Exam 1 (Chapters 1,2,3) - Assignment Essays

question

Macroeconomics is the study of the:

answer

the economy as a whole

question

Which of the following is the best example of a flexible price?

answer

the price of gasoline at a service station

question

Flexible Price is

answer

Method of selling where the prices are open to negotiations between buyers and sellers, and allow for bargaining within a certain range.

p

question

Which of the following is the best example of a sticky price?

answer

the price of a soda in a vending machine

question

Sticky Price is

answer

is a tendency for prices say at a well established price range despite changes in supply or demand. In other words, some prices tend to resist change despite economic forces that would typically push the price up or down.

question

In the relationship expressed in functional form, Y = G(K, L), Y stands for real GDP, K stands for the amount of capital in the economy, and L stands for the amount of labor in the economy. In this case G( ):

answer

is the function telling how the variables in the parentheses determine real GDP.

question

All of the following are important macroeconomic variables except:

answer

the marginal rate of substitution.

question

If nominal GDP increased by 5 percent and the GDP deflator increased by 3 percent, then real GDP ______ by ______ percent.

answer

increased by 2

question

An economy's ______ equals its ______.

answer

total income; total expenditure on goods and services

question

The market value of all final goods and services produced within an economy in a given period of time is called:

answer

gross domestic product.

question

Real GDP is measured in _____ prices ____ time.

answer

constant; per unit of

question

Nominal GDP is measured in _____ prices _____ time.

answer

current; per unit of

question

The statistic used by economists to measure the value of economic output is:

answer

GDP

question

Whats GDP stand for

answer

The statistic used by economists to measure the value of economic output is:

question

Whats CPI Stand for

answer

consumer price index

question

What does equilibrium mean?

answer

a state in which opposing forces or influences are balanced

question

In the long run, what determines the level of total production of goods and services in an economy?

answer

the quantity of capital, quantity of labor, and production technology

question

The production function feature called "constant returns to scale" means that if we:

answer

increase capital and labor by 10 percent each, we increase output by 10 percent

question

If the consumption function is given by C = 500 + 0.5(Y - T), and Y is 6,000 and T is given by T =
200 + 0.2Y, then C equals:

answer

...

question

If the consumption function is given by C = 150 + 0.85Y and Y increases by 1 unit, then savings:

answer

...

question

Investment goods as measured in the GDP are purchased by:

answer

business firms and households

question

Assume that equilibrium GDP (Y) is 5,000. Consumption (C) is given by the equation C = 500 + 0.6(Y - T). Taxes (T) are equal to 600. Government spending is equal to 1,000. Investment is given by the equation I = 2,160 - 100r, where r is the real interest rate in percent. In this case, the equilibrium real interest rate is:

answer

...

question

National saving is:

answer

private saving plus public saving

question

The factor that makes national saving equal investment, in equilibrium, is:

answer

the interest rate

question

The marginal product of labor is:

answer

additional output produced when one additional unit of labor is added

question

The inflation rate is a measure of how fast:

answer

the general level of prices in the economy is rising.

question

The unemployment rate:

answer

has never been zero in the United States.

question

An economy's ______ equals its ______.

answer

total income; total expenditure on goods and services

question

Nominal GDP means the value of goods and services is measured in ______ prices.

answer

current

question

The total income of everyone in the economy is exactly equal to the total:

answer

expenditure on the economy's output of goods and services.

question

Assume that total output consists of 4 apples and 6 oranges and that apples cost $1 each and oranges cost $0.50 each. In this case, the value of GDP is:

answer

$7.

question

To avoid double counting in the computation of GDP, only the value of ______ goods are included.

answer

final

question

Real GDP is a better measure of economic well-being than nominal GDP, because real GDP:

answer

measures changes in the quantity of goods and services produced by holding prices
constant.

question

In the long run, what determines the level of total production of goods and services in an economy?

answer

the quantity of capital, quantity of labor, and production technology

question

If the output is described by the production function Y = AK 0.2L0.8, then the production function has:

answer

constant returns to scale.

question

The marginal propensity to consume is:

answer

normally expected to be between zero and one.

question

Public saving is:

answer

government revenue minus government spending.

question

Which of the following is the best example of a sticky price?

answer

the price of a soda in a vending machine

question

Using a market-clearing model to analyze the demand for haircuts is ______ because the price of a haircut usually changes ______.

answer

unrealistic; infrequently

question

If the number of employed increases while the number of unemployed does not change, the unemployment rate:

answer

will decrease.

question

Prices of items included in the CPI are:

answer

weighted according to quantity of the item purchased by the typical household.

question

In the circular flow model, the flow of dollars from firms to households is paid _____ and the flow of dollars from households to firms are paid _____.

answer

as wages and profits; for goods and services

question

Explain the difference between endogenous variables and exogenous variables.

answer

Endogenous variables are determined within the model and exogenous variables are
determined outside the model.

