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Comment on what you observe in the time series, and how this relates to our model and how we want to interpret it.
What do you notice about how this time series behaves around recession dates (the shaded areas)?
What is the role of the government in the one-period, closed-economy model? Can the government run a deficit in the one-period model? Why or why not?
What are the exogenous variables in the model? What are the four conditions that a competitive equilibrium must satisfy for this model?
Why is the competitive equilibrium in this model Pareto optimal? Explain the difference between the first and second welfare theorems. Why is each useful?
Give three reasons that an equilibrium might not be Pareto optimal. What are the effects of an increase in government purchases?
What are the equilibrium effects of an increase in total factor productivity? Why does a distorting tax on labor income lead to an inefficient economic outcome?
Explain what happens when the economy is on the bad side of the Laffer curve and the income tax rate falls.
In the model used in this chapter, determine the effects this has on aggregate output, consumption, employment, and the real wage, and explain your results.
Under these circumstances, using a diagram determine the effects of an increase in z on output, consumption, employment, and the real wage, treating G as given.
Show that an increase in government spending that is productive in this fashion could increase welfare for the representative consumer.
Is the participation rate procyclical or countercyclical? How does the employment/population ratio behave relative to the participation rate?
How has the labor force participation rate behaved over time? Do women and men behave similarly with respect to labor force participation?
Calculate these growth rates from quarterly data. Do you think your plot shows any evidence that government spending crowds out private consumption? Why or why
What does the DMP model predict would be the effects of labor-saving devices in the home, for example dishwashers, washing machines, and vacuum cleaners?
Which policy is more effective in achieving the government's goal? Explain using the DMP model, with the aid of diagrams.
Compute the effects on the unemployment rate, the vacancy rate, the labor force, the number of firms, aggregate output, and labor market tightness.
Determine the effects of G on the unemployment rate, the vacancy rate, the labor force, the number of private firms and the total number of firms.
Calculate GDP using (i) the product approach, (ii) the expenditure approach, and (iii) the income approach.
Calculate nominal GDP in each year. Calculate real GDP in each year, and the percentage increase in real GDP from year1 to year 2 using year 1 as the base year.
Calculate gross domestic product for the year using (a) the product approach, (b) the expenditure approach, and (c) the income approach.
Determine GDP using (i) the product approach, (ii) the expenditure approach, and (iii) the income approach. Determine the current account surplus.
What are the two ways in which national wealth is accumulated? Give two reasons that the unemployment rate may not measure correctly what we want it to measure.
What are the three approaches to measuring GDP? Explain the concept of value added. Why is the income-expenditure identity important?
What are two difficulties in the measurement of aggregate output using GDP? What is the largest expenditure component of GDP?