Reference no: EM133235607
1. What kinds of noneconomic (something you would normally not think of as an economic decision) trade-offs could be modeled with a production possibilities frontier?
2. Using simple supply and demand analysis, think about the system of allocating human kidneys. The law that forbids the sale of human organs, but allows their voluntary donation, means that there is a bigger shortage of kidneys than there otherwise would be. Does this fact alter your view of the law forbidding the sale of human organs? How about blood?
3. Suppose both gasoline supply and demand are highly inelastic. Knowing that a change in the expected price of gasoline will shift both supply and demand, explain how these combined facts can lead you to an understanding of wildly changing gasoline prices.
4. The amount of principal paid in the early stages of a mortgage is relatively modest. On a $100,000 loan, at 6 percent for 360 months, the first payment is almost exactly $600 with $500 going for interest and $100 going toward principal. Before 2008's financial meltdown, many new homebuyers were getting "interest-only" mortgages. (They paid $500 per month for the first five years and then $644 per month thereafter.) Do you think this was a good idea?
5. The third and fourth years of presidential terms have higher average rates of real growth than the first and second years. Do you think this is a coincidence or is it a reflection of political reality that politicians are more concerned about reelection than about creating long-run economic growth?
6. Explain how the 2010-2013 quantitative easing through the Federal Reserve purchase of mortgage-backed securities is different in style from what it usually does.
7. One political party believes government spending is too high; another party thinks it is too low. Which party will argue for current-services budgeting as a practice for setting government budgets? Explain why.
8. Explain why what deficit spending buys matters in terms of the true burden a national debt will have on future generations.
9. Explain the role of the credit default swap and why the attempt to make things safer for investors made things worse for everyone.
10. Why would a cut in the rate of growth from 2 percent to 1 percent have more than a 10 percent impact if it lasted 10 years?