Indicate whether the following statement is correct or incorrect. \\ b) Find the steady-state capital stock per worker, and con, Consider the following aggregate expenditure model of an economy: C = 50 + (8/9)Yd T = (1/4)Y I = 100 G = 150 X = 100 IM = (1/3)Y where C is consumption, Yd is disposable income, T is taxes, Y, i) Suppose the following information is given about an economy that is described by the Solow model with technological progress and with population growth: \delta = 0.11 g_A=0.02 g_N=0.03 Then the ste. Consider two products, cloth and machines. b. A. Find the Marginal Product of Labor (MP_L). What is the marginal product of labor? For example, in 2010, the money supply was $200, the price of a cell phone was $7.50, and the economy produced 400 cell phones. If both output and prices are falling, then both real GDP and nominal GDP will fall. RGDP < NGDP because prices are rising. The bonds offer a real interest rate of 4.5% per year. The following table contains information on the economy's money supply, velocity of money, price level, and output. Points: 1 / 1 Close Explanation 4. \hspace{17pt}\text{Adj.} Ety of Money Price Level (Dollars) Nominal GDP (Dollars) Quantity of Output (Cell phones) 500 5 entirely 7.20 15 from 2017 to 2018. The following table contains information on the economy's money supply, velocity of money, price level, and output. If the wage rate is $4 and the price of capital is $6, then in order to minimize costs, the firm should use: a. more labor and less capital. Nineteen percent of employers provide a one-day paid holiday with workers off Thanksgiving Day. _______ per year. Consider an economy has the following information 1. Suppose that John, April, and Tristan have two production plants for producing orange juice. A. Indirect Business Taxes 40 Currently, each factory is producing 1,000 boxes of taffy at the same total cost. 110x40 + 80x11 + 20x90, If nominal GDP is less than real GDP, then the price level must have fallen during the year 2.0; 4.5; ____; ____; ____; This means that if we reduce labor by one in oranges, we need one more unit of land, Suppose the production function is y = 2K^{0.5}L^{0.5} and in the short-run K is fixed at K = 16. Capital and land are fixed factors while labor can move be, As the quantity produced by a firm increases, marginal cost eventually starts increasing because: A. of diminishing, or decreasing, marginal product of labor. For example, in 2019, the money supply was $240, the price of a cell phone was $7.20, and the economy produced 500 cell phones. 9.5; 4.5; ____; ____; ____; Inflation-induced tax distortions c. In the absence, Suppose a firm with a production function given by Q=4K^0.25L^0.75 produces 100 units of output. \hline \text { white, male } & 210 & 3,360 & 13,610 & & 22,050 \\ If the price of labor, w = $12 per unit of labor, what is the firm's marginal cost of production when the firm is producing 48 units of output? The firm pays a wage of $30 per units and pays a rental rate of capital $10 per unit. Suppose the production function is q=L^{0.75}K^{0.25}. GDP deflator = Nominal GDP / Real GDP 100. Now suppose the Fed unexpectedly increases the growth rate of the money supply, causing the inflation rate to rise unexpectedly from 4% to 6% per year. Assuming no population growth or technological progress, find the steady-state capital stock per worker, output per worke, Consider a Solow economy that begins in steady state. Suppose the price of labor is w = 24 and the price of capital is r, Consider a simple economy that produces only cell phones. \hspace{7pt}\text{Event/} \hspace{20pt} \text{Cash} \hspace{5pt}+ \hspace{10pt} \text{Other} \hspace{5pt} = \hspace{10pt} \text{Liabilities} \hspace{5pt} + \hspace{10pt}\text{Common} \hspace{5pt} + \hspace{5pt} \hspace{5pt} \text{Retained}\\ All of the above would push GNP above GDP. (Assume that the change in fair value results from a change in market interest rates rather than a change in instrument-specific credit risk.). For example, in 2011, the money supply was $280, the price of a cell phone was $7.00, and the economy produced 600 cell phones. (less than), Consider the following simple economy that produces only three goods: a. Product Quantity Price Per Unit Assuming that the bonds were sold at 100 plus accrued interest on October 1, 2018, prepare the necessary journal entry. 1. When the pric, Suppose an economy is characterized by the Solow model. Further, assume that all of the cotton is used, Consider a simple economy that produces only three products: tacos, earplugs, and toothbrushes. - the fallacy of composition. {/eq}, GDP (2012) = Money supply * Velocity of money, {eq}Price \ of \ cell \ phones \ (2012) \ = \ \dfrac{GDP}{Cell \ phones} a. Assume an economy where the production function is F(K,L) = L2/3K1/3 if L is 125 and K is 1000. Real GDP = 137.5 x 1 + 1350 x 30 = 40637.5, Billions of dollars If the equilibrium quantity of airplanes demanded is 400, can this economy take full advantage, The table below shows how the average cost of production for airplanes at a certain factory changes as the number of airplanes built at that factory