Macro Economics

 

Following are questions on Chapters 1-9 of our Macroeconomics course, as well as other topics we have covered in class.

Please provide answers to at least _7__.  Please document and substantiate your answers:

 

 

 

1.       How do markets to Shifts in the Demand and / or the Supply curve. What is the difference between a movement along a specific demand curve or supply curve and a shift of that demand or supply curve.  Provide an example using the recent Corona Virus situation.

Question 2.   What is GDP?  What is real GDP ? What is per capita GDP ?  Why is our GDP shrinking in the ongoing Corona Virus Crisis?  What is a clear indication that the GDP will be decreasing?

 

Question 3:

Why did the Fed switch from increasing Federal Reserve target rates from Dec 2015 to Dec 2018 to reducing interest rates in August 2019?

 

Question 4. Economists often say that trade is a win-win situation. How do you justify this?

 

5. Why might well-educated economists disagree on appropriate public policy in some situations? Explain some policy options that the US and other countries are considering or implementing in terms of the Corona Virus crisis.

 

6. Carefully distinguish between an economic theory and economic model.  What is the role of value judgments in economic analysis?

 

7. Harry Truman is credited with the statement, “Give me a one-armed economist,” because economists are likely to say, “On the one hand, . . . on the other hand.” Why do economists “waffle” more than physicists or chemists?

 

8. In the early 1800s, there was a smallpox outbreak in a remote part of Russia. The government sent in a large group of army doctors, but they were too late to stop the epidemic. Thirty years later, there was another smallpox scare. A local statistician cautioned the government against a similar response, noting the increased mortality and high number of army doctors during the earlier epidemic. Was the statistician providing good advice?

 

9. A large airline calculates that the additional cost of a having a passenger on a flight to the Bahamas as the cost of a bag of peanuts and a soft drink, which totals $1.50, but the airline’s price is $600 for potential customers who want to buy vacant seats on the day of the flight. Which economic principle is this airline failing to utilize?

10. Explain why an airline may decide to sell an air ticket to a stand-by passenger at less than the full-fare if there are empty seats on the airplane?

 

11. ​Explain the following statement: “Good decisions typically require marginal analysis, which weighs added costs against added benefits.”

12. The U.S. economy is the largest in the world. What two factors primarily explain this? What makes the U.S. economy unique?

 

13. Differentiate between an open and a closed economy? Do you agree that US economy is more open among the advanced industrial countries in the world?

14. What important changes have occurred in the composition of the labor force since 1960? Is the popular image of the American worker as a factory worker accurate? Describe the types of jobs Americans are working in today.

15. Between 1960 and 2018 U.S. GDP, measured in dollars of constant purchasing power, expanded about 5.0 times. However, the standard of living only increased by 4 times over this period. Explain the difference.

 

16. List five major economic activities of government and give an example of each.

17. Is the image of the typical American worker as a blue-collar worker true? Substantiate your answer with facts.

18. How does the United States compare to other nations on a per capita scale as far as government production and taxation?

 

19. It is often asserted that the United States no longer manufactures anything, and that instead it imports manufactured goods from countries like China. Critically evaluate both sides of this argument.

20. A nation’s citizens often dislike the economy’s distribution of income. Explain two methods for creating a more equal distribution of income.

 

21. What you mean by business cycles? What are their consequences?

 

22. All industrialized countries have become “service economies” in recent decades. Explain the reasons behind this shift.

 

23. Define the following terms: a. Recession b. Mixed economy c. Transfer payments d. Progressive taxation

 

24. Carefully define the following terms and explain their importance to the study of economics. a. resources b. rational decision c. scarcity d. opportunity cost

25. Draw a production possibilities frontier for an economy, with the axes labeled “military goods” and “peace goods.” Indicate the region that is attainable and the region that is not. Explain the shape of the curve-what assumptions did you make in drawing it?

 

26. Why is it inefficient for an economy to be inside the production possibilities frontier?

 

27. What is an aggregate? How is it used in macroeconomics? Give two examples of specific aggregates that are used in the study of macroeconomics.

 

28. What are the two basic principles of aggregation?

 

29. What is Gross Domestic Product? What is included in this statistic? What is excluded? Give two examples of goods or services that are included in GDP and two examples of goods or services that are excluded.

 

30. Which of the following items are included in GDP? For those items not included, explain why they are not included in GDP. a. Jane buys newly issued shares of stock in Macro.com, Inc. b. Ross buys a new pair of jeans at a local department store. c. Joey has his mustache trimmed at his hair salon. d. Rachel buys an antique chest at a resale shop. e. Monica makes her own pasta sauce in her apartment. f. Phoebe grows her own herbs on her apartment balcony. g. Michael travels to Austria and buys wine and cheese.

 

31. What are three methods of calculating GDP.   Do they end up with the same number? Please elaborate

 

32. What are intermediate goods? Why do economists exclude the value of intermediate goods while calculating national income?

 

33. Compare and contrast the U.S. economic record prior to 1940 and after 1950. How do the two time periods differ? What best explains the differences according to a macroeconomist?

 

34. Why do price levels increase when government adopts fiscal or monetary policy to correct the economy when it faces a recession and high unemployment?

 

35. Are there key differences between an increase in the capital stock and an improvement in the level of technology?

 

36. Describe how the labor force, the nation’s capital stock, and the rate of technical progress contribute to potential GDP growth and labor productivity.

 

37. High unemployment is socially wasteful. Why?

 

38. Define the following terms carefully: (a) Full employment (b) Purchasing power of money (c) Real wage rate (d) Relative price

 

 

39 . During the course of the twentieth century, the average workweek in the United States has gotten shorter and Americans have enjoyed greater amounts of leisure time. How has this development affected potential GDP and labor productivity?

 

40. How is the unemployment rate calculated? Describe the three principal types of unemployment.

 

41. Does the existence of unemployment insurance eliminate the economic costs of unemployment?

 

42. Explain how the current U.S. tax system levies taxes on capital gains and earned interest. What does this mean for the costs of inflation?

 

43. Does inflation always cause workers losses due to decreases in real wages? Why or why not?

 

44. What is a GDP deflator? Why do some economists consider the GDP deflator to be a better measure of overall inflation than the Consumer Price Index?

45. Define the following terms: a. Human capital b. Investment c. Capital formation d. Property rights

45. Explain the ways in which the government can persuade private businesses to invest more in order to speed up the process of capital formation?

 

46. What is the “cost disease of personal services” phenomenon and why does it help explain why tuition rates keep going up so fast?

 

47. What is a V shaped shock to an economy. What is a U shaped shock to the economy.  What is an L shaped shock to the economy.  Provide examples for each.  What kind of shock will the implications of the Corona Virus cause to the economy?