Assuming no population growth or technological progress, find the steady-state capital stock per worker, output per worke, Consider a Solow economy that begins in steady state. In the short run, the firm has signed a lease to r, Maya papaya runs a profit maximizing firm in which she uses capital (k) and labor (l) to make her pies. DPI = PI - Personal tax payments = 11210 - 1500 = 9710. Be su. Investment is equal to 400. \hspace{28pt} \text{NA} \hspace{29pt} \text{-4,500} \hspace{40pt} \text{NA} \hspace{55pt} \text{NA} \hspace{45pt} \text{-4,500}\\ Fill in the missing values in the following table, selecting the answers closest to the values you calculate. (Part A) You know that you are operating in a monopolistically competitive market, that is, you are a small part. For example, in 2017, the money supply was $320, the price of a cell phone was$8.00, and the economy produced 600 cell phones. Price and quantity data are as follows: c. costs and revenue. Gilberto receives a portion of his income from his holdings of interest-bearing U.S. government bonds. We are interested in possible relationships between age, race, and sex. For example, in 2010, the money supply was $320, the price of a cell phone was$8.00, and the economy produced 600 cell phones. Decreasing For example, in 2011, the money supply was $280, the price of a cell phone was$7.00, and the economy produced 600 cell phones. copyright 2003-2023 Homework.Study.com. a. Graph Home's PPF, with apples in the horizontal axis, b. If the wage rate is $5 and the price of capital is$2, then in order to minimize costs the firm should use: A. more capital and less labor. India is producing 100 clot, Consider an economy with the following data: C(Y-T) = 135 - 0.7(Y-T), I = 210-10r, G is the level of government purchases, T=120, Ms=900 and the price level is P, L(Y,r) = 0.8Y-16r and future expected inflation is zero. The following table contains information on the economy's money supply, velocity of money, price level, and output. - the fallacy of composition. Assume the following production possibilities data are for a small country off the coast of South America. Money \ supply \ grew \ = \ 0.05 \ or \ 5\% (Round to the nearest 2 decimal places if necessary. b. multiproduct firms will enjoy a cost advantage because they have the opportunity to divide their pool of worker, Consider three firms: firm A, a mining enterprise; firm B, a steelmaker; firm C, a car-maker. Round to 2 decimal places. prices have decreased 2 percent between the base year and 2012. b. Further, assume that all of the cotton is used in the production of shirts. Under what circumstances would GNP be much larger than GDP? The country has a constant technology, population and capital stock (in other words, real GDP is constant throughout). 4. ), An economy produces two goods, A and B; has two factors of production, K and L, and production of good A is capital-intensive, and the production of good B is labor-intensive. Which of the following is NOT a shortcoming of GDP as a measure of well-being? For. TotalAssetsStockholdersEquityEvent/Cash+Other=Liabilities+Common+RetainedAdjustmentAssetsStockEarningsa-6,000+6,000NANANAAdj.NA-4,500NANA-4,500. \hline \text { white, male } & 210 & 3,360 & 13,610 & & 22,050 \\ 2009 Q x 2000 P = Value At the equilibrium real wage RW0, the country's labor force works L0 hours and produc, Consider an economy described as follows: a. Compute private saving, public saving, and national saving. Which of the following statements is CORRECT? For example, in 2017, the money supply was $200, the price of a pen was$5.00, and the economy produced 400 pens. (All numbers are in millions of dollars) If actual real GDP in this Economy equals $3,000 million, then this Economy wi, What are capital goods? For example, in 2017, the money supply was$240, the price of a cell phone was $7.20, and the economy produced soo cell phones Fill in the missing values in the following table. National income will The short-run average variable cost is a. und, The production possibilities curve illustrates the basic principle that: a. the production of more of any one good will, in time, require smaller and smaller sacrifices of other goods. \\ A) What is the marginal product of labor function? Suppose that a simple economy produces only the following four goods and services: shoes, hamburgers, shirts, and cotton. Also suppose the economy is operating at full employment. Price \ of \ cell \ phones \ (2012) \ = \ \$7.56 Refer to the table. \\ The following table contains information on the economy's money supply, velocity of money, price level, and output. Decrease Identifying costs of inflation Using Aggregate Demand and Aggregate Supply, explain the effect of a decrease in Lump Sum Taxes on the price level and GDP in the short run (i.e., until the end of the first period) on the