Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 5, Problem 5RQ
To determine
Unfunded liabilities.
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The figure to the right shows the economy initially in equilibrium at output
Upper Y 0Y0.
Suppose that the price level in the economy increases.
Using the line drawing tool, show the impact this increase has on the AE curve. Properly label this line
AE Subscript 1.
Note: Carefully follow the instructions above and only draw the required object.
According to your graph, the relationship between the price level and the level of aggregate output (income) is (indeterminate, positive, negative) --> pick one answer.picture is attached.
Use graph A on the right to determine what happens to the equilibrium values of the interest rate and output when there is
an increasean increase
in government spending (G) with the Fed changing the money supply
(M Superscript S)
by enough to keepby enough to keep
interest rates constantinterest rates constant.
1.) Using the 3-point curved line drawing tool, illustrate the impact of the
increaseincrease
in G. Properly label your curve.
2.) Using the line drawing tool, illustrate the impact of the Fed's money supply decision. Properly label your curve.
3.) Using the point drawing tool, identify the economy's new equilibrium point.
Use graph B on the right to determine what happens to the equilibrium values of the interest rate and output when there is
anan
increaseincrease
in
Upper GG
with no change in
the money supplythe money supply.
1.) Using either the 3-point curved line drawing tool to shift the IS curve or using the line drawing tool to shift the Fed rule…
Some economists argue that the "animal spirits" of investors are so important in determining the level of investment in the economy that interest rates do not matter at all.
Part 2
a. Suppose that this were
truelong dash—that
investment in no way depends on interest rates.
Using the line drawing tool, show what the investment curve would look like. Label the line 'I'.
is my answer correct?
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- Problem 3 ABC Challenges: Attrition, Balance and Compliance Can television inform people about public affairs? Political scientists Bethany Albertson and Adria Lawrence (2009) conducted an experiment in which they randomly assigned people to treatment and control groups to evaluate the effect of watching TV on a person's information level. Those assigned to the treatment group were told to watch a specific television broadcast and were later asked questions related to what they watched. Those in the control group were not shown the TV broadcast but were asked questions related to the material in the TV broadcast. The dataset contains the following variables: • • • • • • Read News: Dummy variable which =1 if a person reads news and 0 otherwise. Political Interest: interest in political affairs (not interested=1 to very interested=4) Education: years of education Female: female dummy variable (female=1; male=0) Income: family income in thousands of dollars Information Level: information…arrow_forwardThe figure to the right gives an economy's initial aggregate demand (AD) curve. Using the line drawing tool, show an increase in aggregate demand. Properly label this line. Part 2 Note: Carefully follow the instructions above and only draw the required object. Part 3 Which of the following will generate an increase in aggregate demand? A. A decrease in the price level. B. A decrease in the money supply. C. Increased government expenditures for war. D. A tax increase.arrow_forwardProblem 2 Experiments/Randomized Control Trial Suppose you are interested in studying the effect of academic counselling on the years it takes for a student to obtain an undergraduate degree. You conduct a randomized control trial to answer the question. You randomly assign 2500 individuals in a university in New York to receive academic counselling and 2500 students to not receive any academic counselling. a. Which people are a part of the treatment group and which people are a part of the control group? (5 points) b. What regression will you run? Define the variables where required. (5 points) Λ c. Suppose you estimate ß₁ = -0.3. Interpret it. (5 points) 1 d. You test for balance using the variables mentioned in the table below. Based on the results do you think that the treatment and control group are balanced? If your answer is "yes" then explain why. If your answer is "no", then explain why and mention how will you address the issue of imbalance. (10 points) Variable GPA Average…arrow_forward
- Problem 1 Experiments/Randomized Control Trial Suppose you are interested in studying the effect of being a part of the labor union on an individual's hourly wage. You collect data on 1000 people and run the following regression. Wage=Bo+B₁Labor Union; + &¿ where Labor Union is a dummy variable which is equal t to 1 for people who are a part of labor union and 0 for others. a. Suppose you estimate b. Do you think B₁ = 1.6. Interpret B₁ (5 points) 1 1 is biased or unbiased? Explain. (5 points) Now suppose you conduct a randomized control trial to answer the same question. You randomly assign some individuals to be a part of the labor union and others to not be a part of the labor union. The first step you take is to ensure that the randomization was done correctly. Then you estimate the following equation: = Wage, Bo+B₁Treatment; + &; Treatment =1 if the student is assigned to be a part of Labor Union Treatment=0 if the student is assigned to not be a part of Labor Union c. Why is it…arrow_forwardThe figure to the right contains a point indicating the economy's initial price and aggregate output (Upper P 0P0,Upper Y 0Y0) combination. Suppose that the price level rises such that P Subscript 1 > P Subscript 0. Using the point drawing tool, identify a potential location for the economy's new price and aggregate output (Upper P 1P1,Upper Y 1Y1) combination. Label this point B. Using the line drawing tool, draw the aggregate demand curve through these points. Properly label the line. picture is attachedarrow_forwardQuestion content area left Part 1 The figure to the right gives an economy's initial aggregate demand (AD) curve. Using the line drawing tool, show a decrease in aggregate demand. Properly label this line. Part 2 Note: Carefully follow the instructions above and only draw the required object. Part 3 Which of the following will generate a decrease in aggregate demand? A. Increased government expenditures for infrastructure. B. A tax increase. C. An increase in the price level. D. An increase in the money supply.arrow_forward
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