Homework #1 1. Graph 1 describes the long term trends in labor productivity in US manufacturing. Both graphs have the same variable on the horizontal axes (x-axes). In Graph 1, its vertical axis (y-axis) represents the labor productivity (output per
Homework #2 1. a. To a lay person, "investment" particularly means financial investment, and it is the same thing as saving. For example, one uses part of his/her income to buy financial assets, such as stocks, bonds and mutual funds, and hope to yie
Homework #3 1. a. According to Table A, the price of apparel has fallen by 1.8 % since September of last year. The major reason is globalization and the competition of international trade. Increasing amount of apparel and textile are imported from fo
Homework #4 1. Interest rate is pro-cyclical, and it moves the same direction as the aggregate level of economy. According to the textbook, there are several reasons why interest rates are procyclical. First, inflation affects the interest rates. Fro
Homework #5 1. a. Discount window is an instrument of monetary policy that allows commercial banks to borrow money from the central bank (the Fed) at discount rate. It is usually the last resort for bank money shortage and prevents bank runs. b. Lowe
Topic 2: Elasticity
Elasticity: how responsive a variable is to a change in price.
Price elasticity of demand (Ed): the responsiveness of the quantity demanded to changes in
Elastic demand: percentage change in quantity is greater tha
Topic 6: The role of the Government
Market failure: a situation where the market fails to produce the efficient level of output.
Externalities: a benefit or cost that affects someone who is not directly involved in the
production or consumption of a good
Topic 1: Demand and Supply
Demand: the quantities of a good that buyers are wiling and able to pay at various prices at a
particular point in time.
Law of demand: the quantity of a good demanded is inversely related to price (ceteris paribus).
The law is
Topic 5: Market structures
There are four major market structures:
1. Perfect competition
2. Monopolistic competition
Many firms with negligible fraction of total market share
Are price taker