question

In general functional notation,

answer

𝑄" =𝐷(𝑃,𝑌)
𝑄=𝑆(𝑃,𝑃 ^cpu)

question

Write down demand and supply equations (in General functional notation) for a laptop
computer, choose one exogenous variable in each equatio

answer

Endogenous Variables: Price of laptop (P) Quantity of laptop that consumers demand (
Quantity of laptop that firms supply (
𝑄#)

Exogenous Variables:
(Demand side) aggregate income (Y) (Or other given variable)
(Supply side) Price of CPU (Central Processing Unit) p^cpu (

question

Name the markets in this economy

answer

Capital, Labor, Goods and Loanable funds markets

question

In capital market, find the equilibrium real rental rate. Draw a diagram which shows the equilibrium real rental rate and capital in the market.

answer

Supply: 𝐾N = 6000
Demand: 𝑀𝑃𝐾 = 0.5𝐾^-0.5(6000)^0.5

So, 𝑀𝑃𝐾 = 0.5(6000)^-0.5(6000)^0.5 Also 𝑀𝑃𝐾 = 𝑅/𝑃.
So, R/P = 0.5

question

In labor market, find the equilibrium real wage. Draw a diagram which shows the equilibrium real wage and labor in the market.

answer

Supply: 𝐿O = 6000
Demand: 𝑀𝑃𝐿 = 0.5𝐾^0.5(6000)^-0.5

So, 𝑀𝑃𝐿 = 0.5(6000)^0.5(6000)^-0.5 = 0.5 Also 𝑀𝑃𝐾 = 𝑊/𝑃.
So, W/P = 0.5

question

In goods and services market, find the equilibrium interest rate. Draw a diagram which shows the equilibrium interest rate and output in the market.

answer

...

question

Show that the equilibrium interest rate found in (d) also clears the loanable funds market. Draw a diagram which shows the equilibrium interest rate and investment in the market.

answer

Supply: 𝑆 = (𝑌−𝑇)−𝐶+(𝑇−𝐺)

Demand = 𝐼 = 1000 − 100𝑟

question

Now suppose that G is reduced by 100 and T is increased by 100. Compute the new equilibrium interest rate in the loanable funds market. Which curve is shifted in the loanable funds market? Draw a diagram which shows the shift in the curve, new equilibrium interest rate and new investment in the market.

answer

Supply: 𝑆b =𝑆c +𝑆d =(𝑌−𝑇)−𝐶+(𝑇−𝐺)

Demand: 𝐼 = 1000 − 100𝑟

question

Show that the equilibrium interest rate found in (f) also clears the goods and services market. Draw a diagram which shows new equilibrium interest rate and output in the market.

answer

Aggregate Supply: 𝑌

𝐴𝑔𝑔𝑟𝑒𝑔𝑎𝑡𝑒𝐷𝑒𝑚𝑎𝑛𝑑=C+I+G

question

Compute the number of unemployed workers.

answer

6% = 𝑈/188+𝑈*100

6(188 + 𝑈) = 100𝑈 1128+6𝑈= 100𝑈 94𝑈 = 1128

𝑆𝑜, 𝑈=12

question

Computer the labor force.

answer

𝐿 = 𝐸 + 𝑈 = 188 + 12 = 200 𝑚𝑖𝑙𝑙𝑖𝑜𝑛

1 of 54

question

Macroeconomics is the study of the:

answer

the economy as a whole

question

Which of the following is the best example of a flexible price?

answer

the price of gasoline at a service station

question

Flexible Price is

answer

Method of selling where the prices are open to negotiations between buyers and sellers, and allow for bargaining within a certain range.

p

question

Which of the following is the best example of a sticky price?

answer

the price of a soda in a vending machine

question

Sticky Price is

answer

question

answer

is the function telling how the variables in the parentheses determine real GDP.

question

All of the following are important macroeconomic variables except:

answer

the marginal rate of substitution.

question

If nominal GDP increased by 5 percent and the GDP deflator increased by 3 percent, then real GDP ______ by ______ percent.

answer

increased by 2

question

An economy's ______ equals its ______.

answer

total income; total expenditure on goods and services

question

The market value of all final goods and services produced within an economy in a given period of time is called:

answer

gross domestic product.

question

Real GDP is measured in _____ prices ____ time.

answer

constant; per unit of

question

Nominal GDP is measured in _____ prices _____ time.

answer

current; per unit of

question

The statistic used by economists to measure the value of economic output is:

answer

GDP

question

Whats GDP stand for

answer

The statistic used by economists to measure the value of economic output is:

question

Whats CPI Stand for

answer

consumer price index

question

What does equilibrium mean?

answer

a state in which opposing forces or influences are balanced

question

In the long run, what determines the level of total production of goods and services in an economy?

answer

the quantity of capital, quantity of labor, and production technology

question

The production function feature called "constant returns to scale" means that if we:

answer

increase capital and labor by 10 percent each, we increase output by 10 percent

question

If the consumption function is given by C = 500 + 0.5(Y - T), and Y is 6,000 and T is given by T =
200 + 0.2Y, then C equals:

answer

...

question

If the consumption function is given by C = 150 + 0.85Y and Y increases by 1 unit, then savings:

answer

...

