Page 1

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Chapter 1 Graph It 1 (See next page for Table 1–1)

6 US GDP Grow th Rate 4

2

0

-2

-4 1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Chart 1 PERCENTAGE CHANGE IN GDP

Crossword ACROSS

2. 6. 8. 9. 11.

CPI AS growth macroeconomics time

DOWN

1. 3. 4. 5. 7. 9.

potential inflation business long models output

5. 6. 7.

aggregate supply zero consumer price index

Fill-In Questions 1. 2. 3. 4.

growth theory aggregate supply/demand aggregate supply aggregate demand


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TABLE 11 Year

GDP

Percent change from previous year

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

8033.9 8015.1 8287.1 8523.4 8870.7 9093.7 9433.9 9854.3 10283.5 10779.8 11226.0 11347.2 11553.0 11840.7 12263.8 12638.4 12976.2 13228.9 13228.8 12880.6

-0.2 3.4 2.9 4.1 2.5 3.7 4.5 4.4 4.8 4.1 1.1 1.8 2.5 3.6 3.1 2.7 1.9 0.0 -2.6


True-False Questions 1. 2. 3. 4. 5.

True. FalseAS curve is upward sloping in the medium run. FalseAS curve is horizontal when prices do not change FalsePrices rise when actual output is above potential output. Falsenearly everything you will learn can be fit into this framework!


Chapter 2 Graph It 2 (See next page for Table 2–1)

10.0 7.5 5.0

CPI Inflat ion

2.5 0.0 -2.5

PPI Infla t ion

-5.0 -7.5 -10.0 1990

1992

1994

1996

Chart 21 CPI- AND PPI-BASED INFLATION

1998

2000

2002

2004

2006

2008


TABLE 21 Year

CPI

Percent change from previous year

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

130.7 136.2 140.3 144.5 148.2 152.4 156.9 160.5 163.0 166.6 172.2 177.0 179.9 184.0 188.9 195.3 201.6 207.3 215.2 214.5

4.2 3.0 3.0 2.6 2.8 2.9 2.3 1.5 2.2 3.4 2.8 1.6 2.3 2.7 3.4 3.2 2.9 3.8 -0.3

Crossword ACROSS

2. 6. 7. 9. 13. 14. 15. 17.

save gross exogenous endogenous CPI durable NDP (or NNP) income

DOWN

1. 3. 4. 5. 6. 8. 10. 11.

real adjusted investment consumers GNP accounting deflation exports


12. 16.

GDP final

Fill-In Questions 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

GDP depreciation factors of production; factor payments transfer payments gross private domestic investment exports; imports government budget deficit value added adjusted GNP price

True-False Questions 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Falseroughly 3/4 of all factor payments are paid to labor. True. True. False. True. Falsethe text discusses several reasons GDP (& GNP) are imperfect measures of welfare. Falsethe GDP deflator does not include import prices. True. True. Falsefraction of unemployed people actively seeking work.

Multiple-Choice Questions 1. c

2. b

3. b

4. d

5. d

6. d

7. d

8. a

9. d

10. d

Conceptual Problems 1. 2. 3. 4.

GDP would increase. This would not necessarily reflect a change in the physical output of the economy. Personal computers are an example. The trade deficit (–NX) must equal the budget deficit (G +TR – T). The government could decrease its spending, reduce the amount of money it gives out in the form of transfer payments, or increase taxes. An increase in savings without a corresponding increase in investment could also achieve this, as could an increase in exports without a corresponding increase in imports. Keep in mind, however, that it isn’t always easy to change just one of these things.

Technical Problems 1.

GDP = C + I + G = $1,000 + $100 + $300 = $1,400 Because the government’s budget is balanced and net exports are zero, saving equals investment: S = I = $100.


2.

We know that (S – I) = (G + TR – T) + NX. If we solve this equation for I, we find that investment is equal to savings minus the budget deficit + the trade deficit, or that investment equals $160: I = S – (G + TR – T) +(– NX ) = $200 – $50 + $10 = $160.

3.

Disposable Income = Total Income + Transfers – Taxes = Total Output + Transfers – Taxes. Total output (GDP) is given to us in the problem; the difference between taxes and transfers (TR – T) is not. We do know enough about the government’s budget deficit, however, to figure it out: (G + TR – T) = ($250 + TR – T) = $40, so TR – T = $40 – $250 = –$210. Disposable Income = GDP + TR – T = $1,000 – $210 = $790.

4.

We know that GDP = C + I + G + NX. This tells us that NX = GDP – C – I – G. GDP, C, and I are given to us; G is not. Luckily we can figure it out from the information that we have been given about the budget deficit (BD), and about the difference between transfers and taxes: BD = G + TR – T, so G = BD – (TR – T) = $120 – $20 = $100. NX = GDP – C – I – G = $500 – $350 – $150 – $100 = – $100.

5.

Inflation () is just the rate of change of the price level:  = (2 – 1.75)/2 = .125, or 12.5%.

6.

With 6% inflation our real interest rate would be 0%you would have 6% more money, but it would be worth 6% less. With 8% inflation you would actually have a negative returnyou would have 6% more money, but it would be worth 8% less, leaving you a real interest rate of approximately 2% (8 – 2).

Solution manual macroeconomics 11th edition dornbusch  

solution manual macroeconomics 11th edition dornbusch. Full file at http://testbank360.eu/solution-manual-macroeconomics-11th-edition-d...

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