Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Question
Chapter 1, Problem 3QR
To determine
Define market-clearing model.
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Explain the difference(s) between an economic and an econometric model.
1. What is a market-clearing model? When is it appropriate to assume that market clear?
2. Use the model of supply and demand to explain how fall in the price of frozen yogurt
would affect the price of ice cream and the quantity of ice cream sold. In your
explanation, identify the exogenous and endogenous variables.
3. Consider an economy that produces and consumes hot dogs and hamburgers. In the
following table are data for two different years.
Goods
Hot dogs
Hamburgers
Quantity (2010)
200
200
Price (2010)
$2
$3
Quantity (2020)
250
250
Price (2020)
$4
$4
Using 2010 data as the base year
Compute the following statistics for each year.
Nominal GDP, Real GDP, GDP Deflator, Inflation rate using GDP deflator, CPI, Inflation rate
using CPI. (Hint: i) to calculate CPI use base year fixed quantity Hot dogs 200 and Hamburgers
200, ii) To calculate inflation rate, use percentage change in price level between two years.)
Define the concept of economic models
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