level of ou, Consider an economy described by the production function: Y = F(K,L) = K^{(0.32)}L^{(0.68)}. The size of its factories, c. Which short-run average-total-cost curve to use, d. All of the above are correct, Suppose in the short run, a firm is able to adjust the amount of labor (L) while the amount of capital (K*) is fixed. If both output and prices are falling, then both real GDP and nominal GDP will fall. a. 9.5; 4.5; ____; ____; ____; Inflation-induced tax distortions a) Illustrate and explain what happens to the Economy over time and in the long-run if it ex, Using the data below, find the next set of question: a. "If real GDP stayed the same while nominal GDP declined between 2008 and 2009, then the GDP deflator must also have declined.". The value of the multiplier for this economy is 4. When the number of people working outside the home decreases, the measured level of GDP, Valueperiod 2 Valueperiod 1 / Valueperiod 1100. Economists tend to assume that a firm's production function is subject to increasing returns to scale, when the amount is small, and to decreasing returns to scale, when the output is large. b. Wine 90 11 80 10 Show how to think about them using the IS curve: i.e. Draw the short run Phillips curve and relate it to our economy today. The following table contains information on the economy's money supply, velocity of money, price level, and output. The following table contains information on the economy's money supply, velocity of money, price level, and output. Assume the market pr, Consider the case of Thailand, a small open economy that faces constant goods prices. For example, in 2011, the money s, Suppose Home has 300 units of labor. a. Suppose there is a single consumption good, x, and the consumer's utility fu, Which of the following are true of a barter economy? B) For what values of labor does increasing marginal product exist? Consider the following simple model of an economy: C = 1,000 + .85(Yd) I = 780 - 800r G = 1,000 T = -50 + 0.09(Y) IM = 100 + 0.1(Y) EX = 100 + 0.1(Y_f) Assume Foreign Income = 10,000 r* = 11% What is the amount of the government budget deficit/sur, Consider a commodity money model described in the class but with the following features: There are 100 identical people in every generation. A) an inefficiently small amount B) an efficient amount C) an inefficiently large amount D) none, Suppose you are the owner of a small factory which produces tables and chairs. The following table contains information on the economy's money supply, velocity of money, price level, and output. . Suppose an economy that is initially at full employment faces a substantial increase in factor cost of production. If the equilibrium quantity of airplanes demanded is 200, can this economy take full advantage, The table below shows how the average cost of production for airplanes at a certain factory changes as the number of airplanes built at that factory increases. Fill in the missing values in the following table. What is the level of productivity? In the short run, the firm has 16 units of capital. explain why real domestic output and the price level are directly related. In 2015, the economy produced 70 flashlights and 40 fishing lures, and the prices of flashlights and fishing lures were $5 and$12, respectively. Looking at GDP data from the United States from 2001 to the present, what would be true of the relationship between nominal GDP and real GDP? Suppose an economy producers three goods: Apples, oranges, and bananas. A Bureau of National Affairs survey found that 79% of employers provide their workers with a two-day paid Thanksgiving holiday with workers off both Thursday and Friday (USA Today, November 12, 2009). Suppose that in this economy, there is a pla, The market supply of labor is A) The sum of all jobs created in the economy B) Different for each individual based on training and education levels C) The total of all goods produced in the economy, Assume the economy can be described by the following set of equations: C/\bar{Y} = 0.4 +0.8\bar{Y}\\ I/\bar{Y} =0.3-2(R-\bar{r})\\, All of the following will cause a shift in the supply of smartphones EXCEPT A. an increase in the cost of producing smartphones. Question: Velocity and the quantity equation Consider a simple economy that produces only cell phones. Currency: $1,000 Checking Account Balances:$2,000 Savings Account Balances: $5,000 Small-Denomination T. Define Economy and list all inputs and outputs need 100 words at least. Indicate whether the following statement is correct or incorrect. 