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a. Draw a graph of the data. b. Which country has the lowest real GDP per person and which has the highest?
Business Macroeconomics Problem set 3: Economic growth; Finance, Saving, and Investment; and Money, the Price Level, and Inflation. 6 c. Which country has experienced the fastest growth rate since 1960 and which the slowest? d. Explain why the growth rates in these four countries are ranked in the order you have discovered. e. Return to the Web site and obtain data for any four other countries that interest you. Describe and explain the patterns that you find for these countries. 14. Policy makers talk about the “capacity” of the economy to grow. What specifically is meant by the “capacity” of the economy? How might capacity be measured? In what ways is capacity limited by labor constraints and by capital constraints? What are the consequences if demand of the economy exceeds capacity? What signs would you look for? 15.What was the rate of growth in real GDP during the most recent quarter? You can find the answer in publications such as the Survey of Current Business, The Economist,andBusiness Week. Has growth been increasing or decreasing? What policies might you suggest for increasing the economy’s potential long-run rate of growth? CHAPTER 7:FINANCE, SAVING, AND INVESTMENT 16.Michael is an Internet service provider. On December 31, 2007, he bought an existing business with servers and a building worth $400,000. During his first year of operation, his business grew and he bought new servers for $500,000. The market value of some of his older servers fell by $100,000. a. What was Michael’s gross investment, depreciation, and net investment during 2008? b. What is the value of Michael’s capital at the end of 2008? 17.Marat is a student who teaches golf on the weekend and in a year earns $20,000 after paying her taxes. At the beginning of 2007, Marat owned $1,000 worth of books, CDs, and golf clubs and she had $5,000 in a savings account at the bank. During 2007, the interest on her savings account was $300 and she spent a total of $15,300 on consumption goods and services. There was no change in the market values of her books, CDs, and golf clubs. a. How much did Marat save in 2007? b. What was her wealth at the end of 2007? 18. First Call, Inc. is a cellular phone company. It plans to build an assembly plant that costs $10 million if the real interest rate is 6 percent a year. If the real interest rate is 5 percent a year, First Call will build a larger plant that costs $12 million. And if the real interest rate is 7 percent a year, First Call will build a smaller plant that costs $8 million. a. Draw a graph of First Call’s demand for loanable funds curve. b. First Call expects its profit from the sale of cellular phones to double next year. If other things remain the same, explain how this increase in expected profit influences First Call’s demand for loanable funds. 19.Draw a graph to illustrate how an increase in the supply of loanable funds and a decrease in the demand for loanable funds can lower the real interest rate and leave the equilibrium quantity of loanable funds unchanged. 20.