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Why are the Social Security and Medicare programs headed for trouble? When will the trouble begin? What solutions have been proposed?
Why did the federal budget go from a huge deficit in 1992 to a surplus in 1998? Explain the factors that contributed to the turnaround.
Burden of the Debt Suppose that budget deficits are financed to a considerable. How does this create a potential burden on future generations of Americans?
Interest on the Debt Why did interest payments on the national debt fall from 15.4 percent. Why is this percentage expected to increase in the future?
Distinguish between beneficial and adverse supply shocks. Do such shocks affect the short-run aggregate supply curve, long-run aggregate supply curve, or both?
Why is the long-run aggregate supply curve located at this output rather than below or above potential output?
Long-Run Adjustment In the long run, why does an actual price level that exceeds the expected price level lead to changes in the nominal wage?
What are some explanations for the coordination failures that prevent workers and employers from reaching agreements?
Output Gaps and Wage Flexibility What are some reasons why nominal wages may not fall during a recessionary gap?
Recessionary Gap What does a recessionary gap imply about the actual rate of unemployment relative to the natural rate?
Discuss some instances in your life when your actual production for short periods exceeded what you considered your potential production.
Potential Output Define the economy's potential output. What factors help determine potential output?
Short-Run Aggregate Supply In the short run, prices may rise faster than costs. How would such adjustments affect the slope of the aggregate supply curve?
What did classical economists assume about the flexibility of prices, wages, and interest rates? What disagreements did Keynes have with classical economists?
Explain how the steepness of the short-run aggregate supply curve affects the government's ability to use fiscal policy to change real GDP.
find one article about a country where real wages are growing and one where real wages are falling. Compare and contrast economic situations in the countries.
Read the article Inflation Should Be Lesser Worry for MPC. At the time of publication, what was the output gap in South Africa?
Why Is Unemployment So High in Con tinental Europe? How do they compare to the explanations reviewed in the chapter case study?
Supply Shocks Give an example of an adverse supply shock and illustrate graphically. Now do the same for a beneficial supply shock.
List three factors that can change the economy's potential output. What is the impact of shifts of the aggregate demand curve on potential output?
Read the editorial Why We Need a Second Stimulus. What are three reasons given for a second round of federal spending to follow the 2009 stimulus plan?
Also has a component that varies directly with the level of real GDP. How would this affect the size of the government purchase and net tax multipliers?
How could a tax cut achieve the same result? Would the tax cut have to be larger than the increase in government purchases? Why or why not?
Explain why it has this impact. What is the impact on the level of real GDP demanded, assuming the price level remains unchanged?
Explain the difference between the government purchases multiplier and the net tax multiplier. If the MPC falls, what happens to the tax multiplier?