funmommy
Dec 21, 2009, 12:43 PM
Answer each question in one or two paragraphs:
1. Define the term GDP and explain why some products are excluded from the GDP.
2. “It doesn’t pay to put all your eggs in one basket.” Why might a saver decide to take this advice to diversify his or her portfolio of assets?
3. Suppose that the government of the small nation of Stabilia is overturned by a military coup. (The new ruling junta restores the country’s old name of Instabilia.) What would you expect to happen to Instabilia’s real interest rate and real exchange rate?
Answer each question in one to four sentences each:
1. The IRS indicates that many Americans report their income from illegal sources. The IRS also estimates the total amount of illegal income earned in the United States. Why do you suppose we don’t include the income reported from illegal sources as part of GDP?
2. In 1950, the price of soft drinks was $0.10. In 1990, the price of soft drinks was $0.60. If the CPI in 1950 was 30 and the CPI in 1990 was 90, what was the change in the price of soft drinks from 1950 to 1990, measured in 1950 dollars?
3. How is knowledge a public good?
4. What is the financial system, and what is its purpose in the economy?
5. What are the three tools of monetary control available to the Fed?
6. What is it that ensures that in the long run, the quantity of money supplied by the Fed will equal the quantity of money demanded by the public?
7. What is meant by the term purchasing-power parity?
8. The foreign exchange market is the market where U.S. dollars and other currencies are bought and sold, and where exchange rates are determined. Explain how the exchange rate can be understood as the price of a dollar.
9. Why does unemployment rise in recessions?
10. Suppose the U.S. Army closes a base in the town of Paxville. What is the likely effect on the stores and other businesses in Paxville? What fiscal policy does this illustrate?
1. Define the term GDP and explain why some products are excluded from the GDP.
2. “It doesn’t pay to put all your eggs in one basket.” Why might a saver decide to take this advice to diversify his or her portfolio of assets?
3. Suppose that the government of the small nation of Stabilia is overturned by a military coup. (The new ruling junta restores the country’s old name of Instabilia.) What would you expect to happen to Instabilia’s real interest rate and real exchange rate?
Answer each question in one to four sentences each:
1. The IRS indicates that many Americans report their income from illegal sources. The IRS also estimates the total amount of illegal income earned in the United States. Why do you suppose we don’t include the income reported from illegal sources as part of GDP?
2. In 1950, the price of soft drinks was $0.10. In 1990, the price of soft drinks was $0.60. If the CPI in 1950 was 30 and the CPI in 1990 was 90, what was the change in the price of soft drinks from 1950 to 1990, measured in 1950 dollars?
3. How is knowledge a public good?
4. What is the financial system, and what is its purpose in the economy?
5. What are the three tools of monetary control available to the Fed?
6. What is it that ensures that in the long run, the quantity of money supplied by the Fed will equal the quantity of money demanded by the public?
7. What is meant by the term purchasing-power parity?
8. The foreign exchange market is the market where U.S. dollars and other currencies are bought and sold, and where exchange rates are determined. Explain how the exchange rate can be understood as the price of a dollar.
9. Why does unemployment rise in recessions?
10. Suppose the U.S. Army closes a base in the town of Paxville. What is the likely effect on the stores and other businesses in Paxville? What fiscal policy does this illustrate?