Supply & Demand/PPF
What Rotunda Principle helps us to explain why quantity demanded decreases as price increases?
Incentives affect behavior.
What is the definition of GDP
The market value of final goods and services produced in a country in a year.
If 2014 is our base year, and in 2015 the GDP Deflator = 115, what was the inflation rate from 2014 to 2015?
15%
Who is not included in the relevant population?
Under 16, institutionalized, military
Who are the suppliers in the market for loanable funds?
Savers
What will happen to the equilibrium price and quantity of Samsung Galaxy S21s if the price of the iPhone 13 falls (assume these are substitutes).
P increases
Q decreases
In France, the average work week is shorter than that in the U.S. All else equal, this can cause France’s measured GDP to (overestimate/underestimate) its living standards.
underestimate
If the prices of homes go up by 5% and the prices of concert tickets rise by 10%, which will have the larger impact on the CPI? Why?
The price of homes, since it comprises a MUCH larger part of the typical consumer's budget.
What is our term for people who were looking for a job but have stopped looking?
Marginally attached workers.
If there is a huge wave of retirements (fewer people of prime working age) in an economy, what happens to the supply and demand graph for loanable funds?
Supply shifts left
Suppose the demand for the Samsung Galaxy S21 is given by QD = 600 - 2P and supply for the same is given by QS = P. What is the equilibrium price and quantity for a Samsung galaxy?
P = $200, Q = 200
If the United States imports $2 million dollars worth of bananas from Guatemala and consumes them, what happens to US GDP? What happens to Guatemala's GDP? (increase/decrease/stay the same)
US = stays the same
Guatemala = increases
What is the Fisher equation?
r = i - pi
(real interest rate = nominal interest rate - inflation rate)
If cyclical unemployment > 0, in what region of the PPF graph are we?
Underneath the curve--"inefficient" zone
Name three shift factors for the demand of loanable funds
1. Capital productivity
2. Investor confidence
3. Government borrowing
What principle explains why PPFs are bowed out?
Increasing marginal opportunity cost
In 2014, Spain's Nominal GDP was 266,227 thousand dollars and the GDP deflator was 100.8. What was Spain's Real GDP in 2014?
264,114
When unexpected inflation reduces the real value of loan repayments, which "problem of inflation" is that associated with?
wealth redistribution
What is the definition of U-6 unemployment?
(Unemployed + MAW + Part Time for economic reasons) / (Unemployed + MAW)
Consider two bonds, one with an AA rating and one with a BBB rating. Which one will have the higher interest rate?
The one with the BBB rating.
In one day, Angelo can make 6 sculptures or 2 paintings. Michael can make 10 sculptures or 5 paintings. Who should specialize in making what?
Micheal’s OC(painting): 2 sculptures. Angelo’s OC(painting): 3 sculptures → Micheal should specialize in painting and Angelo should specialize in sculptures.
Consider this data about the GDP of Spain:
2015 : Nom. GDP = 275,418; Real GDP = 273,372
2016: Nom. GDP = 286,116; Real GDP = 281,610
Assuming that the velocity of money remained constant, what was the rate of growth of the money supply in Spain in 2016.
3.9%
(%∆ real GDP growth = %∆Y = 3%,
%∆ price level growth = %∆P = 0.9%
%∆M + %∆V = %∆P + %∆Y)
Suppose a country's consumption = 5% bananas, 80% bread, and 15% soy beans. Here is a table of prices for these goods in two years:
2010: bananas = $1, bread = $4, soy beans = $2
2011: bananas = $1.50, bread = $3.50, soy beans = $2
Using the CPI, what is the inflation rate from 2010 to 2011.
Inflation rate = -11%
CPI in 2010 = 3.55
CPI in 2011 = 3.175
In a country with 100,000 in the relevant population, 80,000 are employed and 10,000 are unemployed. 3,000 are structurally unemployed and 1,000 are cyclically unemployed. What is the natural rate of unemployment in this country?
10%
Marge's Tomatoes puts out a bond with a par value of $10,000 and a price of $9,500. Suppose inflation is 2%. What is the real rate of return (real interest rate) on the Marge's Tomatoes bond?
(nominal rate of return = 5.3%)