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(a) Let's say that the US's GDP was $260 billion in 1980 and $325 billion in 1990. Both figures were calculated as usual in term of market prices for the year involved. The price index rose from 100 in 1980 to 130 in 1990. What happened to real output from 1980 through 1990? In terms of 1980 prices, the 1990 GDP would be? The overall rate of inflation during the ten years is approximately? Show all work
(b) Now suppose that nominal GDP in 1998 totals $8475 billion and rises to $12.5 trillion ten years later for the United States. The GDP deflator for 1998 is 1.85 and for 2008 is 2.75, in what year is real GDP greater? By how much? How did you arrive at this conclusion? Show all work and fully explain your reasoning. Explain why measuring GDP in real terms is important. Now consider the following information for the U.S.: During 2004, consumption expenditures increased by $13.5 billion, gross private domestic investment increased by $5.8 billion, and government expenditures declined by $10.4 billion. In addition, the country experienced a trade deficit of $2.9 billion. Did the U.S.'s GDP increase or decrease during this year? By how much? Show all work and fully explain your reasoning.
(c) Discuss three automatic expenditures in the federal budget. What is the difference between discretionary fiscal policy and automatic stabilizers? Discuss the effects of both expansionary and contractionary fiscal policies on the federal budget position? How would a budget deficit impact aggregate demand and crowd out private sector spending? How would this effect change the impact of expansionary fiscal policy on the economy and what are the overall effects in terms of the demand side transmission mechanism? Fully explain your analysis.
Perfect competition guarantees allocative efficiency. A profit-maximizing monopolist can never be allocatively efficient.
Suppose you are running a photo copy center that makes illegal copies of the textbook. An illegal copy of the book sells for $10 and you only have one copy machine.
What is the profit-maximizing price-output combination and what are the levels of the profits and consumer surplus at that point? What is Dead-weight-loss?
Draw a bowed-out production possibilities curve (PPC or PPF) with an aggregate measure of medical services, Q, on the horizontal axis and an aggregate measure of all other goods (and services), Z, on the vertical axis.
What were some of causes of stagflation of 1973 and 1979? In what ways were these episodes of stagflation different from great depression of the 1930s?
Use the IS/LM model and the IS-PC-MR model to explain what monetary policy to pursue.
Show the effect of moving to a consumption tax on the loan able funds market if people react favourably to the incentive to save. Choose which curve or curves you believe are affected.
Suppose we have a competitive market for a good with domestic demand and supply given by:
What will be the effect of this change in policy on both the real and the nominal interest rate in the long - run?
Graph the accompanying demand data, and then use the midpoint formula for E d to determine price elasticity of demand for each of the four possible $1 price changes.
What price and quantity will the monopolist produce at if marginal cost is a constant$4 ? Compute the dead weight loss from having the monopolist produce, rather than the perfect competitor
Explain how the aggregate expenditure function shifts in response to the changes in each of the following variables:
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