Economics Homework – assignment

Macroeconomics: Assignment # 1

1. ; Define Economics. Distinguish between Microeconomics and Macroeconomics.

2. ; State against each of the following sentences whether they belong to micro or macro economics:-

a) ; The U.S. GDP registered a growth rate of 1.8% in 2013.

b) ; The U.S. unemployment rate stood at 6.7% in Dec. 2013.

c) ; Compared to Fall ;2013, in Spring 2014, the student enrollment at MSU increased by 5%.

d) ; In 2013, ;the U.S. inflation rate was 1.5%.

e) ; Castle Toyota, a car dealer, retrenched 5 of its workers in Jan. 2014.

f) ; Adverse weather conditions damaged the tomato output and raised its price.

3. ; What are the goals of macroeconomic policies?

4. ; What were the factors that led to the civil war?

5. ; Discuss briefly the causes and consequences of the great depression?

6. ; Write short notes on:

a) ; The great expansion

b) ; The great recession

c) ; Kennedy Tax Cuts ;

d) ; Business Cycle and its different phases

e) ; Stagflation

7. ; List 5 factors that contributed to the emergence of U.S.A, as the largest economy of the world.

8. ; What are the key economic problems? How are they addressed by different economic systems?

9. ; Alice has $100 to spend on CDs and DVDs. A CD costs $10, and a DVD costs $20.

a) ; Construct an opportunity set.

b) ; Draw a budget line with DVDS measured along the horizontal axis.

c) ; Find the slope of the budget line.

d) ; If Alice has more money to spend what will happen to the budget line?

e) ; If the price of the DVD falls to $10 a piece, what will be the slope of the new budget line?

10. ; John purchases apples and oranges. Price per lb of apples and oranges are ; $2 and $1 respectively.

If John measures apples along the horizontal axis, what will be the slope of his budget line?

11. ; A country has the following production possibilities:

If the country is at point C, what is the opportunity cost of producing an extra unit of

a) ; Capital good ;

b) ; Consumer good

c) ; How will further increase in the production of capital/consumer goods affect the opportunity cost? ;

12. ; Account for the law of increasing opportunity costs.

13. ; a) ; What is demand?

b) ; State the law of demand.

c) ; Draw a demand curve?

d) ; What do movement along the demand curve and shift in demand curve indicate?

e) ; List four factors that cause shifts in the demand curve? ;

14. ; What will be the effect of each of the following on demand for ;SUVs:-

a) ; SUVs become more popular.

b) ; Gas price substantially increases.

c) ; A recession hits the country.

d) ; Newspapers report large number of fatal accidents involving small cars.

15. ; a) ;What is supply?

b) ; State the law of supply.

c) ; Draw a supply curve.

d) ; What do movement along the supply curve and shift in supply curve indicate?

e) ; List four factors that cause shifts in the supply curve? ;

16. ; What will be the effect of the following on supply of auto tires?

a) ; A technological advance in the method of producing tires.

b) ; An increase in the price of rubber.

c) ; Levying of a per unit tax on tires.

d) ; Expected fall in tire prices.

17. ; ;Wheat Market

a) ; What is the equilibrium price?

b) ; What is the equilibrium quantity?

c) ; At a price of $3 per bushel, what will be the surplus/ shortage? What will be its consequence on price?

d) ; At a price of $6 per bushel, what will be the surplus/ shortage? What will be its consequence on price?

; ;18. ; If ; Q_d = 6-P, ; and ; Q_s= -2+P, ; find the equilibrium price and quantity.

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; 19. ; What does happen to the housing market when rent control is imposed? Show with a diagram.

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; ;20. ;Draw a circular flow of income diagram, and explain its various flows.