Reference no: EM13213764

1. Suppose the sum of consumption, planned investment, and government spending is $800 billion, where the figures for government spending included in that $800 billion includes: a) $5 billion interest payments on the national debt (government issued bonds), b) $15 billion social security payments, c) $25 billion expenditure on goods and services produced by the private sector in this country and d) $5 billion in goods produced by firms abroad. Additionally, firms have experienced an involuntary (unplanned) inventory reduction of $10 billion during the course of the year. If we export $8 billion more than we imported, measured GDP using the expenditures method for GDP accounting is _______. Show your work and briefly explain your answer below.

2. Suppose the economy consists of two consumer goods, Harley Motorcycles and Quiche. We have the following information regarding these two goods: Year Harley--Price--Quiche Harley--Quantity-Quiche 2010 2.0 1.00 100 50 2011 3.0 7/3 110 30 2012 4.0 5.00 150 20 A. What is the rate of inflation between 2011 and 2012 (or the inflation rate for 2012) for this economy, approximately (using the CPI with 2010 as the base year)? Show your work below. B. What is the rate of real economic growth in this economy from 2011 to 2012? (Use the old method for computing real GDP, 2010 is the base year).

3. Consider an increase in government spending. An economy that has shorter wage contracts will likely experience (Circle one) A. a smaller multiplier effect on output and employment than an economy with longer contracts. B. a larger multiplier effect on output and employment than an economy with longer contracts. C. a smaller multiplier effect on output and but a larger effect on employment than an economy with longer contracts. D. a larger multiplier effect on output and smaller effect on employment than an economy with longer contracts. E. the multiplier effect on output will be the same regardless of the duration in contracts, but the effect on employment should be smaller in the economy with shorter contracts. F. None of the above.

4. The public's attitude toward international trade and imports has shifted over the years. A traditional view of trade focuses on the demand? side effects of greater final goods imports have on the economy. While greater access to imports may be beneficial from a microeconomic standpoint (people have greater range of goods to choose from, and available at a lower price) the macroeconomic view of things may be a little different. A more recent view of trade and imports focuses on the supply?side of trade. Here, the focus is on imports of intermediate goods (goods used to produce final goods). Again, while there may be some microeconomic points to trade, one can ignore them (in the aggregate) and focus on the macroeconomic of things. As a side note: As evidence of this changing shift: On November 8, 2007, the Democratic?controlled House of Representatives, led by Speaker of the House Nancy Pelosi, passed H.R. 3688, the United States?Peru Free Trade Agreement Implementation Act, by a margin of 285 to 132. In the recent past, Democrats have tended to block such trade agreements. This question asks you to sift through the two views. 4A. Using our AD/AS model and our model of the labor market, show the short?run effects greater imports may have on an economy, focusing solely on the traditional view and its emphasis on the demand?side effects of greater imports. Explain precisely why you shift the curves in your graphs. Your grade will depend on what you draw and how well you explain it. Explanation: Real GDP Wages Employment Price Level 4B. The traditional view you have outlined above is one that organized labor usually focuses in on. Discuss explicitly how labor fairs in this context (a demand?side view of imports). 4C. Using our AD/AS model and our model of the labor market, show the short?run effects greater imports may have on an economy, focusing the emphasis on the supply?side effects of greater imports. Explain precisely why you shift the curves in your graphs. Your grade will depend on what you draw and how well you explain it. Explanation: 4D. Should labor hold the same view it has about imports here as it does 4B? Explain.