| Question | Go to the OPEC Web site, www.opec.org, and find the current “OPEC basket price” of oil. By clicking on that amount, you will find the annual prices of oil for the past 5 years. By what percentage is the current price higher or lower than 5 years ago? Next, go to the Bureau of Economic Analysis Web site, www.bea.gov, and use the interactive feature to find U.S. real GDP for the past years. By what percentage is real GDP higher or lower than it was 5 years ago? What if, anything, can you conclude about the relationship between the price of oil and the level of real GDP in the United States? |
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| Subject | business-economics |
Order the answer to: Go to the OPEC Web site, www.opec.org, and find the
Order the answer to: In early 2001 investment spending sharply declined in the United
| Question | In early 2001 investment spending sharply declined in the United States. In the 2 months following the September 11, 2001, attacks on the United States, consumption also declined. Use AD-AS analysis to show the two impacts on real GDP. |
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| Subject | business-economics |
Order the answer to: Use shifts of the AD and AS curves to explain
| Question | Use shifts of the AD and AS curves to explain (a) The U.S. experience of strong economic growth, full employment, and price stability in the late 1990s and early 2000s. (b) How a strong negative wealth effect from, say, a precipitous drop in the stock market could cause a recession even though productivity is surging. |
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| Subject | business-economics |
Order the answer to: Explain: “Unemployment can be caused by a decrease of aggregate
| Question | Explain: “Unemployment can be caused by a decrease of aggregate demand or a decrease of aggregate supply.” In each case, specify the price-level outcomes. |
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| Subject | business-economics |
Order the answer to: Why does a reduction in aggregate demand reduce real output,
| Question | Why does a reduction in aggregate demand reduce real output, rather than the price level? Why might a full-strength multiplier apply to a decrease in aggregate demand? |
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| Subject | business-economics |
Order the answer to: Explain how an upsloping aggregate supply curve weakens the real
| Question | Explain how an upsloping aggregate supply curve weakens the realized multiplier effect. |
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| Subject | business-economics |
Order the answer to: Assume that (a) the price level is flexible upward but
| Question | Assume that (a) the price level is flexible upward but not downward and (b) the economy is currently operating at its full-employment output. Other things equal, how will each of the following affect the equilibrium price level and equilibrium level of real output in the short run? a. An increase in aggregate demand. b. A decrease in aggregate supply, with no change in aggregate demand. c. Equal increases in aggregate demand and aggregate supply. d. A decrease in aggregate demand. |
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| Subject | business-economics |
Order the answer to: What effects would each of the following have on aggregate
| Question | What effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output. Assume all other things remain constant. a. A widespread fear of depression on the part of consumers. b. A $2 increase in the excise tax on a pack of cigarettes. c. A reduction in interest rates at each price level. d. A major increase in Federal spending for health care. e. The expectation of rapid inflation. f. The complete disintegration of OPEC, causing oil prices to fall by one-half. g. A 10 percent reduction in personal income tax rates. h. A sizable increase in labor productivity (with no change in nominal wages). i. A 12 percent increase in nominal wages (with no change in productivity). j. Depreciation in the international value of the dollar. |
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| Subject | business-economics |
Order the answer to: Suppose that a hypothetical economy has the following relationsh
| Question | Suppose that a hypothetical economy has the following relationship between its real output and the input quantities necessary for producing that output: Input Quantity Real GDP 150.0 ……… $400 112.5 ……… 300 75.0 ……… 200 a. What is productivity in this economy? b. What is the per-unit cost of production if the price of each input unit is $2? c. Assume that the input price increases from $2 to $3 with no accompanying change in productivity. What is the new per-unit cost of production? In what direction would the $1 increase in input price push the economy’s aggregate supply curve? What effect would this shift of aggregate supply have on the price level and the level of real output? d. Suppose that the increase in input price does not occur but, instead, that productivity increases by 100 percent. What would be the new per-unit cost of production? What effect would this change in per-unit production cost have on the economy’s aggregate supply curve? What effect would this shift of aggregate supply have on the price level and the level of real output? |
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| Subject | business-economics |
Order the answer to: Suppose that the aggregate demand and aggregate supply schedules
| Question | a. Use these sets of data to graph the aggregate demand and aggregate supply curves. What is the equilibrium price level and the equilibrium level of real output in this hypothetical economy? Is the equilibrium real output also necessarily the full-employment real output? Explain. b. Why will a price level of 150 not be an equilibrium price level in this economy? Why not 250? c. Suppose that buyers desire to purchase $200 billion of extra real output at each price level. Sketch in the new aggregate demand curve as AD1. What factors might cause this change in aggregate demand? What is the new equilibrium price level and level of realoutput? |
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| Subject | business-economics |