question

Investment goods as measured in the GDP are purchased by:

answer

business firms and households

question

answer

...

question

National saving is:

answer

private saving plus public saving

question

The factor that makes national saving equal investment, in equilibrium, is:

answer

the interest rate

question

The marginal product of labor is:

answer

additional output produced when one additional unit of labor is added

question

The inflation rate is a measure of how fast:

answer

the general level of prices in the economy is rising.

question

The unemployment rate:

answer

has never been zero in the United States.

question

An economy's ______ equals its ______.

answer

total income; total expenditure on goods and services

question

Nominal GDP means the value of goods and services is measured in ______ prices.

answer

current

question

The total income of everyone in the economy is exactly equal to the total:

answer

expenditure on the economy's output of goods and services.

question

Assume that total output consists of 4 apples and 6 oranges and that apples cost $1 each and oranges cost $0.50 each. In this case, the value of GDP is:

answer

$7.

question

To avoid double counting in the computation of GDP, only the value of ______ goods are included.

answer

final

question

Real GDP is a better measure of economic well-being than nominal GDP, because real GDP:

answer

measures changes in the quantity of goods and services produced by holding prices
constant.

question

In the long run, what determines the level of total production of goods and services in an economy?

answer

the quantity of capital, quantity of labor, and production technology

question

If the output is described by the production function Y = AK 0.2L0.8, then the production function has:

answer

constant returns to scale.

question

The marginal propensity to consume is:

answer

normally expected to be between zero and one.

question

Public saving is:

answer

government revenue minus government spending.

question

Which of the following is the best example of a sticky price?

answer

the price of a soda in a vending machine

question

Using a market-clearing model to analyze the demand for haircuts is ______ because the price of a haircut usually changes ______.

answer

unrealistic; infrequently

question

If the number of employed increases while the number of unemployed does not change, the unemployment rate:

answer

will decrease.

question

Prices of items included in the CPI are:

answer

weighted according to quantity of the item purchased by the typical household.

question

In the circular flow model, the flow of dollars from firms to households is paid _____ and the flow of dollars from households to firms are paid _____.

answer

as wages and profits; for goods and services

question

Explain the difference between endogenous variables and exogenous variables.

answer

Endogenous variables are determined within the model and exogenous variables are
determined outside the model.

question

In general functional notation,

answer

𝑄" =𝐷(𝑃,𝑌)
𝑄=𝑆(𝑃,𝑃 ^cpu)

question

Write down demand and supply equations (in General functional notation) for a laptop
computer, choose one exogenous variable in each equatio

answer

question

Name the markets in this economy

answer

Capital, Labor, Goods and Loanable funds markets

question

In capital market, find the equilibrium real rental rate. Draw a diagram which shows the equilibrium real rental rate and capital in the market.

answer

Supply: 𝐾N = 6000
Demand: 𝑀𝑃𝐾 = 0.5𝐾^-0.5(6000)^0.5

So, 𝑀𝑃𝐾 = 0.5(6000)^-0.5(6000)^0.5 Also 𝑀𝑃𝐾 = 𝑅/𝑃.
So, R/P = 0.5

question

In labor market, find the equilibrium real wage. Draw a diagram which shows the equilibrium real wage and labor in the market.

answer

Supply: 𝐿O = 6000
Demand: 𝑀𝑃𝐿 = 0.5𝐾^0.5(6000)^-0.5

So, 𝑀𝑃𝐿 = 0.5(6000)^0.5(6000)^-0.5 = 0.5 Also 𝑀𝑃𝐾 = 𝑊/𝑃.
So, W/P = 0.5

question

In goods and services market, find the equilibrium interest rate. Draw a diagram which shows the equilibrium interest rate and output in the market.

answer

...

question

Show that the equilibrium interest rate found in (d) also clears the loanable funds market. Draw a diagram which shows the equilibrium interest rate and investment in the market.

answer

Supply: 𝑆 = (𝑌−𝑇)−𝐶+(𝑇−𝐺)

Demand = 𝐼 = 1000 − 100𝑟

question

answer

Supply: 𝑆b =𝑆c +𝑆d =(𝑌−𝑇)−𝐶+(𝑇−𝐺)

Demand: 𝐼 = 1000 − 100𝑟

question

Show that the equilibrium interest rate found in (f) also clears the goods and services market. Draw a diagram which shows new equilibrium interest rate and output in the market.

answer

Aggregate Supply: 𝑌

𝐴𝑔𝑔𝑟𝑒𝑔𝑎𝑡𝑒𝐷𝑒𝑚𝑎𝑛𝑑=C+I+G

question

Compute the number of unemployed workers.

answer

6% = 𝑈/188+𝑈*100

6(188 + 𝑈) = 100𝑈 1128+6𝑈= 100𝑈 94𝑈 = 1128

𝑆𝑜, 𝑈=12

question

Computer the labor force.

answer

𝐿 = 𝐸 + 𝑈 = 188 + 12 = 200 𝑚𝑖𝑙𝑙𝑖𝑜𝑛

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