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Problem Set #1 - ECON 162-90 91 Fall 2007 PROBLEM SET...

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ECON 162-90, 91 Allison Kim Fall 2007 due: September 7 PROBLEM SET NUMBER ONE 1. Determine whether each of the following statements are positive or normative, and if it concerns macroeconomics or microeconomics: a. A decrease in demand has led to a decline in the price of gasoline in recent weeks. Positive statement about microeconomics. b. The price of gasoline is too low to encourage the use of alternative energy sources. Normative statement about microeconomics. c. According to the most recent estimates by the Bureau of Economic Analysis, GDP increased by 3.4% in the second quarter of 2007. Positive statement about macroeconomics. d. George W. Bush’s tax cuts have led to increases in consumption spending throughout the economy. Positive statement about macroeconomics. e. Federal taxes should be cut even more to avoid the threat of recession and to pressure lawmakers to reduce government spending. Normative statement about macroeconomics. f. If the price of Ben and Jerry’s ice cream increases, then the quantity purchased in New York State each year is likely to decline. Normative statement about microeconomics. 2. This question came in my email: FIND THE MISSING DOLLAR Three men go into a motel, and the man behind the desk said the room is $30, so each man paid $10 and went to the room. A while later the man behind the desk realized the room was only $25, so he sent the bellboy to the three guys’ room with $5 to return.
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