KW_Macro_Ch_07_End_of_Chapter_Problems

KW_Macro_Ch_07_End_of_Chapter_Problems - chapter 7 >...

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>> Tracking the Macroeconomy chapter 7 1. Following is a simplified circular-flow diagram for the economy of Micronia. a. What is GDP in Micronia? b. What are net exports? c. What is disposable income? d. Does the total flow of money out of households—the sum of taxes paid, consumer spending, and private savings—equal the total flow of money into households? e. How does the government of Micronia finance its purchases of goods and services? PROBLEMS
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2. The following chart shows a more complex circular-flow diagram for the economy of Macronia. a. What is GDP in Macronia? Government purchases of goods and services = $100 Consumer spending = $650 Imports = $20 Exports = $20 Wages,dividends, interest, rent = $750 Gross domestic product Wages, profit, interest, rent = $750 Government Households Taxes = $100 Markets for goods and services Factor markets Firms Rest of world 2 CHAPTER 7 PROBLEMS
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b. What are net exports? c. What is disposable income? d. Does the total flow of money out of households—the sum of taxes paid, consumer spending, and private savings—equal the total flow of money into households? e. How does the government finance its spending? Government purchases of goods and services = $150 Government borrowing = $60 Consumer spending = $510 Imports = $20 Exports = $50 Wages, profit, interest, rent = $800 Gross domestic product Investment spending = $110 Wages, profit, interest, rent = $800 Borrowing and stock issues by firms = $110 Foreign borrowing and sales of stock = $130 Foreign lending and purchases of stock = $100 Government Households Taxes = $100 Government transfers = $10 Private savings = $200 Markets for goods and services Financial markets Factor markets Firms Rest of world 3 CHAPTER 7 PROBLEMS
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3. The small economy of Pizzania produces three goods (bread, cheese, and pizza), each pro- duced by a separate company. The bread and cheese companies produce all the inputs they need to make bread and cheese, respectively; the pizza company uses the bread and cheese from the other companies to make its pizzas. All three companies employ labor to help pro- duce their goods, and the difference between the value of goods sold and the sum of labor and input costs is the firm’s profit. This table summarizes the activities of the three com- panies when all the bread and cheese produced are sold to the pizza company as inputs in the production of pizzas.
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This note was uploaded on 04/10/2008 for the course ECONOMICS 103 taught by Professor Sheflin during the Spring '08 term at Rutgers.

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KW_Macro_Ch_07_End_of_Chapter_Problems - chapter 7 >...

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