increases. Many U.S. citizens currently work in foreign countries while few foreign citizens currently work in the U.S. (Round to the nearest 2 decimal places if necessary. B. all things are produced by the people of the lowest wage rate. Identifying costs of inflation Question: Consider a simple economy that produces only cell phones. C. a decrea. For example, in 2017, the money supply was $360, the price of a pie was $9.00, and the economy produced 800 pies. Velocity and the quantity equation Consider a simple economy that produces only cell phones. The Inflation rate from 2017 to 2018 was Consider a simple economy that produces only pies. You know that A) You are operating in a monopolistically competitive market, that is, you are a small part of a, Consider the following short run production function. Suppose we have a small economy that produces only two goods For a given output level, a firm's short-run average product of labor is 4 while its marginal product of labor is 5. 2000 (Base Year) 2009 A. Graph the short-run marginal and average product curves Graph the short-run total co, If an increase in production lowers your firm's short-run average total cost, your firm is likely experiencing blank and should consider blank output levels. Suppose the economy is operating at full-employment and all capital goods are subject to legal price ceilings set below equilibrium, Suppose that capital costs $10 per unit and labour costs $4 per unit. For example, in 2010, the money supply was $320, the price of a cell phone was $8.00, and the economy produced 600 cell phones. Become a Study.com member to unlock this answer! (Solved) - Consider a simple economy that produces only loaves of bread Use the IS-LM-model to explain what happens to national income. Draw the short run Phillips curve and relate it to our economy today. (Enter your response as an integer.) They have a total of 850 crates of oranges. You can produce 30 units that you can sell, The first principle of economics is that people face trade-offs. \\ The efficiency of ma3. M=money supply, V=velocity, P=price level, Y=real output, k=1/V In year 1, Quantecon is a country in which the theory of money operates. b. more capital and less la, Suppose the total cost of production in the short run is $500,000 when 2,000,000 units are produced. In 2015, the economy produced 70 flashlights and 40 fishing lures, and the prices of flashlights and fishing lures were $5 and $12, respectively. GDP = (50,000,000 * 1) + (10 * 10,000,000) = $150,000,000. Personal Tax Payments 1,500, National income (NI) equals $11860 billion. b. Fill in the missing values in the following . If the wage rate is $15 and the firm has sunk costs of $1000 what is the firm's total cost fu, You estimate a short-run production function to be Q = 16L^{0.8} which gives a Marginal Product of Labor function MPL = 0.8*16L^{-0.2} = 12.8/L^{0.2}. Few foreign firms maintain facilities in the U.S. while many U.S. firms are currently operating abroad. Show this change on the PPC above (make sure to label the change clearly). \\ a. India is producing 100 clot, Consider an economy with the following data: C(Y-T) = 135 - 0.7(Y-T), I = 210-10r, G is the level of government purchases, T=120, Ms=900 and the price level is P, L(Y,r) = 0.8Y-16r and future expected inflation is zero. Textbooks 15 90 20 100, Real GDP in 2009 equals $6680. If the consumer s money income is 20, the a) consumer can obtain a combination of 5 units of both C and D, b) price of C is 4 and the price of D is 2, c) price of C is 2 and the price of D is 4, d) pri, Assume a technological advance leads to lower production costs. The contract required a one-year commitment starting September 1. b. multiproduct firms will enjoy a cost advantage because they have the opportunity to divide their pool of worker, Consider three firms: firm A, a mining enterprise; firm B, a steelmaker; firm C, a car-maker. a. Assume that this economy is currently at point "C". A Bureau of National Affairs survey found that 79% of employers provide their workers with a two-day paid Thanksgiving holiday with workers off both Thursday and Friday (USA Today, November 12, 2009). Disposable personal income will Velocity \ of \ money \ (2011) \ = \ \dfrac{3,600}{240} The following table contains information on the economy's money supply, velocity of money, price level, and output. {/eq}, {eq}Money \ supply \ grew \ = \ \dfrac{252 \ - \ 240}{240} \ \times \ 100 Also suppose the economy is operating at full employment. GDP is not adjusted for pollution and it does not account for unequal income distribution. . c. Assuming that this economy produces only the thr. Now consider the long-run impact of the change in money growth and inflation. The realization of these economies of scale, however, is far, Consider a simple economy that produces two goods: pens and oranges. Suppose that the exchange rate is flexible and that there is a permanent increase in total factor productivity (TFP), i.e., both z and z' increase. b. a) Illustrate and explain what happens to the Economy over time and in the long-run if it ex, Using the data below, find the next set of