***Three to four pages in length APA format textbook ECON macro 4th ed.***
1.(Aggregate demand and supply) How do the aggregate demand/supply curves differ from market curves?
2. (suppy-side economics) On supply-side measure introduced by the Reagan administration was a cut in income tax rates. Use an aggregate demand/supply diagram to show what effect was intended. What might happen if such a tax cut also shifted the aggregate demand curve?
3. (income approach to GDP) How does the income approach to measuring GDP differ from the expenditure approach? Explain the meaning of value added and its importance in the income approach. Consider the following data the selling price at each stage of production for a 5lb. bag of flour. Calculate the final market value of the flour.
Stage of production sale price
Farmer $ 0.30
4. (Expenditure approach to GDP) Given hypothetical info answer a-d
Billions of dollars
Personal consumption expenditures $200
Personal taxes 50
Gov. purchases 50
Gross private domestic investment 40
Gov. transfer payments 20
a. What is the value of GDP?
b. Value of net domestic product?
c. Value of net investment?
d. Value of net exports?
5.(consumer price index) calculate a new consumer price index for the exhibit. Assume that current-year prices of twinkies, fuel oil, and cable tv are .95/package, 1.25/ gallon, and 15.00/month. Calculate the current year’s cost of the market basket and the value of the current year’s price index. What is this year’s % change in the price level compared to the base year?
Twinkies 365 packages .89/package 324.85 .79 288.35
Fuel oil 500 gallons 1.00/gallon 500.00 1.50 750.00
Cable tv 12 months 30.00/month 360.00 30.00 360.00
$1,184.85 $1, 398.35
6. What was the value of the consumer price index in the base year? Calculate inflation in 2013 for following a. CPI equals 200 in 2012 and 240 2013. b.150 and 175 c. 325 and 340 d. 325 and 315