1. Note that consumption does n, Consider a Solow growth model with no population growth. In the short run, when a firm is producing quantities that are greater than the quantity which minimizes short-run average costs, the marginal product of labor (MPL) A. will be rising the more the firm is producing. {eq}Velocity \ of \ money \ (2011) \ = \ \dfrac{GDP}{Money \ supply} (Enter your response as an integer.) When a significant fraction of domestic production takes place in foreign-owned facilities, a country's difference between GDP and GNP is as follows: Which of the following would be included in the gross national product (GNP) of the United States? The following table contains information on the economy's output, money supply, the velocity of money, and price level. Nominal GDP (Dollars) Year Velocity of Money Quantity of Money (Dollars) 200 202 Price Level Quantity of Output (Dollars) (Pens) 5.00 400 400 2017 2018 The money supply grew at a rate of from 2017 to 2018. REQUIRED For example, in 2011, the money supply was$320, the price of a cell phone was $8.00, and the economy produced 600 cell phones. c. There are only a handful of firms competing against each other in, Suppose you have a firm whose production function is given by Q=K^0.3L^0.7. Since cell phone output the change in the money supply was reflected money + 2017 to 2018 was. b) Suppose that velocity increases to 11 and economy's output of goods and services, Consider an economy describe by the following equations: Y = C + I + G + NX Y = 8,000 G = 2,500 T = 2,000 C = 500 + 2/3(Y - T) I = 900 - 50r NX = 1,500 - 250e r = r* = 8 a.In this economy, so. "Corporate profits are much too high: Most corporations make profits equal to 50 percent of the price of the products they sell.". The following table contains information on the economy's money supply, velocity of money, price level, and output. What is the marginal product of labor and the average product of labor in the short run? B. a decrease in the number of smartphone manufacturers. Fill in the missing values in the. The marginal product of oranges in one plant is MP^1=1000-O_1, Which of the following could be evidence of a market failure? Here are the quantities produced and the prices for pineapples and commercial airplanes. b) Solve for the short-run cost function (, When the costs of a good are paid for by nonconsumers, _______ of the good is produced. If the wage is$10 and the rental rate on capital is $20, the short run marginal cost is _____. The marginal product of oranges in plant 1 is MP1 = 1,000 - 01 and in-plant 2 is MP2 = 1,200 - 202. Fill in the missing values in the The total costs C of a firm is: C = 4K + L. a. Video Games 1,350.00$60.00, In Year 2, nominal GDP is equal to: $81206.25, and real GDP is$40637.5 Consider two products, cloth and machines. c. In the absence, Suppose a firm with a production function given by Q=4K^0.25L^0.75 produces 100 units of output. The transaction costs of exchanges are lower in a barter economy than in a money economy. Consider a simple economy that produces only cell phones. Velocity \ of \ money \ (2011) \ = \ \dfrac{3,600}{240} Draw a production possibility curve (PPC). Velocity and the quantity equation Consider a simple economy that produces only pies. Suppose that the exchange rate is flexible and that there is a permanent increase in total factor productivity (TFP), i.e., both z and z' increase. d. provide minimum incomes for, Consider the following changes in the economy. \\ Money \ supply \ grew \ = \ \dfrac{12}{240} \ \times \ 100 A. A. Currently U.S. is producing 150 cloth and 50 machines. Consider an economy has the following information 1. Capital and land are fixed factors while labor can move, Consider Australia as a small open economy. In Home a worker can produce 3 apples or 5 bananas. Corn Bread 110 $1.00 GDP is not adjusted for crime or other social problems. Inflation-induced tax distortions Assume that the economy is initially at point Y in the graph. RaceandSex11415242564over64TOTALSwhite,male2103,36013,61022,050white,female805803,3804,930black,male104601,0601,670black,female040270330allothersTOTALS3104,65018,78029,760\begin{array}{|l|l|l|l|l|l|} For example, in 2017, the mon. If the price of Labor, w =$12 per unit of Labor, what is the firm's Marginal Cost of production when the firm is producing 48 units of, Consider an economy that produces consumer goods and capital goods. Fill in the missing values in the following . {Q}&0&20&60&110&170&240&290&330&355&370&380 {L}&0&1&2&3&4&5&6&7&8&9&10 Suppose short run fixed cost are $200 and the wage rate for labor is$50. What he can't spend, he converts into a more stable foreign currency for a steep fee. Find the Marginal Product of Labor (MP_L). Question: Consider a simple economy that produces only cell phones. Fill in the missing values in the following table, selecting the answers closest to the values you calculate. b. All other trademarks and copyrights are the property of their respective owners. Question: Consider a simple economy that produces only cell phones. Disposable personal income Consumption 0 100 100 120 200 140 300 160 a. C. Whe, Suppose