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Macro HW Set 2

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Macro HW Set 2                                                        Name: ___________________________

 

  1. Fill in the following chart on GDP/capita and growth rates.

GDP: http://www.indexmundi.com/g/r.aspx?v=67

Growth: http://www.indexmundi.com/g/r.aspx?t=0&v=66&l=en

 

Rank Country GDP/Capita Rank Country Growth Approximate Doubling time
1   1    
  USA     USA    
  Canada     Canada    
  Mexico     Mexico    
  China     China    
  India     India    
226 (last)   216(last)    

 

  1. On the following graph, approximate when historically the US had a GDP/capita of what China, Mexico, and Canada have today (from the above question).

 

 

  1. Suppose the economy in the graph doubles its capital stock (per worker) from the initial point k0. Then GDP/capita _______ all else constant.

 

  1. more than doubles
  2. doubles
  3. less than doubles

 

  1. Show the effect on the graph of technological improvement of the capital stock (ceteris paribus).

 

  1. Show the effect of a war destroying half of the capital stock (k0) on the graph(ceteris paribus).

 

  1. Explain why the graph is downward sloping (growth on the y-axis, and initial GDP on the x).

 

 

 

 

 

 

 

 

 

  1. What is a key factor in leading to a relationship between historical GDP and modern growth rates (as seen in the above graph)?

 

 

 

 

In Poverty Income Global Percent richer than
1 Person under 65 $12,500  
2 People under 65 $16,000  
Your income after college
  $40,000  
$60,000  
  1. Given in the table is the rough amount of income in the U.S. is considered to be in poverty. Look up the what global percentile it is (in other words only this percent of people globally are richer than you). If you get a job after college with the given wages, fill in what percentile your income is in.

 

Income                        http://www.globalrichlist.com/

 

 

  1. Look up any stock and record the following:
Date looked up  
Company  
Ticker Symbol  
Price  
Daily change (%)  
Volume  
Dividend  
Dow change (%)  

 

  1. Fill in the following for US Treasury Bonds. http://finance.yahoo.com/bonds
Maturity Yield
3 Month  
6 Month  
2 Year  
3 Year  
5 Year  
10 Year  
30 Year  

 

  1. For question 10, why should you expect the yield to increase for longer bond maturities before you looked up the data?

 

 

  1. On the following graph of US Loanable Funds draw the following:

 

  1. The initial supply and demand for loanable funds
  2. The shock if South East Asians move funds to the US from their countries
  3. The shock if the US government runs large deficits

 

 

  1. Would one be more or less likely to buy AT&T bonds in the following situations:

 

  1. More/Less AT&T bonds become more liquid.
  2. More/Less You expect stock prices to fall.
  3. More/Less You expect gold to appreciate in value, relative to other investments.
  4. More/Less Your wealth increases.
  5. More/Less The bond market becomes more volatile.

 

  1. What is an advantage of a mutual fund over buying stock in a single company?

 

 

 

 

 

  1. If an expert stock analyst tells you a stock will go up 10% in the next month, why should you be skeptical of the claim?

 

 

  1. Explain how inequality has simultaneously increased and decreased over the past few decades.

 

 

 

 

 

  1. When a firm uses the government to increase profits, instead of making a better product, this is called:

 

  1. Rent Seeking
  2. Concentrated Benefits Diffused Costs
  3. Insider-Outsider
  4. Bootleggers and Baptists
  5. Regulation Persistence
  6. Freeriding

 

  1. When opposing sides each agree on the same regulation, this is called:

 

  1. Rent Seeking
  2. Concentrated Benefits Diffused Costs
  3. Insider-Outsider
  4. Bootleggers and Baptists
  5. Regulation Persistence
  6. Freeriding

 

  1. If you benefit from other’s work and therefore don’t contribute leading to lower levels of output, this is called:

 

  1. Rent Seeking
  2. Concentrated Benefits Diffused Costs
  3. Insider-Outsider
  4. Bootleggers and Baptists
  5. Regulation Persistence
  6. Freeriding

 

  1. Small special interest groups tend to do better at getting legislation passed than larger unorganized groups. This is because of:

 

  1. Rent Seeking
  2. Concentrated Benefits Diffused Costs
  3. Insider-Outsider
  4. Bootleggers and Baptists
  5. Regulation Persistence
  6. Freeriding

 

 

  1. If your marginal propensity to consume is 0.75 and you get a $10,000 windfall, how much do you save?

 

 

 

  1. If the spending multiplier is 1.3 and consumer spending increases by $1 billion, how much does overall spending go up (including the initial billion)?

 

 

 

  1. In the graph, what does the $20,000 represent on the Y-axis?

 

 

 

 

  1. If you have $50,000 in disposable income, how much do you spend?

 

 

 

  1. What is the MPC in this graph?

 

 

 

  1. If you spend $50,000, how much disposable income do you have?

 

 

 

  1. Suppose you discover that you have a rich uncle that will give you millions in the near future. Draw the appropriate shift in autonomous spending on the graph.

 

 

28A. On the following graph, draw the following:

  1. Initial AD, SRAS, LRAS
  2. Appropriately labeled axes
  3. Equilibrium inflation and appropriately labeled growth rate
  4. A negative AD shock, call this AD2
  5. The short run equilibrium inflation and growth; label them π2 and g2

 

 

 

 

28B. For part (e), what will be unemployment relative to the natural rate? What will happen to wages?