question: a. The following table contains information on the economy's money supply, velocity of money, price level, and output. Gross Domestic Product (GDP) in which of the following ways? The following table contains information on the economy's money supply, velocity of money, price level, and output. Inflation \ rate \ from \ 2011 \ - \ 2012 \ = \ 5\% For example, in 2019, the money supply was $360, the price of a pie was $9.00, and the economy produced 800 pies. Suppose you are deciding whether to spend your tax rebate check on AirPods or save the money for a new smart phone. Economists tend to assume that a firm's production function is subject to increasing returns to scale, when the amount is small, and to decreasing returns to scale, when the output is large. What is the best. For example, in 2017, the money supply was $200, the price of a pen was $5.00, and the economy produced 400 pens. The following table contains information on the economy's money supply, velocity of money, price level, and output. Personal income (PI) equals $11210 billion. Consider the following Economy: Only Coconuts are produced, using labor Year 1 Coconut Producer Total Revenue $20 Wages $5 Taxes $1.5 Interest on Loan $0.5 (a) What is the Coconut Producer. b) What is the optimal ratio of c, When an economy is on the flat portion of its AS curve: A. small changes in the price level have little or no effect on the amount of production in the economy. The following table contains information on the economy's money supply, velocity of money, price level, and output. "Whenever real GDP declines, nominal GDP must also decline." The following table contains information on the economy's output, money supply, the velocity of money, and price level. The marginal product of oranges in plant 1 is MP1 = 1,000 - 01 and in-plant 2 is MP2 = 1,200 - 202. B. Aggregate supply describes a relationship between? \hline The following table contains information on the economy's money supply, velocity of money, price level, and output. What are the equilibrium levels of: a. GDP? For example, in 2011, the money supply was $280, the price of a cell phone was $7.00, and the economy produced 600 cell phones. Household production and the underground economy. Suppose the base year is 2001. Consider a simple economy that produces only pies. The following table shows the relationship between output and number of workers in the short run. |Year|Price of Meat|Price of a Toy |2004|$3 per pound|$2 |2005|$1 per pound|$7 |2006|$4 per pound|$5 Refer to table. The inflation rate from 2017 to 2018 was. The value of leisure is not included in GDP. There are six equally productive individuals on the island. The Fisher effect and the cost of unexpected inflation The following table contains information on the economy's money supply, velocity of money, price level, and output. When the number of people working outside the home decreases, the measured level of GDP, Valueperiod 2 Valueperiod 1 / Valueperiod 1100. Economy A has a high average rate of time preference relative to economy B?s low average rate of time preference. Is it true that in a short-run production process, the marginal cost curve eventually slopes upward because firms have to pay workers a higher wage rate as they produce more output? Price and quantity data are as follows: Then, average total cost (ATC) is A) 25 cents per unit and average fixed cost (AFC) is 15 cents per unit. Find a new equilibrium. The marginal propensity to consume for this economy is: a. a) Determine the equations for MPL and APL. People save 20% of their income, so their savings rate s = 0.20, In a certain economy, the components of aggregate spending are given by: C = 100 + 0.9(Y - T) - 500r I = 150 - 1,000r G = 200 NX = 50 T = 100 Given the information about the economy above, the immedi, Assume a specific-factors economy produces two goods, cloth and food, and that when representing the output of this economy graphically, cloth is on the x-axis and food is on the y-axis. Use a production possibilities frontier to illustrate society's trade-off between two "goods" a clean environment and the quantity of industrial output. We reviewed their content and use your feedback to keep the quality high. Since cell ph Change in the money supply was reflected partially did not change from 2017 to 2018 and the velocity of in changes in the price level. Few foreign citizens currently work in the U.S. and few foreign firms maintain facilities in the U.S. Compared with lower inflation rates, a higher inflation rate will ______ the after-tax real interest rate when the government taxes nominal interest income. Assume a December 31 closing date. For example, in 2011, the money supply was $320, the price of a cell phone was $8.00, and the economy produced 600 cell phones. The following table contains information on the economy's money supply, velocity of money, price level, and output. Agree. For example, in 2011, the money s; The equation of exchange Consider a simple economy that produces only cell phones. RaceandSexwhite,malewhite,femaleblack,maleblack,femaleallothersTOTALS1142108010031015243,360580460404,650256413,6103,3801,06027018,780over64TOTALS22,0504,9301,67033029,760. Suppose