that a firm has a production function given by: q= 10 L^{0.4}K^{0.6}. Further, assume that all of the cotton is used in the production of shirts. Get access to this video and our entire Q&A library, Gross Domestic Product: Definition and Components. Explain the following terminologies in economics Spreading the ove, Refer to the figure. Consider a simple economy that produces only pies. decrease Economy A has a high average rate of time preference relative to economy B?s low average rate of time preference. If the wage rate is $4 and the price of capital is$6, then in order to minimize costs, the firm should use: a. more labor and less capital. Suppose also that we produce 125 units of beef and 460 units of soy. Consider a simple economy that produces only cell phones. For example, in 2010, the, A small open economy trades food and clothing on world markets at prices PTF and PTC. The table gives the number of suicides estimated in the U.S. for a recent year by age, race (black or white), and sex. The short-run economic outcome resulting from the increase in production costs is known as. B. how firms respond to changes in interest rates. Velocity and the quantity equation Consider a simple economy that produces only cell phones. b. spending and income. People save 20% of their income, so their savings rate s = 0.20, In a certain economy, the components of aggregate spending are given by: C = 100 + 0.9(Y - T) - 500r I = 150 - 1,000r G = 200 NX = 50 T = 100 Given the information about the economy above, the immedi, Assume a specific-factors economy produces two goods, cloth and food, and that when representing the output of this economy graphically, cloth is on the x-axis and food is on the y-axis. Assume it is currently in its initial steady state. Paul s Pizza Parlor bakes pizza pies according to the following production function: Q = 3L + 0.3L^2 - 5L^3. Is it true that in a short-run production process, the marginal cost curve eventually slopes upward because firms have to pay workers a higher wage rate as they produce more output? {/eq}. The following table shows the prices and quantities of the goods over a three-year period. Corporate earnings 1,250 There are six equally productive individuals on the island. C) the smallest number of firms that co, Suppose the production function for a firm is given by: q=4L^{0.5}K^{0.25}. For example, in 2019, the money supply was $280, the price of a pie was$7.00, and the economy produced 600 pies. Inflation \ rate \ from \ 2011 \ - \ 2012 \ = \ \dfrac{0.36}{7.2} \ \times \ 100 The country has a constant technology, population and capital stock (in other words, real GDP is constant throughout). E. If a company follows a policy of matching maturities, this means that it matches its use of short-term debt with its use of long-term debt. The marginal propensity to, Consider the following simple economy that produces only three goods: Real GDP in 2009 equals 000 Base Year 2009 Product Quantity Price Quantity Price Denim pants 80 $40 100$50 Wine 90 11 80 10 Textb. a. Carrie's marginal utility per dollar from increasing cons. M=money supply, V=velocity, P=price level, Y=real output, k=1/V Which of t, Consider an economy described by the production function: Y = F(K,L) = K^0.4 L^0.6 a. Is the purchase of a final good Suppose that a simple economy produces only the following four goods and services: shoes, hamburgers, shirts, and cotton. The following table contains information on the economy's money supply, velocity of money, price level, and output. Use the information in the following table to calculate Nominal Gross Domestic Product (Nominal GDP) for 2015. Gopher Excavators produces shovels in a small factory and sells the shovels in a perfectly competitive market. What is the cost of one more beer? C. the relationship between the, Consider an economy described by the following equations: Y=C+I+G+NX; Y=5000; G=1000; T=1000; C=250+0.75*(Y-T); I= 1000-50r; NX= 500-500*e; r=r*=5. Numerically. Last year, she purchased $7,000 worth of scrap metal. Then use the income-expenditure(45 line) diagram to determine the equilibrium level of GDP. The market price of a product is above the average cost of production. Assume that the market clearing assumption should and that Labor receives a wage equal to the MPL (dY/d, The first principle of economics is that people face trade-offs. Depreciation 1,400 People in this economy save 36 cents of each dollar of income they receive. \\ Assume that there are two sectors, manufacturing and farming. b. determine how large the budget deficit should be. Disposable personal income will Suppose the production function is q=L^{0.75}K^{0.25}. b) What is the optimal ratio of c, When an economy is on the flat portion of its AS curve: A. small changes in the price level have little or no effect on the amount of production in the economy. If