What the importance of the business cycle in macroeconomics

Reference no: EM131457222

PART I: Problem/Discussion

1. a) What is the importance of the business cycle in macroeconomics?

b) With an aid of a graph, identify the phases of the business cycle and then show the trend line on the business cycle itself.

b) Why would economist expect inflation to increase during an economy's expansionary phrase and to rise during a contractionary phrase? Discuss and make reference to the business cycle.

2. a) What is the difference between nominal and real gross domestic product (RGDP)?

b) The market value of the nation's output can be measured by either Aggregate Spending (AD) or Aggregate income (Y)? Are these two approaches measure the same time or different from each other. Explain.

c) Does GDP measure only the final goods and services produced rather than all goods and services produced? If true explain; if false explain.

3. a) What is meant by the economy's aggregate demand curve(AD)?

b) Does the AD always downward sloping? Discuss and use graphs where necessary.

4. Complete Table below for

a) Total Cost (TC)

b) Average variable cost (AVC)

c) Fixed Cost for producing 20 units of output

Q	FC	VC	TC	AVC
0	100	0
10	100	100	200
15	100	125	325
20		150
25	100	175	175
30	100	200	300
40	100	225	325

5. Use Table above and answer the following questions

A. What is the marginal cost for producing the 10th unit?

a. 350 c. 50

b. 0 d. None of the above

Show your work?

B. What is the total cost of producing 20 units of output

a. 100 c. 150

b. 200 d. 300

Show your work?

C. What is the average variable cost of producing 10 units of output?

a. 10 c. 100

b. 25 d. 20 e. None of the above

Show your work?

D. What is the average total cost of producing 10 units of output?

a. 10 c. 100

b. 25 d. 20 e. None of the above

Show your work?

6. The table below summarizes the short-run production function for your firm. Your product sells for $10 per unit, labor costs $5 per unit, and rental price of capital is $5 per unit.

Complete the following table, and then answer the accompanying questions.

K	L	Q	MP_L	AP_L	MP_K	VMP_L
10	1	0
10	2	5
10	3	10

a. Which inputs are fixed inputs?

b. Which are the variable inputs?

c. How much are your fixed costs?

d. What is the variable cost of producing 5 units of output?

7. Suppose XYZ Company leases an equipment form MTA for $10,000 for one week. The MTA lease is returnable, but only 7,000 is refundable within 5 days of the date of the lease.

a. What are XYZ's fixed costs?

b. What is XYZ's sunk cost?

c. Suppose XYZ manager obtains the lease but then decides against operating the business. If another similar firm offers the manager $8,000 for the lease, should the manager accept the offer? Explain.

8. a) What is the difference(s), if any, between the unemployment rate and the natural rate of unemployment? Discuss.

b) The expenditure approach (the sum of all spending) to measuring the value of the nation's output (GDP) is equivalent to the income approach (the sum of all payments to factors). Discuss and illustrate with examples(s) where necessary.

c) The Real GDP is a better measure compared to nominal GDP in ascertaining the value of the nation's output? If yes, explain. If no, explain.

d) Does GDP provide an accurate measure of the well-being of the population in a country? Yes or No. Discuss and offer examples where necessary.

9. a) Suppose a surplus of oil exists in the world market. What kind of output strategy would you recommend for the oil producing countries to resolve the problem of a surplus?

b) Suppose there is shortage of gasoline in your local neighborhood. Discuss some possible solutions to resolve the problem of the shortage.

c) Economics is the science of the study of the scarcity of resources? Explain and illustrate with the help of examples.

d) What is meant by "There is no such a thing as a free lunch?" Explain.

10. a) What is ethics? Explain.

b) What are the advantages and disadvantages in making unethical decisions as a manager of a corporation that trade stocks and bond in the open public?

11. Use the following information to answer the question below.

Consumer Expenditures	$1,732.6
Government purchases	530.3
Depreciation	303
Government transfers	312.6
Indirect business tax	230.3
Interest and dividend income	324.9
Investment	437.0
Net Exports	32.1
Other income not received	200.9
Personal taxes and non-tax payments	340.5
Private taxes transfer	121.1
Social Insurance taxes	216.5
Net income from American resources abroad	5.7
Corporate profits	177.2

What is GDP? Show your work by using the income approach and expenditure approach. Are the two sides equivalent? If yes, why? If no, why?

12. Fill in the blanks

Year

Basket of Goods (nominal)

Basket of Goods (Real)

CPI

Inflation Rate

1988

$3,053.6

$3,294.1

94.4

1989

3,277.7

---------------

96.9

-------------

1990

3,544.5

-----------------

----------------

1991

-----------------

3,728.5

103.2

----------------

13. a. Discuss what is and what is not included in calculating GDP

b. What is value added? How value is added related to the market value of the final good?

14. a) The Aggregate Supply (AS) curve slopes upward to reflect the profit motive of businesses. So, why are there two versions of the AS curve (i.e., short run and long- run). Discuss.

b. What is the US national debt? How it is primarily financed? Do you believe that the debt itself is a national macroeconomic problem? Discuss.

15. Suppose market demand and supply are given by Q^d = 10 - 32P and Q^s = 5 + 3P

Show all work for this question

a) What is the equilibrium price and quantity?

b) Show the equilibrium values using demand and supply curves.

16. a) What is the Multiplier Effect? Does the total increase in AD always greater than the initial increase in Government spending? Discuss.

b) The Crowding effect of fiscal policy is the same as the multiplier effect. True or False. Explain and illustrate with the AD and AS model.

Reference no: EM131457222

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4/10/2017 6:30:30 AM

Economics homework- No additional attachments are required. Write your answers next to each question and Don’t change the question. Why would economist expect inflation to increase during an economy's expansionary phrase and to rise during a contractionary phrase? Discuss and make reference to the business cycle.

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