pleased answer the questions attached I am open to price suggestion! tip included as well!
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
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?
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
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
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
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
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
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