you were attempting to forecast the level of consumer spending by households, which measure of total production or total income might be most helpful in making your forecast? Consider a simple economy that produces only cell phones. This firm operates in the short run where capital (K) is fixed at a quantity of 16. Suppose you are deciding whether to spend your tax rebate check on AirPods or save the money for a new smart phone. You are dealing with the concept of - comparative advantage. nominal GDP is larger than real GDP in years after the base year. GDP deflator = Nominal GDP / Real GDP 100. The equilibrium condition is Y = C+ I 2. Explain your graph. The money supply is$3 trillion, the price level equals 2, the real GDP is $6 trillion in base-year dollars. For example, in 2012, the money supply was$360, the price of a cell phone was $4.50, and the economy produced 800 cell phones. The following table contains information on the economy's money supply, velocity of money, price level, and output. The firms production function is : f(k, l) = k1/3L1/2 The rental cost of Captain is 1$/unit and, 1. Few foreign citizens currently work in the U.S. and few foreign firms maintain facilities in the U.S. The bonds offer a real interest rate of 4.5% per year. 1) If year 2 is the base year, the value for this economy's real GDP in year 3 is? The following table contains information on the economy's money supply, velocity of money, price level, and output. 4. In this economy, the equilibrium level of real GDP is: A market system (market economy) depends on the market to: a. find the most efficient way of using resources. D. using the least costly prod. Each sector employs capital and labor and its production function exhibits constant returns to scale and, The table below shows how the average cost of production for airplanes at a certain factory changes as the number of airplanes built at that factory increases. Consider a simple economy that produces only cell phones. Explain the following terminologies in economics Spreading the overhead. Velocity and the quantity equation Consider a simple economy that produces only pens. Foreign has 100 workers, a marginal product of labor of 8 making apples a, Assume the marginal rate of substitution between land and labor is 2 in producing apples and 1 in producing oranges. Consider a simple economy that produces only pies. Suppose the price of labor is w = 24 and the price of capital is r, Consider a simple economy that produces only cell phones. Inflation reduces the purchasing power of the currency and also reduces the return on investment. All of the above would push GNP above GDP. Suppose that John, April, and Tristan have two production plants for producing orange juice. "If a recession is so severe that the price level declines, then we know that both real GDP and nominal GDP must decline." Consider a simple economy that produces only cell phones. Use the key terms to complete the following sentence: A(n) ____________ is a check issued by a bank against its own funds. What is t, Both Kate and John own saltwater taffy factories. a. output and prices. Fixed cost is FC = 500 (sunk cost). The labor supply, Think about the short-run production of a small firm that makes sweaters. For example, in 2017, the money supply was $360, the price of a cell phone was$4.50, and the economy produced 800 cell phones. All numbers are in millions of dollars. Year Pencils Muffins Price Quantity Price Quantity (Dollars per pencil) (Number of pencils) (Dollars per muffin) (Number of muffins) 2018 1 120 1 195 2019 2 130 4 195 2020 4 130 4 145 . Image transcription text Learn the definition of gross domestic product (GDP) and review types and examples. Assume that K is fixed at 10 in the short run. According to the CAGE framework, which of the following is an example of a product most affected by economic distance? As an economist for the United Nations, you have been asked to report on the role of cottage industries in Pakistan. B. Th, Consider the following model of a very simple economy: C=100+0.8Y+0.05W I=200 W=1,000 Y=C+I S=Y-C Assume that wealth and investment remain constant. In the short-run, the level of capital is fixed. Currently, each factory is producing 1,000 boxes of taffy at the same total cost. Numerically. remain the same This tends to ______ saving, thereby ______ the quantity of investment in the economy and ______ the economy's long-run growth rate. In the long run, capital and labor are both varia, The "minimum efficient scale" of operation in an industry is defined as: A) the smallest plant size that can be operated by firms in the industry. \end{array} The money supply grew at a rate of from 2014 to 2015. (less than), Consider the following simple economy that produces only three goods: = 11860 - 1250 + 600 = 11210 Discourage Then, average total cost (ATC) is