ECON255 Principles of Macroeconomics Assignments Name: Chapter 5 Elasticity 1. When the price of CD increased from $10 to $11, the quantity of CDs demanded decreased from 100 to 87. Using the mid-point formula: a. What is the price elasticity of demand for CDs? b. Is demand elastic or inelastic? 2. When the price of paper increases from $100 to $104 per ton, the quantity supplied increased from 200 to 220 tons per day. Using the mid-point formula: a. What is the price elasticity of supply for paper? b. Is the supply elastic of inelastic? 3. If firm wants to increase its total revenue, should it raise or lower its prices? Explain your answer. Chapter 6 GDP and Economic Growth 1. Do increases in gross domestic product necessarily means into improvement in the standard of living of the citizens? Explain your answer. 2. Someone said. Trade deficits are good because we are buying more goods than we are producing. What is the downside of trade deficits? 3. What factors determine technological progress? Chapter 7 Unemployment and Inflation 1. What is unemployment? Why cant it be driven down to zero? 2. Supposed the government hires workers who are currently unemployed but does not give them any work to do. a. What will happen to the measured unemployment rate? b. Is this an accurate reflection of the underlying economic situation? 3. Critically evaluate the following statement: Hong Kong is an expensive place to live. They must have a high inflation rate in Japan. Chapter 12 Money and Banking 1. Why do all societies have some form of money? 2. If people never withdrew cash from banks, a. How much money could the banking system potentially create? b. Could this really happen? c. What might limit deposit creation in this case? Chapter 13 Monetary Policies 1. Refrigerators and clothing are, to some extent durable. Explain why the decision to buy a refrigerator is likely to be more sensitive to interest rates than the decision to buy clothing. Chapter 15 Globalization and Trade 1. Why do both rich and poor countries benefit from trade? 2. If the dollar increases in values against the Japanese Yen, how will this affect the balance of trade between the United States and Japan? 3. Consider two financial planners, Phil and Frances. i. In an hour, Phil can either produce one financial statement or answer 10 phone calls ii. In an hour, Frances can either produce three financial statement or answer 12 phone calls? a. Who has the absolute advantage? b. Who has the comparative advantage?
