Ch. 2 - ECN 101 Intermediate Macroeconomics Professor...

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ECN 101 Intermediate Macroeconomics Winter 2009 Professor E.A.Frenkel Homework 2 On Thursday we begin the Long Run Theory of Classical Income Determination (as it is called). We will see more clearly just why E (expenditure) equals Y (income that is earned), and we will construct our first simple model of the macroeconomy. We will be able to derive some policy implications even from this simple model. This begins material on which you may well be TESTED. In the meantime, here is Homework for the textbook Chapter #2 and today's lecture. __________________________________ As I explained in lecture, Chapter Two of the Textbook introduces you to some basic tools we use to measure macroeconomic variables. In this ECN 101 course, we will emphasize the Theory of Macroeconomics, and we will not spend a lot of time on the concepts in this chapter. However, you need to understand such things as the real GDP, nominal GDP, CPI, and relation between GDP as expenditure and GDP as income (pages 25-30 in the text). So, a GOOD READING OF THE CHAPTER and going through the homework will help you in the rest of the course. Remember, answers to the workbook questions are in the back of the workbook. Look at the answers, only if you are not sure of your response or get stuck. The problems for this chapter are not very difficult in any case. So . . . here we go. (1) Please answer Problems and Applications questions #2, #3, and #4 on page 40 of the textbook. (2) Please consider Problems and Applications question #9 in the textbook on page 41. Senator Kennedy is making a strong "political" statement here, but my own experience tells me that the senator is perhaps incorrect as he discusses the economic concept and measurement of GDP. What do you think? Now turn to the "Questions to Think About" on page 29 of the Workbook . How do you think GDP as a measure of well-being measures up to the other items in the list? (3) Let's say you are a policy maker who is interested in lowering your economy& unemployment rate from 10 percent to 4 percent over two years. Can you think of a better goal than increasing GDP to accomplish this? If so, what would that goal be??
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Prof E. A. Frenkel ECN 101 Intermediate Macroeconomics Winter 2009 (4) Chapter Two of the textbook deals with the definitions and the measurement of GDP, the change in the price level, and the degree of labor unemployment in the macro- economy. Please do all of the fill-in and multiple choice questions on pages 9 through 13 in your Workbook. Now do Exercise (1) on pages 13-14 of the workbook. Answering these questions should complete your understanding of the central ideas in the chapter. (5) Let's say that Japanese-made Honda automobile prices skyrocket. Perhaps the cost of auto production in Japan has risen due to large wage hikes give to autoworkers. The typical American consumer purchases Honda vehicles. What would you expect to happen to the U.S. consumer price index (CPI) in this
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Ch. 2 - ECN 101 Intermediate Macroeconomics Professor...

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