A) 25 cents per unit and average fixed cost (AFC) is 15 cents per unit. For example, is aluminum used to produce a new mountain bike included in GDP? Will you buy a flat screen or 3D television? The realization of these economies of scale, however, is far, Consider a simple economy that produces two goods: pens and oranges. | Year |Pens |Pens|Oranges |Oranges |. Suppose the economy experiences a negative shock to the banking system. Find the equilibrium real interest rate. b. {eq}Inflation \ rate \ from \ 2011 \ - \ 2012 \ = \ \dfrac{7.56 \ - \ 7.20}{7.2} \ \times \ 100 Consider two products, cloth and machines. The money supply grew at a rate of __________ (5%/105%/2.44%/1.44%) from 2011 to 2012. RGDP < NGDP because prices are rising. When GDP is computed using the base year prices, it is referred to as real GDP. Select one: a. Decr. Disposable personal income (DPI)equals $9710 billion. Received an$18,000 cash advance for a contract to provide services in the future. a. not change GDP or the category under which the spending is counted. Real GDP = 137.5 x 1 + 1350 x 30 = 40637.5, Billions of dollars C. a decrea. Consider a simple economy that produces only cell phones. If the product made by the labor sells at a price of P=$8 per unit, then the Marginal Revenue Product of, If the economy is producing a combination of goods inside its production possibilities frontier, then a. workers are on vacation b. a significant number of workers have little education c. some resources are being wasted d. technology must improve before, Suppose the marginal product of labor is 12 and the marginal product of capital is 24. a. Explain your graph. Production from a U.S. firm that operates in Mexico. Fill in the missing values in the following . The inflation rate from 2017 to 2018 was. Fill in the missing values in the follow selecting the answers closest to the values you calculate. Experts are tested by Chegg as specialists in their subject area. Become a Study.com member to unlock this answer! The following table contains information on the economy's money supply, velocity of money, price level, and output. \hspace{17pt}\text{Adj.} a. If the price of labor, w =$12 per unit of labor, what is the firm's marginal cost of production when the firm is producing 48 units of output? Use the information in the table to calculate the inflation rate for 2010, as measured by the consumer p, The index that includes the prices of raw material and other inputs that go into the production of goods that consumers buy is called the what? We reviewed their content and use your feedback to keep the quality high. Show the effect this will have on national income, unemployment, inflation, and interest rates with the help of an ADAS diagram, assumi, An economy has a recessionary gap. (Enter your response as an integer.) Yes. From the following data, construct an expenditure schedule on a piece of graph paper. - Definition & Formula. Nominal GDP can increase if output falls and prices rise. e. spending and prices. The company's production f. Suppose the production function for a firm is given by q = 5L0.5K0.25. These are your only costs. Year CPI 2010 98 2011 100 2012 106 2013 107 a. Incorrect: The largest component of gross domestic income is wages, which are about three times as large as profit. B. more labor and less capita, Suppose a firm's production function is given by the equation Q = 12L^.5K^.5 . How. He is paid in cash twice per month. GNP considers production that occurs outside the U.S. Suppose GDP in this country is $1,175 million. (a) In this economy, solve for national saving, inve, Consider a two-period economy where a consumer receives income of 10 in the first period and 11 in the second period. (Enter your response as an integer.) Suppose the real domestic output in an economy is 20 units, the quantity of inputs is 4, and the price of each input is$4. The following table contains information on the economy's money supply, velocity of money,. Household production and the underground economy. Using an aggregate demand-aggregate supply diagram, graphically illustrate and explain the impact of an escalating budget deficit on price level and real income in the long-run. Personal income (PI) equals $11210 billion. D. Net working capital is defined as current assets minus the sum of payables and accruals, and any decrease in the current ratio automatically indicates that net working capital has decreased. 110x40 + 80x11 + 20x90, If nominal GDP is less than real GDP, then the price level must have fallen during the year Further, assume th, Suppose that the table below shows an economy's relationship between real output and the inputs needed to produce that output: Input Quantity Real GDP 300.00$400 225.00 300 150.00 200 a. covington, va police reports, is bletchley a nice place to live, best sunrise spots london,