Question Details

(solution) 1. Jeff buys a used truck from a rental agency to make deliveries

Please help and answer questions attached. Tip is included !

1. Jeff buys a used truck from a rental agency to make deliveries from his new furniture


store. Would this purchase be included in GDP? If so, would it be consumption or


investment spending?


2. What is a ?recession? and how would a recession affect the level of real GDP and the


growth rate of real GDP in a nation?


3. How are GDP, total output, total spending, and total income related in an economy?


Briefly explain.


4. Imagine an economy that produces only pizza and pretzels. In 2010, the price of pizza


was $20 and the price of pretzels was $1. In 2011, the price of pizza is $22 and the price


of pretzels is $1.10. If 100,000 pizzas and 1,000,000 pretzels were produced in 2010,


and 110,000 pizzas and 1,100,000 pretzels are produced in 2011, what is the nominal


GDP and real GDP (using 2010 prices) for this economy in 2010 and 2011? Calculate


the growth rate of real GDP for this economy during this period. Why is the growth rate


of real GDP different than the growth rate of nominal GDP over this period? Can you use


the GDP data to calculate the inflation rate from 2010 to 2011?


5. On your first day of a summer internship with a pharmaceutical sales company, your


boss explains how the company is in the midst of examining its sales data over the past


25 years to identify trends of growth and decline. She asks for your opinion on whether


the company should use real or nominal sales data. What would you say?


6. Would a significant decline in the economic activity of construction workers qualify as a




7. What does GDP per capita tell us about a nation's economy? What issues does


conventional GDP methodology exclude?


8. Explain why GDP does not include the underground economy.


9. Anuradha is a recent immigrant from India. She currently works as a software


programmer in California's Silicon Valley. Are her earnings counted in India's GDP or


America's GDP? What about GNP?


10. Korea was divided into North and South Korea at the end of World War II. What


similarities did the two nations have at that time? What differences contributed to the fact


that South Korea now has a per capita GDP that is over ten times higher than that of


North Korea? 11. What factors best explain China's increased rate of growth after 1978?


12. How has the recent growth experience in China benefited the ordinary citizen in China?


13. Why do economists look at a government's honesty when they study national wealth?


14. Explain how ?good institutions? enhance the incentives for entrepreneurship.


15. Some of the poorest countries in the world are rich with natural resources. Explain why


these resource-rich nations still struggle with low economic growth.


16. Explain why per capita real GDP is a better measure of economic growth than real GDP.


17. Why are property rights important for economic development?


18. What are ?incentives? and why are they important in the growth process?


19. Explain what the production function represents in the Solow model.


20. What are the positive and negative effects of patents on the creation of new ideas? ? 21. Using a graph showing private marginal cost, private marginal benefit, and social


marginal benefit of the research and development of new ideas, show how government


subsidies of research and development might mitigate the effect of spillovers. ? 1/2? 22. Consider an economy with production function Y


? = 2?K , an investment rate of 10%, and a depreciation rate of 5%. Assume there are no increases in labor, education, or


technology. If the capital stock in this economy is currently 9, is this economy above,


below, or at its steady state? What does this imply about growth in this economy?


23. Explain why patents are important for innovation.


24. For over 25 years, China has experienced growth rates averaging 7% or more each


year. According to research by economists, this ?miracle? rapid growth occurred because


of increases in capital and labor, not increases in technology. In the context of the Solow


model, discuss what these findings imply about China's expected growth for the future.


25. If an economy with no growth in labor, education, or technology has a steady-state


capital stock of 125,000 and a depreciation rate of 5%, what is the level of investment


needed to maintain the steady state? 26. In the context of the Solow model (with no growth in labor, education, or technology),


explain how an increase in the investment rate will affect an economy's steady state


output level and its growth rate.


27. Explain why entrepreneurs are often viewed as job destroyers.


28. An economy has a steady-state output level of 9. The economy's labor, technology, and


education levels are constant and the economy is described by the production function


Y= ?K . If the depreciation rate is 6%, what is the steady-state capital stock and what is


the investment rate needed to maintain it?


29. Explain the impact of unemployment benefits on the unemployment rate


30. If the adult population is 200 million, and 100 million are working and 10 million are


actively looking for a job, but not working, what is the unemployment rate? What is the


labor force participation rate?


31. Discuss the major economic factors that explain the rising labor force participation rate of


women after World War II.


32. Table: Statistics for a Small Economy Type of statistic Number


(millions) Population under the age of 16 16 Population over the age of 16 54 Retirees 14 Discouraged workers 3 Frictionally unemployed 1.5 Structurally unemployed 2.5 Cyclically unemployed 6 Refer to the table to answer the following questions.


A) How many people are in the country's labor force?


B) What is the labor force participation rate?


C) What is the unemployment rate?


D) What is the natural unemployment rate?


E) What is the rate of cyclical unemployment?


33. Why would the unemployment rate likely understate the overall decline in an economy's


performance, especially in a recession?


