equal in the current year?
> The market basket consists of 10A and 20B. The prices of A and B in the current year are $2 and $4, respectively. The prices of A and B in the base year are $1 and $2.50, respectively. What is the current-year CPI?
> Freeway congestion (at certain times of the day) is the result of a disequilibrium price (below equilibrium price) being charged to drive on the freeway. Do you agree or disagree? Explain your answer. Price Dza.m. D7 a.m. S $1.25 500 800 Freeway mil
> Renters always are better off if they have more rather than fewer days to vacate the premises after receiving an eviction notice. Do you agree or disagree? Explain your answer. Rent S2(Law: 200 days) S:(Law: 10 days) R2 R Apartments
> The schools on the east side of town are considered better schools than the schools on the west side of town. Will this fact affect house prices on each side of town? Explain your answer.
> Two colleges, A and B, that have the same number of openings for the first-year class and charge the same tuition. At college A, the standards of admission are higher than at college B. Explain why. Tuition SAB DA No. of 200 290 420 Openings
> Can the absolute price of a good rise at the same time as its relative price declines? Explain your answer.
> Are there more or fewer exchanges at a price floor than at equilibrium price? Explain your answer.
> The absolute price of X is $40 and the absolute price of Y is $10. What is the relative price of X in terms of Y? What is the relative price of Y in terms of X?
> James lives in a rent-controlled apartment and has for the past few weeks been trying to get the supervisor to fix his shower. Why does waiting to get one’s shower fixed have to do with a rent-controlled apartment?
> What will happen if businesses become optimistic about future sales at the same time that there is an increase in wage rates, and AD shifts by less than SRAS shifts? The price level will _______________ and Real GDP will _______________.
> Prove diagrammatically that a price floor reduces consumers’ surplus.
> Prove diagrammatically that a minimum wage (set above the equilibrium wage) reduces employment.
> Suppose demand increases more than supply increases. Represent diagrammatically what happens to equilibrium price and quantity.
> If the supply of a good declines, what happens to consumers’ surplus? Explain your answer and represent it diagrammatically.
> What is the difference between a change in demand and a change in quantity demanded? Between a change in supply and a change in quantity supplied?
> Does an increase in income always shift demand curves (for goods) to the right? Why or why not?
> Explain how to derive a market demand curve and represent your explanation diagrammatically.
> Suppose both demand and supply rise, but equilibrium price does not change. Why? Explain your answer and represent it diagrammatically.
> A country is currently experiencing a high unemployment rate. Diagrammatically represent the country within a PPF framework of analysis.
> Illustrate scarcity, opportunity cost, and economic growth within a PPF framework of analysis.
> Many of the proponents of price ceilings argue that government-mandated maximum prices simply reduce producers’ profits and do not affect the quantity supplied of a good on the market. What must the supply curve look like before a price ceiling does not
> Based on the data below, identify which good each person has a comparative advantage in producing. a. Person A can produce the following three combinations of goods: (1) 10X and 0Y, (2) 5X and, (3) 0X and 10Y. b. Person B can produce the following t
> What does a PPF that is bowed outward imply about the opportunity cost of production?
> Explain how to derive a production possibilities frontier (PPF).
> Complete the following table: Federal Reserve Action Effect on the Money Supply (up or down?) Lower the discount rate Conduct open market purchase Lower required reserve ratio Raise the discount rate Conduct open market sale
> If the federal funds rate is 6 percent and the discount rate is 5.1 percent, to whom will a bank be more likely to go for a loan, another bank or the Fed? Explain your answer.
> If reserves decrease by $3 million and the required reserve ratio is 8 percent, what is the change in the money supply? What does the simple deposit multiplier equal?
> Reserves change by $10 million and the money supply changes by $50 million. What does the simple deposit multiplier equal? What does the required reserve ratio equal?
> If reserves decrease by $4 million and the required reserve ratio is 10 percent, what is the change in the money supply?
> If reserves increase by $2 million and the required reserve ratio is 10 percent, what is the change in the money supply?
> If reserves increase by $2 million and the required reserve ratio is 8 percent, what is the change in the money supply?
> Think of ticket scalpers at a rock concert, a baseball game, and an opera. Might they exist because the tickets to these events were originally sold for less than the equilibrium price? Why or why not? In what way is a ticket scalper like and unlike your
> If excess reserves are $2 million and required reserves are $22 million, then how much do reserves equal?
> If checkable deposits are $20 million and the required reserve ratio is 15 percent, how much do required reserves equal?
> Currency held outside banks is $100 billion, money market mutual funds (retail) are $120 billion, small-denomination time deposits are $50 billion, and savings deposits (including money market deposit accounts) are $200 billion. How much does M2 equal?
> If currency held outside banks is $200 billion and M1 is $600 billion, do we know for sure how much checkable deposits equal? Why or why not?
> Currency held outside banks is $400 billion, checkable deposits amount to $350 billion, traveler’s checks are $2 billion, and money market mutual funds (retail) are $100 billion. What does M1 equal?
> A bank currently has $100 million checkable deposits, $4 million in reserves, and $8 million in securities. If the required reserve ratio is 10 percent, is the bank meeting its legal reserve requirements? Explain.
> A bank’s assets are $90 million, and its liabilities are $71 million. Its assets increase by 10 percent, and its liabilities increase by 6 percent. What is the percentage change in the bank’s capital, or net worth?
> The required reserve ratio is 9 percent, required reserves are $10 million, and (total) reserves are $50 million. How much do excess reserves equal? How much do checkable deposits equal?
> If bank deposits at the Fed equal $40 million and reserves equal $43 million, then how much does vault cash equal?
> Checkable deposits are $50 million, and required reserves are $4 million. What is the required reserve ratio?
> Should grades in an economics class be “rationed” according to dollar price instead of how well a student does on the exams? If they were and prospective employers learned of this, what effect might this have on the value of your college degree?
> Illustrate the following graphically: (a) Fiscal policy destabilizes the economy. (b) Fiscal policy eliminates an inflationary gap. (c) Fiscal policy only partly eliminates a recessionary gap.
> Illustrate graphically how government can use supply-side fiscal policy to get an economy out of a recessionary gap.
> A hypothetical society has three income earners, and all three must pay income taxes. The taxable income of Smith is $40,000, the taxable income of Jones is $100,000 and the taxable income of Brown is $200,000. (a) How much tax revenue is raised under a
> What is the average tax rate of someone with a taxable income of $13,766?
> What is the marginal tax rate on the 10,001st dollar? What is the marginal tax rate on the 10,000th dollar? Taxable Income Taxes $1,000-$5,000 10% of taxable income $5,001-$10,000 $500 + 12% of everything over $5,000 $10,001-$15,000 $1,100
