Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 21, Problem 3.1P
To determine
The differences in GNP and real GNP.
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Savings and wealth - Although the United States is one of the richest nations in the world, it is also one of the world's largest debtor nation. We often hear that the problem is our low savings rate. Suppose policy makers attempt to rectify this be encouraging greater savings in the economy. What could they do to make you save more? Would raising minimum wage help? What effects would their successful attempts have on GDP? Is this a good or bad idea? What can you do to increase your savings rate? Also, how is wealth related to savings?
In the above figure, which of the following policies could move the economy to potential GDP?
Group of answer choices
increasing government expenditures and decreasing taxes
decreasing government expenditures and increasing taxes
decreasing taxes and not changing government expenditures
increasing government expenditures and not changing taxes
a) Calculate GDP Deflator of 2009.
b) Calculate the Growth rate of real GDP of 2009.
c) What can you conclude from your answer to part a.
d) What can you conclude from your answer to part b.
Please answer all and answer must be correct.
Chapter 21 Solutions
Principles of Economics (12th Edition)
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- The following equations describe a small economy. Figures are in millions of dollars; interest rate (i) is in percent per annum. Assume that the price level (P) is fixed. Goods Market C = Co + cYD (Private consumption) YD = Y + TR – T (Disposable income) T = To + tY (Total taxes) I = Io – bi (Private investment) G = Go, TR = TRo (Gov. Expenditure and Transfers, respectively) Y = C + I + G (Goods mkt. equilibrium condition) Money Market L = kY- hi (Demand for real balances) Ms = Mo/P (Real money supply) L = Ms (Money mkt. equilibrium condition) Endogenous Variables: C, YD T, I, Y, L, Ms and i Exogenous Variables: Co = 300, To = 80, Io = 450, Go = 300, TRo = 100, Mo = 350, P =1 Parameters: c = 0.85, t = 0.15, b = 50, k = 0.25 and h = 62.5 Policy…arrow_forwardTo measure the vital signs - or indicators of the strengths or weaknesses of an economy include factors other than the GDP. Below is a list of such additional economic indicators that also measure the strength of an economy. But ONE of the items listed is NOT an economic indicator that helps us assess the economic condition of the economy. Which one of the below IS NOT an economic indicator of the strength of an economy? Group of answer choices Relatively lower income inequality. Heavy government controls and large government spending. The lower percentage of people living below the poverty rate. Lower unemployment rate.arrow_forwardPlease answer the questions provided on the image below.arrow_forward
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