Archives: Solution Manual

Solution Solution S-217 1. Using a figure similar to Figure 15A-1, explain how the money market and the loan- able funds market react to a reduction in the money supply in the short run. 1. In the accompanying diagram, both […]

S-191 1. An economy has a marginal propensity to consume of 0.6, real GDP equals $500 billion, and the government collects 20% of GDP in taxes. If government purchas- es increase by $10 billion, show the rounds of increased spending […]

Solution 1. Complete the following table by calculating the value of the multiplier and identi- fying the change in Y* due to the change in autonomous spending. How does the value of the multiplier change with the marginal propensity to […]

Solution Solution 1. You have won the state lottery. There are two ways in which you can receive your prize. You can either have $1 million in cash now, or you can have $1.2 million that 1. If you choose […]

Solution Solution 1. Determine the amount of consumer surplus generated in each of the following situations. a. Leon goes to the clothing store to buy a new T-shirt, for which he is willing to pay 1. a. Leon’s consumer surplus […]

Solution 1. Study the four accompanying diagrams. Consider the following statements and indi- cate which diagram matches each statement. Which variable would appear on the horizontal and which on the vertical axis? In each of these statements, is the slope […]

Solution 1. How would the following transactions be categorized in the U.S. balance of payments accounts? Would they be entered in the current account (as a payment to or from a foreigner) or the financial account (as a sale of […]

Solution S-231 1. Since the crash of its stock market in 1989, the Japanese economy has seen little eco- nomic growth and some deflation. The accompanying table from the Organization for Economic Cooperation and Development (OECD) shows some key macroeconomic […]

Solution 1. Which of the following are not examples of a vicious cycle of deleveraging? Explain. a. Your university decides to sell several commercial buildings in the middle of town in order to upgrade buildings on campus. 1. a. This […]

Solution S-219 1. In the economy of Scottopia, policy makers want to lower the unemployment rate and raise real GDP by using monetary policy. Using the accompanying diagram, show why this policy will ultimately result in a higher aggregate price […]

Solution Solution S-207 1. Go to the FOMC page of the Federal Reserve Board’s website (www.federal reserve.gov/FOMC/) to find the statement issued after the most recent FOMC meeting. (Click on “Meeting calendars and information” and then click on the 1. […]

Solution 1. For each of the following transactions, what is the initial effect (increase or decrease) on M1? On M2? 1. a. Shares of stock are not a component of either M1 or M2, so holding fewer shares does not […]

Solution S-177 1. The accompanying diagram shows the current macroeconomic situation for the econ- omy of Albernia. You have been hired as an economic consultant to help the economy move to potential output, YP. SRAS Aggregate price level LRAS 1. […]

Solution Solution 1. A fall in the value of the dollar against other currencies makes U.S. final goods and services cheaper to foreigners even though the U.S. aggregate price level stays the same. As a result, foreigners demand more American […]

S-149 1. Due to an increase in consumer wealth, there is a $40 billion autonomous increase in consumer spending in the economies of Westlandia and Eastlandia. Assuming that the aggregate price level is constant, the interest rate is fixed in […]

Solution Solution S-135 1. Given the following information about the closed economy of Brittania, what is the level of investment spending and private savings, and what is the budget balance? What is the relationship among the three? Is national savings […]

Solution 1. The accompanying table shows data from the Penn World Table, Version 8.0, for real GDP per capita in 2005 U.S. dollars for Argentina, Ghana, South Korea, and the United States for 1960, 1970, 1980, 1990, 2000, and 2011. […]

Solution Solution 1. Each month, usually on the first Friday of the month, the Bureau of Labor Statistics releases the Employment Situation Summary for the previous month. Go to www.bls. gov and find the latest report. On the Bureau of […]

Solution 1. Below is a simplified circular-flow diagram for the economy of Micronia. (Note that there is no investment spending in Micronia.) a. What is the value of GDP in Micronia? b. What is the value of net exports? Imports […]

Solution Solution 1. Which of the following questions are relevant for the study of macroeconomics and which for microeconomics? a. How will Ms. Martin’s tips change when a large manufacturing plant near the res- taurant where she works closes? 1. […]

Solution 1. Both Canada and the United States produce lumber and footballs with constant opportunity costs. The United States can produce either 10 tons of lumber and no footballs, or 1,000 footballs and no lumber, or any combination in between. […]

S-61 1. In order to ingratiate himself with voters, the mayor of Gotham City decides to lower the price of taxi rides. Assume, for simplicity, that all taxi rides are the same distance and therefore cost the same. The accompanying […]

CHAPTER 3 SUPPLY AND DEMAND S-47 Solution 11. Fans of rock and rock stars often bemoan the high price of concert tickets. One superstar has argued that it isn’t worth hundreds, even thousands, of dollars to hear him and his […]

Solution 1. A survey indicated that chocolate is the most popular flavor of ice cream in America. For each of the following, indicate the possible effects on demand, supply, or both as well as equilibrium price and quantity of chocolate […]

Solution 1. Two important industries on the island of Bermuda are fishing and tourism. According to data from the Food and Agriculture Organization of the United Nations and the Bermuda Department of Statistics, in 2009 the 306 registered fishermen in […]

Solution 1. In each of the following situations, identify which of the twelve principles is at work. a. You choose to shop at the local discount store rather than paying a higher price for the same merchandise at the local […]