Chapter 1-2 Review
1. In each of the following situations, identify which of the twelve principles is at work.
a. Responding to incentives
b. Resources are scarce
c. Markets lead to efficiency
e. Trade Interaction.
Complete the following table by calculating the value of the multiplier and identifying the change in
Y* due to the change in autonomous spending. How does the value of the multiplier change with the
Chapter 26 Review Questions: 6, 11, and 14
6. Use the market for loanable funds shown in the accompanying diagram to explain what happens to private
savings, private investment spending, and the rate of interest if the
following events occur. Assume that
1. In each of the following situations, explain what happens to the money supply and interest rate. (1
a. The Fed sells government securities on the open market. The Fed wants to decrease the money
supply; the interest rate will ri
chapter 31 review questions 2, 7 and 13.
2. How will the following events affect the demand for money? In each case, specify whether there is a
shift of the demand curve or a movement along the demand curve and its direction.
a. There is a fall in the int
Chapter Review Questions
4. Answer the following questions about the (real) inflation tax, assuming that the price level starts at 1.
a. Maria Moneybags keeps $1,000 in her sock drawer for a year. Over the year, the inflation rate is
Large time deposits
Non-checkable savings deposits
Small time deposits
Institutional money market mutual funds
1.Using the data in the table, calculate each categ
3. Suppose that the United States economy is in a experiencing inflation.
a) Using a correctly labeled aggregated demand and aggregate supply graph, show the equilibrium price level and the real gross
domestic product. (1 points)
b) There is a debate in C
4. Use the concepts of consumer and producer surplus to explain Galinskys reasoning.
A potential buyer is more likely to bid when the price of a good is less than or equal to the price they
1. Before Congress decided to provide more funding for higher education there was more ad more
students attending college and graduating (Point A). Since Congress increased the funding for
education there is more capital goods in the short run (point C) t
2. The National Bureau of Economic Research (NBER) maintains the official chronology of past U.S.
business cycles. Go to its website at http:/www.nber.org/cycles/cyclesmain.html to answer the
a. How many business cycles have occurred
Factors That Shift Demand
Changes in the prices of related goods or services
If A and B are substitutes . . . . . . and the price of B rises, . . . . . . demand for A increases.
. . . and the price of B falls, . . . . . . demand for A decreases.
Week 12 Chapter 30
1.For each of the following transactions, what is the initial effect (increase or decrease) on M1? or M2?
a. You sell a few shares of stock and put the proceeds into your savings account.
Depositing the money into your sa
1. For each of the following situations, identify the type of unemployment and state the reason for choosing that type of
a. A Wisconsin construction worker cannot find work in the winter. Cyclical, when unemploym
1.The expenditures method of GDP calculation is the one most often used and easiest. From the
following list, please identify where it is counted (explain as necessary) consumption, government
spending, investment, or not count
1. Why do the MPC and MPS always equal 1?
The good people of Econland lived on an isolated island. One year, a stranger arrived and built a $1000
house. If the marginal propensity to consume was 75%, what happened to the GDP in Econland?
Please complete t
1. Identify how inflation affects each group in the following scenarios. Are the members helped or
hurt? Please explain your reasoning. (1 point each)
a. Banks extend many fixed-rate loans. Banks are hurt.Inflation rates will go up and they would end up
The reserve requirement for the banking system is 25%. Currently Kiekel National Bank has no excess
reserves. Then, Jason deposits $5000 in his checking account at Kiekel National.
a. Explain, without using a mathematical formula, why Jasons deposit can l
1. By reducing their herds, dairy farmers reduce the supply of cream, a leftward shift
of the supply curve for cream. As a result, the market price of cream rises, raisng the cost of producing
a unit of
Week 4 Problem Set
1. Before the price of sugar increased (Point A) more consumers bought the Jelly Beans. Since sugar is
complimentary to Jelly Beans this caused a shift in prices and the amount of consumers buying Jel
Week 9 Chapter Review
Aggregate demand is the total real quantity of goods and services demanded by an economy.
Aggregate supply is the total real quantity of goods and services produced in an economy. 4
determinates of aggrega
3. An economy is in long-run macroeconomic equilibrium when each of the following aggregate
demand shocks occurs. What kind of gapinflationary or recessionarywill the economy face after
the shock, and what type of fis
1. Ted and Nancy can produce the following amounts of fish and cheese (tons/hr).
A. Ted has the absolute advantage of Fish, Nancy of Cheese.
B. The problem is an output problem.
C. From the table we can see th