Principles of Macroeconomics

Structure: Choose and answer 10 out of 11 questions. All questions are weighted equally.
Rules: Online open-book assignment. No collaboration is allowed.

1. Due to a decrease in the global economic growth, the demand for oil decreases. Illustrate this event in a
   supply and demand graph. What will happen to the price of oil?
2. On June 8, the NBER announced a peak in monthly economic activity occurred in the U.S. economy in
   February 2020. Predict how the economic indicators of the unemployment and the inflation were moving
   following this peak of economic activity. Explain your answer.
3. Explain why each of the following transactions would or would not be counted in the GDP of the United
   States. Refer to the aggregate expenditure equation of GDP = C + I + G + (X – M) in your explanation.
   a. A Kenosha resident bought her neighbor’s house.
   b. A Chicago resident bought a bottle of California wine.
   c. A Korean automaker built a new production facility in Alabama.
4. A country’s real GDP per capita increased from $5,700 to $5,850 in one year.
   a. Calculate the country’s real GDP per capita growth rate.
   b. What can the government do to increase this growth rate? List three suggestions.
5. Table: Labor Market Data
   Adult population 500
   Number employed 350
   Number unemployed 40
   According to the above data:
   a. What is the labor force of this economy?
   b. What is the labor force participation rate?
   c. What is the unemployment rate?
6. Some economists argue that the official unemployment rate (U3) understates the true level of
   unemployment. Discuss this argument.
7. Table: Cost of Market Basket
   Price in 2018 Price in 2019
   Loaf of bread $2.00 $2.20
   Gallon of gasoline $3.00 $3.10
   Suppose 2018 is the base year. The market basket for purposes of constructing a price index consists of
   100 loaves of bread and 200 gallons of gasoline.
   a. What is the value of the price index in 2019, using 2018 as the base year?
   b. What is the rate of inflation between 2018 and 2019 in this economy?
8. Rob is looking to borrow money from a bank. He is told that the nominal rate is 7%; that includes
   expected inflation of 3% and a real interest rate of 4%. If there is unexpectedly high inflation of 5% over
   the term of this loan, will Rob be hurt or will the bank be hurt? Explain your answer.
9. Suppose that the marginal propensity to consume in an economy is equal to 0.6 and the level of
   investment spending increases by $100 this year. Trace out the total increase in real GDP, showing the
   increase in consumer spending for at least the second and third round of spending and the overall
   increase in real GDP.
10. Scenario: Autonomous consumption is $1,000, and planned investment spending is $500. The marginal
    propensity to consume is 0.6. Assumptions: no taxes, transfers, government purchases, and foreign trade.
    Solve for the income-expenditure equilibrium level of real GDP.
11. Figure: Aggregate Expenditures
    :
    a. What is the equilibrium level of real GDP in this economy?
    b. When real GDP is $300 billion, is unplanned inventory investment positive or negative?
    Given your answer, do you predict firms will increase or decrease output?
    APPLY FOR THIS CASE 
    Save the order and increase your rating! If you have any questio