Answer Key to Homework Assignment 4
Econ243
Chapter 5
2.
Y=[1/(1-c1)]*[c0-c1T+I+G]
The multiplier is 1/(1-c1).
b.
Y=[1/(1-c1-b1)]*[c0-c1T+ b0-b2i +G]
The multiplier is 1/(1-c1-b1). Since the multiplier is larger than the multiplier in
part (a), the effect

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Multiple Choice
1) When using the income approach to measure GDP, the largest share of GDP
generally consists of
A) interest income.
B) labor income.
C) indirect taxes.
D) profits.
E) capital income.
Answer: B
2) Suppose nominal GDP increased in a given y

Practice Exercises
Multiple Choice (There exists one and only one correct choice)
1) When using the income approach to measure GDP, the largest share of GDP
generally consists of
A) interest income.
B) labor income.
C) indirect taxes.
D) profits.
E) capit

Practice Exercises
Econ 243
Multiple Choice Questions
1. Suppose workers and firms expect the overall price level to increase by 5%. Given
this information, we would expect that:
a. the nominal wage will increase by less than 5%
b. the nominal wage will i

Homework Assignment 6
Econ243
Due 4/3/15
TEXTBOOK, p. 157: #2, 3, 4
1.
Concisely explain why the AS curve is upward-sloping.
2.
Concisely explain why the AD curve is downward-sloping.
3.
Explain what effect each of the following events has on the IS curve

Homework Assignment 5
Econ243
Due: 3-27-15
In your textbook:
Chapter 6, Question 3, page 129
Chapter 6, Question 5, page 129
Chapter 6, Question 6, page 129
1.
Using the wage equation (equation 6.1 in the text), briefly explain how each of the
following e

Solutions to Practice Exercises
Econ 243
Multiple Choice Questions
1. Suppose workers and firms expect the overall price level to increase by 5%. Given
this information, we would expect that:
a. the nominal wage will increase by less than 5%
b. the nomina

Answer Keys to Homework 2
Chapter 3
1.
a.
True.
b.
False. Government spending without transfers was 20.4% of GDP without
transfers.
c.
False. The propensity to consume must be less than one for our model to
be well defined.
d.
True.
e.
False.
f.
False. Th

Answer Keys to HW6
Econ243
Due by 4/3/15
SELECTED ANSWERS PROBLEMS FROM TEXTBOOK
2.
3.
a.
b.
IS right, AD right, AS up, LM up.
Y same, i up, P up; Consumption up because taxes decrease; Investment
down because interest rate (i) increases.
An increase in u

Answers to Homework Assignment 5
Econ243
1. a.
The nominal wage is set based on the expected price level since workers care
about the real wage. A reduction in the expected price level will cause a proportionate
reduction in W.
b.
This increases bargainin

Answer Keys to HW3
Econ243
(2/25/15)
1.
a. False.
b. False.
c. False. Money demand describes the portfolio decision to hold wealth in the form of
money rather than in the form of bonds. The interest rate on bonds is relevant to this
decision.
d. True.
e.

Answer Keys to HW1
(Econ243)
1. a.
no change: intermediate good
b.
+$100; Personal Consumption Expenditures
c.
+$200 million; Gross Private Domestic Fixed Investment
d.
+$200 million; Net Exports
e.
no change: the jet was already counted when it was produ

Econ 243
In class Exercise (>4 ’15 WW A9/ 5)
(2/11/15)
1. Write out the tetal spending equation as a linear function of total income.
Z=c1+f+é§
: a+MYeNT)"‘-7+ G
:fa+f+é‘,~ANT)-ll;)’
2. Draw the model of total spending and output graphically. Identify and