an economy that is initially at full employment faces a substantial increase in factor cost of production. National income will \hline \text { Race and Sex } & \mathbf{1 - 1 4} & \mathbf{1 5 - 2 4} & \mathbf{2 5 - 6 4} & \text { over 64 } & \text { TOTALS } \\ ?1.) Rajiv manages a grocery store in a country experiencing a high rate of inflation. Price \ of \ cell \ phones \ (2012) \ = \ \$7.56 Suppose that John, April, and Tristan have two production plants for producing orange juice. The increase in real GDP per capita between 1890 and today understates well-being because the value of leisure is not included in GDP. (Enter your response as an integer.) Each individual is endowed with 10 units of the consumption, The short run aggregate supply curve shows: A. what happens to output in an economy as the actual price level changes, holding all other determinants of real GDP constant. Assume that the market clearing assumption should and that Labor receives a wage equal to the MPL (dY/d, The first principle of economics is that people face trade-offs. Suppose also that we produce 125 units of beef and 460 units of soy. Production and Prices in Year 1 (Base year) Since pen output did not change from 2017 to 2018 and the velocity of money the change in the money supply was reflected v in changes in the price level. The nominal interest rate on the bonds adjusts automatically to account for the inflation rate. A. \\ b) Suppose that velocity increases to 11 and economy's output of goods and services, Consider an economy describe by the following equations: Y = C + I + G + NX Y = 8,000 G = 2,500 T = 2,000 C = 500 + 2/3(Y - T) I = 900 - 50r NX = 1,500 - 250e r = r* = 8 a.In this economy, so. - Definition & Formula. The following table contains information on the economy's money supply, velocity of money, price level, and output. For example, in 2019, the money supply was $280, the price of a pie was $7.00, and the economy produced 600 pies. b) the size of its factories. 4. The following table contains information on the economy's money supply, velocity of money,. Consider a simple economy with two countries, the United States and India. Production and Prices in Year 2 As an economist for the United Nations, you have been asked to report on the role of cottage industries in Pakistan. Consider a simple economy that produces only cell phones. (b) Graph the short-run marginal and average product curves. Show calculations. Labor is employe, Assume a desert island economy in which labor is the only scarce resource and labor can be used to gather food (coconuts) or to build huts. This country produces both goods (clothing with capital and labor; food with land and labor) and imports food. Corn Bread 110 $1.00 The pizza company also buys $. B) the scale of operation at which economies of scale are exhausted. Assume it is currently in its initial steady state. Which of the following statements is CORRECT? John's factory has high fixed costs and low variable costs. A) What is the marginal product of labor function? In the short run, the firm has 16 units of capital. If Americans still worked 60-hour weeks, as they did in 1890. If the wage rate is $5 and the price of capital is $2, then in order to minimize costs the firm should use: A. more capital and less labor. Suppose the economy experiences a negative shock to the banking system. The marginal product of oranges in one plant is MP^1=1000-O_1, Which of the following could be evidence of a market failure? In the short run, the firm has signed a lease to r, Maya papaya runs a profit maximizing firm in which she uses capital (k) and labor (l) to make her pies. Consider an economy that begins with an output equal to its natural level. Show the effect this will have on national income, unemployment, inflation, and interest rates with the help of an ADAS diagram, assumi, An economy has a recessionary gap. Derive an equation for the (short run) average product of labor and for the short run marginal product of labor. The inflation rate from 2011 to 2012 was __________ (5%/2.44%/1.44%/105). The unanticipated change in inflation arbitrarily benefits _______. What is the per-worker production function? An artist buys scrap metal from a local steel mill as a raw material for her sculptures. Consider a simple economy that produces only cell phones. Consider a simple economy that produces only cell phones. The labor costs $6 and pizza sells for $10. If the price per unit of the good is $1.9 and labor costs $10 per unit. \hline \text { all others } & & & & & \\ B. will be falling the more the firm is, Suppose in the short run a firm's production function is given by Q = L^(1/2) x K^(1/2), and that K is fixed at K = 9. B. a decrease in the number of smartphone manufacturers. Assume that there are two sectors, manufacturing and farming. The following table contains information on the economy's money supply, velocity of money, price level, and output. Consider a simple economy that produces only cell phones. The following Yes. The money wage rate falls, real GDP increases, and the price level rises. The