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 6, Problem 2.6P
To determine
Which item should be purchased at first.
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Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all:
13. What would happen to the net exports function in Europe and the US respectively if thedemand for dollars rises worldwide? Explain why.
20. Given the mathematical model below, solve for the expenditure multiplier for a) government
spending, G; and b) for consumer taxes, T. (medium difficulty)
Y=C+I+G
C=Co+b(Y-T)
1 = 10
T=To+tY
G = Go+gY
Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all:
11. What exactly is a rectangular hyperbola and what relevance is it to classical economics?
Chapter 6 Solutions
Principles of Economics (12th Edition)
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- Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all: 9. Explain the difference between absolute and comparative advantage in a family setting, i.e.using parents and children. What can we glean from knowing about comparative andabsolute advantages?arrow_forwardUse the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all: 18. Explain why most economists believe it is absolutely necessary to allow free trade in aneconomy. Why is it harmful (under most circumstances) to have tariffs and trade barriers?arrow_forwardUse the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all: 19. How does the multiplier work in theory? How would you interpret Robert Barro’s empiricalfindings of a multiplier (note, not the MPC) of 0.8? What about Christine Romar’s finding ofa multiplier of 1.5?arrow_forward
- Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all: 16. Explain the difference between absolute and comparative advantage. Be specific. How woulda country (or person) know that they had such an advantage?arrow_forwardUse the Feynman technique throughout. Assume that you’reexplaining the answer to someone who doesn’t know the topic at all: 2. Give an overview of the equation of exchange (EoE) as used by Classical Theory. Now,carefully explain each variable in the EoE. What is meant by the “quantity theory of money”and how is it different from or the same as the equation of exchange?arrow_forwardUse the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all: 5. What is “Say’s Law” and how is it different from “Keynes’ Law”? How are these “laws”directly seen in the respective AD/AS models? Why is there such a huge disagreement aboutwhich “law” is correct?arrow_forward
- 8. Read these recent quotes (taken from blogs) below and determine whether the sentiment inthe quote is Keynesian or Classical. Just write “Keynesian” or “Classical” in the space rightafter the Ph.D. economist’s name: a) “Market economies are not self-stabilizing and they do not quickly adjust to findthe socially optimal employment rate in the absence of active stabilizationpolicies.” – Economist Roger Farmer b) “The paradox of thrift purportedly shows that saving is bad and results in poverty.Well, it (saving) isn't that bad, because here we have the recognition that addedsaving results in lower interest rates and more investment.” – Economist BillWoolsey c) “In much of the world, there is insufficient demand to fully employ the valuableservices of available humans and machines. This characterization of the globaleconomy has been true for the past seven years. It seems likely to be true for yearsto come.” – Economist Nararyana Kocherlakota d) “The economic cost of unemployment…arrow_forwardUse the Feynman technique throughout. Assume that you’reexplaining the answer to someone who doesn’t know the topic at all: 1. Explaina) what the marginal propensity to consume is; b) the marginal propensity to consume’s association with a Keynesian expendituremultiplier; c) the mechanism or process by which the expenditure multiplier “works” in the KeynesianModel.arrow_forwardDon't use ai to answer I will report you answerarrow_forward
- 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.arrow_forwardUse 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…arrow_forwardSome 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?arrow_forward
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