09 Apr Accept the fact that a high proportion of recent college graduates as a result from the Covid economic downturn decides to stay in school seeking advanced degrees, rather than confront the challenge of landing a good job in a period of generally high unemployment

 

1) Accept the fact that a high proportion of recent college graduates as a result from the Covid economic downturn decides to stay in school seeking advanced degrees, rather than confront the challenge of landing a good job in a period of generally high unemployment. What is the direct impact of this behavior on the unemployment rate? In the longer term, what indirect impacts might there be on the unemployment rate?

 

2) Most macroeconomists agree that sustained economic growth over extended time periods is more important than the economy’s short-term fluctuations. Why, then, do macroeconomists and policymakers, and the general public care so much about the business cycle and actions to reduce it?

 

3) Prior to the Covid 19 downturn in 2010 we recovered from a three-year recession. During the recession despite an economic growth rate well above zero, unemployment showed little sign of declining much below ten percent. Focusing on the definition of the unemployment rate, explain how it is possible to have positive economic growth without declining unemployment. Do you expect a similar result relative to our Covid 19 economic downturn and recovery?

 

4) Why do government budget deficits and continued government borrowing  matter?

 

5) Describe how speculation might have macroeconomic consequences that justify government prohibition or regulation . Since with speculation people seek to make money by merely buying and selling pre-existing things, rather than by making new or better or, at least, more things.

 

6) Since Savings = Investment people in the United States, save less than is good for themselves and for the economy as a whole how might policymakers encourage more saving?

 

 

7) A firm whose final output (and sales) in a particular year has a value of $1,200. To produce these goods, the firm used $500 worth of intermediate goods it had purchased in previous years plus $200 worth of newly purchased intermediate goods. In the subsequent year, this same firm again sells $1,200 worth of final goods, but in this year has purchased $700 worth of intermediate goods, of which $100 is not used in current production but, rather, added to the firm’s inventory. For each of these two years, calculate the value added by this firm. For each of these two years, calculate the contribution of this firm to the economy’s GDP.

 

 

8) State the fundamental identity of national income accounting. Why is it not possible for this identity to be violated?

 

9) In what ways is the investment component of GDP distinct from the other GDP components?

 

 

10) If labor productivity in one economy is higher than it is in some other economy does that mean that the first economy is using its productive resources better than the second?

 

 

11) If laws are passed that reduce barriers to international financial transactions it should cause an increase in the economy’s supply of capital. Explain, step-by-step, how the economy adjusts to arrive at a new long-run equilibrium.

 

 

12) Assume that a technological advance raises total factor productivity (A). Explain, step-by-step, how the economy adjusts to arrive at a new long-run equilibrium.

 

13) With the recent pandemic financial turmoil has caused many people to increase saving and to prefer assets that are perceived to be relatively safe and liquid. What are the likely effects on M1 and M2?

 

14) Credit cards are a popular means of payment. Why are credit card accounts not included in M1 or M2? Are credit cards of no relevance to these money measures?

 

15) Which of the government policies to stimulate saving is essential? That is, which policy can on its own, regardless of the other policies, determine the level of the national saving rate?

 

16) Why is it important, for an open economy, that investment not be consistently higher than saving?

 

17) How does a decline in the real interest rate cause an increase in investment? How will the business use the investment dollars and up to what point will they invest? What happen to business firm’s purchase and holding of financial assets?

 

18) With a tax reduction will most people save more or less than before? Does national saving rise or fall? Explain.

 

19) In theory, differences in output across economies and over time might be the result of differences in either capital input, labor input, or productivity. The evidence points clearly to productivity as a more likely and powerful source of growth differences. Which aspects of the Solow growth model help to explain why the inputs of capital and labor contribute little to growth of output, relative to productivity?

 

20) During the 1970s, nominal interest rates in the United States were quite high, while real rates were extremely low. Which group “wins” in this circumstance, lenders or borrowers? What might explain the willingness of the “losers” to accept disadvantageous loan terms?

 

21) Variables measured at current market prices are nominal, rather than real. In what sense are nominal variables unreal?