 

 

 

 

  1. On the following graph, draw the following:
  2. Initial AD, SRAS, LRAS
  3. Appropriately labeled axes
  4. Equilibrium inflation and appropriately labeled growth rate
  5. A positive SRAS shock, call this SRAS2
  6. The short run equilibrium inflation and growth; label them π2 and g2

 

 

 

 

 

 

  1. For 29e, what will be unemployment relative to the natural rate? What will happen to wages?

 

 

  1. On the following graph, draw the following:
  2. Initial AD, SRAS, LRAS
  3. Appropriately labeled axes
  4. Equilibrium inflation and appropriately labeled growth rate
  5. A negative SRAS shock, call this SRAS2
  6. The short run equilibrium inflation and growth; label them π2 and g2
  7. The Long Run AS shifting to the new short run equilibrium

 

 

 

 

 

  1. For 31e, what will be unemployment relative to the natural rate? What will happen to wages?

 

 

 

  1. For 31f, what will be unemployment relative to the natural rate?

 

 

 

  1. On the graph, circle when you should expect unemployment to be higher than the natural rate.

 

 

  1. Via this link https://www.cbo.gov/publication/53624fill in the following table, in billions of dollars. The rows below have identical names as rows on the chart on the BEA table.

 

2017 Fiscal Policy in Billions or trillions
Revenues  
Spending  
Calculate the difference between Revenue and Spending  
Social Security  
Medicare + Medicaid  

 

  1. What was the federal debt at the end of 2017 (you can round to one decimal point in trillions)? Note: you must mouse over on the graph to get the 2017 Q4 number. http://research.stlouisfed.org/fred2/series/GFDEBTN?cid=5

 

 

 

  1. Why is the number Revenue/Spending difference calculated from question 35different from question 36?

 

 

 

 

  1. The US federal budget for 2014 is provided here http://www.gpo.gov/fdsys/pkg/BUDGET-2014-BUD/pdf/BUDGET-2014-BUD.pdfand contains spending data for 2012. Look up the Outlays of each of the following in Table S–4. Adjusted Baseline by Category. For the percent of the budget, use the number “Total Expenditures” from question 35. Be sure to have the units match up in calculating the percent.

 

2012 Total spending % of Budget
Outlays Defense    
Outlays, Medicare + Medicaid    
Outlays, Social Security    

 

 

  1. On the following graph of US Loanable Funds draw the following:

 

  1. The initial supply and demand for loanable funds
  2. The shock if the US government suddenly vastly expands its deficit

 

 

  1. What will happen to the interest rate on bonds, given the above?

 

 

 

 

  1. The opposite of (40) is what happened when the US recently has increased its federal deficit. Using supply and demand, what could account for this?

 

 

 

 

 

  1. Valerie Ramey gives an overview of estimates on the fiscal multiplier http://weber.ucsd.edu/~vramey/research/JEL_Fiscal_14June2011.pdf. (Note: this is just a link; you don’t have to look anything up.) Fill in the following chart for an exogenous increase of $1 billion of government spending with the given multipliers.
Multiplier Effect on GDP
-0.3  
0.3  
1.5  
3.6  

 

  1. If you are a politician, which multiplier do you prefer?
  2. What is the Monetary Base of the US? http://research.stlouisfed.org/fred2/series/AMBSL?cid=124

 

 

  1. What has happened to the Money Base since late 2008/early 2009?

 

 

 

  1. How much US Federal Debt does the Fed hold? http://research.stlouisfed.org/fred2/series/TREAST?cid=32218

 

 

  1. What is the value of mortgages that the Fed owns? http://research.stlouisfed.org/fred2/series/MBST?cid=32218

 

 

  1. What is the most recent discount lending? http://research.stlouisfed.org/fred2/series/DISCBORR?cid=122

 

 

  1. What was the 2012 level of the Fed Funds Rate? http://www.federalreserve.gov/monetarypolicy/openmarket.htm

 

 

  1. When was the last time the FFR was different from question 51?

 

 

 

  1. Suppose you own a bank. Fill in the following chart of your Reserve Requirement percentages based off of your liabilities. http://www.federalreserve.gov/monetarypolicy/reservereq.htm
Liabilities Required Reserves (percent)
$5 million  
$50 million  
$500 million  

 

 

  1. Suppose you have an account at Bank of America and want to get a CD, of the “Fixed Term CD/IRA Products” kind. What rate (%) do you get for a CD of 10 years? https://www.bankofamerica.com/deposits/bank-account-interest-rates.go

 

 

 

  1. On the following graph of money draw the following:

 

  1. The initial supply and demand for money
  2. The shock if the Fed engages in an Open Market Sale
  3. Show the final interest rate

 

 

  1. On the following graph of money draw the following:

 

  1. The initial supply and demand for money
  2. The shock if the Fed increases Reserve Requirements
  3. Show the final interest rate

 

 

 

  1. On the following graph, draw the following:
  2. Initial AD, SRAS, LRAS
  3. Appropriately labeled axes
  4. Equilibrium inflation and appropriately labeled growth rate
  5. The shock of expansionary MP of the Fed
  6. The short run equilibrium inflation and growth; label them π2 and g2

 

 

 

 

 

 

 

  1. For 55e, what will be unemployment relative to the natural rate? What will happen to wages?

 

 

 

  1. Draw the effect of the change of wages of question 56 on the graph for question 55 This can be viewed as a long run adjustment.

 

  1. Fill in the following chart of the effects of an increase of the MS in the short and long run relative to 55a.

(write in up, down or same)

Increase of MS Short Run (question 55e) Long Run (question 57)
Inflation    
Growth    

 

 

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