following table contains information on the economy's money supply, velocity of money, price level, and output. Assume that K is fixed at 10 in the short run. The following table contains information on the economy's money supply, velocity of money, price level, and output. NI = NNP - Indirect Business taxes =11900 - 40 = 11860 \\ Pineapples 50,000,000 lbs. GDP is not adjusted for crime or other social problems. Which range of aggregate supply would represent an economy in the short term when prices are sticky and the economy is producing low levels of output? This firm operates in the short run where capital (K) is fixed at a quantity of 16. This tends to ______ saving, thereby ______ the quantity of investment in the economy and ______ the economy's long-run growth rate. The total value added of the artist is $3000. Suppose that the economy consists of two types of firms: type A firms which produce output using a technology Qa Min 1 3K,L and type B firms which produce output using a technology Qb Min12K,L. DPI = PI - Personal tax payments = 11210 - 1500 = 9710. The price of a unit of beef = $19 and the price of a unit of soy = $14. GNP is the value of final goods and services produced by residents of the U.S. If the product made by the labor sells at a price of P=$8 per unit, then the Marginal Revenue Product of, If the economy is producing a combination of goods inside its production possibilities frontier, then a. workers are on vacation b. a significant number of workers have little education c. some resources are being wasted d. technology must improve before, Suppose the marginal product of labor is 12 and the marginal product of capital is 24. copyright 2003-2023 Homework.Study.com. Since cell phone output did not change from 2011 to 2012 and the velocity of money __________ (increased/decreased/remained the same) , the change in the money supply was reflected __________ (partially/entirely) in changes in the price level. Our experts can answer your tough homework and study questions. The government places a modest minimum wage on this industry above the market clearing equilibrium wage. According to the CAGE framework, which of the following is an example of a product most affected by economic distance? Using the line drConsider a decrease in the supply of money th, An economy with zero net exports is described below: C= 80 + 0.75 (Y - T) I^p= 100 G= 150 NX= 0 T= 180 The multiplier in this economy is 4. a. For example, in 2017, the mon. The following table contains information on the economy's money supply, velocity of money, price level, and output. M=money supply, V=velocity, P=price level, Y=real output, k=1/V Which of t, Consider an economy described by the production function: Y = F(K,L) = K^0.4 L^0.6 a. Year Velocity of Money (Cell phones) (D 1.44% (Dollars) 7.20 500 2017 2.44% 2018 15 500 5% The money supply 105% rate of from 2017 to 2018. When GDP is computed using the base year prices, it is referred to as real GDP. In the best case scenario, the Fed will: a Increase money supply to take the economy to point X. b Decrease money sup, Consider the following competitive economy: Capital Stock: K=150 Labor Supply: L=150 Production Function: Y = K .4 L .6 Consumption Function: C = 10 + 0.7 Y d Investment Function: I = 40 - 100r Government spending: G=30 Taxes: T=30 For this produ, The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. Question Velocity and the quantity equation Consider a simple economy that produces only cell phones. What is t, Both Kate and John own saltwater taffy factories. {eq}Velocity \ of \ money \ (2011) \ = \ \dfrac{GDP}{Money \ supply} 4. Velocity and the quantity equation 4. Velocity an.docx {/eq}. B. more labor and less capita, Suppose a firm's production function is given by the equation Q = 12L^.5K^.5 . Then the profit-maxi, A firm's production function is given by q = f(L, K) = LK + 2L^2 K - L^3. Suppose that Home has 100 workers, a marginal product of 4 making apples, and a marginal product of labor of 4 making shirts. Find the probability that a randomly selected individual was a white male. PI = NI - Corp earnings + Gov Transfer Payments 1. b) Suppose five of the planes produced were now sold overseas rather than domestically. For example, in 2017, the money supply was $240, the price of a cell phone was $7.20, and the economy produced soo cell phones Fill in the missing values in the following table. In the U.S., gross domestic product (GDP ) and gross national product (GNP) are close in value. \\ b. an economy will automatically seek the level of output at which, In the long run, a firm that produces and sells textbooks gets to choose: a. Product Market C = Ca + 0.7(Y - T) ; Ca = 1,000 - 10r ; T = 100 + 0.15Y ; Ip = 3,500 - 20r ; G = 3,000 NX = 2,000 - 0.4Y Money M. Quantecon is a country in which the theory of money operates. From the following data, construct an expenditure schedule on a piece of graph paper. The government cuts public spending. Determinants of aggregate suppDeterminants of aggregate supply The following graph shows a decrease in aggregate supply (AS) in a hypothetical economy where the currency is the dollar.