34.The natural unemployment rates run higher for European countries than the United States.


Briefly discuss some of the major reasons.


35.?Table: Demographic Data Overall population 600 million Population 65 years or older 82 million Population younger than 16


years 71 million Unemployed persons 20 million Employed persons


Discouraged workers 330 million


25 million Refer to the table. Use these data to calculate the total labor force, the labor force participation


rate, and the unemployment rate.


36.If Congress passes legislation making it more difficult for firms to fire workers, how will this


legislation affect the nation's level of unemployment? (An example might be a law requiring


severance pay for fired workers.) Explain.


37. If the government wanted to encourage workers over age 60 to retire in order to free up jobs


for younger workers, what are two examples of policies that could help to encourage early retirement? Would encouraging older workers to retire be beneficial to the younger workers?


Explain. 38. Identify both the factors that can increase structural unemployment and the policies that can


decrease it.


39. Suppose that you are buying your first home. Current interest rates on a 30-year fixed-rate


mortgage are 5%. Lenders expect an inflation rate of 2% over the next 30 years, thus giving


them an expected real return of 3%. If actual inflation over the next 30 years is 4% because of a


continued rapid expansion of the money supply, would you be better off or worse off by taking


out a 30-year fixed-rate mortgage?


40. Use the quantity theory of money to explain how an increase in the money supply leads to


an increase in the price level.


41. Explain the difference between the price level and the rate of inflation.


42. Briefly explain this statement: ?In the long run, money is neutral.? Does this statement mean


the money supply has no effect at all on real economic activity? Explain.


43. Suppose a worker earns twice as much income this year as 5 years ago. Is that worker


necessarily better off in terms of the goods and services that can be purchased with that income


today? How could you tell?


44. List three nations that have experienced hyperinflation. What is the cause of hyperinflation,


and how does hyperinflation and velocity interact?


45. Discuss the reasons for Zimbabwe's high inflation rate.


46. Suppose the Consumer Price Index in 1987 is 428 with a base year of 1967. What does this


tell us about prices in 1987?


47. Why does volatility in the inflation rate make it harder for businesses to get loans?


48. If velocity is constant and the economy's real growth rate is 3%, what rate of money growth


will achieve price stability?


49. What happened to the U.S. money supply during the early years of the Great Depression? 50. The following question has three parts, which are to be answered independently of each


other. Graphically show your response to the following shocks in the AD-AS model:


A) If a new round of consumer pessimism abounds, what would happen to the economy's


short-run growth rate?


B) If there is a positive, but temporary, monetary shock, what would happen to the economy's


short-run growth rate?


C) If a country's imports temporarily increase, but exports stay the same, what would happen to


the economy's short-run growth rate?


51. Imagine that an economy experiences a long-lasting banking crisis and that subsequently


consumption growth permanently falls. Using the AD-AS model, draw a diagram and explain the


effects of the permanent decline in consumption growth on the inflation rate and the real growth


rate in both the short run and the long run.


52. Using the AD-AS model, show and explain how real GDP growth and inflation would change


in both the short run and long run if the growth rate of the money supply increases




53. What types of shocks can be found in the AD-AS model? Why do these shocks not


disappear immediately but rather tend to spread across sectors of an economy?


54. Assume that a country's money velocity remains constant and that the rate of money growth


is 4%.


A) What is the rate of spending growth?


B) If money growth increases by 1.5 percentage points and consumption growth increases by


0.5 percentage points, what is the new rate of spending growth?


C) Given your answer in Part B, what is the long-run rate of real GDP growth at an inflation rate


of 4%?


55. What assumptions about wage and price flexibility are possible in the AD-AS model? What


do these different assumptions imply about the slopes of the long-run and short-run aggregate


supply curves?


56. Why is the long-run aggregate supply curve vertical in the AD-AS model?


57. Compare two economies, one that is highly agricultural and another that is highly


manufacturing-based. Discuss what types of shocks might be relevant to each of these




58. Answer the following three questions about the Great Depression.


A) What were the four major shocks that contributed to the Great Depression? B) Using a graph, show how these shocks affected AD.


C) Did the monetary authorities have a hand in causing and/or exacerbating the Great


Depression? Explain.


Solution details:

This question was answered on: Jan 30, 2021

PRICE: $15 (25.37 KB)

Buy this answer for only: $15

This attachment is locked

We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free solution (Deadline assured. Flexible pricing. TurnItIn Report provided)

Pay using PayPal (No PayPal account Required) or your credit card . All your purchases are securely protected by .

About this Question






Jan 30, 2021





We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.

You can also use these solutions:

  • As a reference for in-depth understanding of the subject.
  • As a source of ideas / reasoning for your own research (if properly referenced)
  • For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).
This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student.


Order New Solution. Quick Turnaround

Click on the button below in order to Order for a New, Original and High-Quality Essay Solutions. New orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.


Order Now