Problems lecture 15
Using Economic Theory
Mansfield, Chpt 5, The Ups and Downs of the Economy.
I’m reversing the order of the problems as they are given in Mansfield. I believe it is more useful and reinforcing to first do the AS/AD questions because last week you read about the AS/AD graph and this week you put to it to its descriptive purpose in the reading and problems. Second, come the Forecasting problems.
The following problems are good thought provoking examples of how the AS/AD curves (see my comments about these in Week 10 assignment) can be used to describe macroeconomic conditions.
Page 68, # 5.5 a – d. This problem will not be turned in, but will be discussed in class with my asking you to explain via the graph the “yes” or “no” answer that is given.
# 5.6 a, b, c, d, 4 points each
# 5.7 a – e: . This problem will not be turned in, but will be discussed in class with my asking you to explain via the graph the “yes” or “no” answer that is given.:
d) the new equilibrium point is given, but what is the macroeconomic meaning (output, income, employment, price level) of this new equilibrium?
e) is the answer given at the end of the book is only partially correct, incorrect because ot the way it is worded. What is wrong with the answer as given.
Can you see in this set of actions (a-e) the classical (and today's New Classical and Monetarist) description of the macroeconomc behavior? If so, briefly describe 10 points
Of a, b, c, or d, which is the critical step in this argument. What was Keynes' response in 1936? 10 points
Page 65 # 5.1 a, b, c This problem will not be turned in, but will be discussed in class with my asking you to explain the “why” part of each question.
Page 66 # 5.2 For this problem, assume that there is no autonomous component (“a”) of Consumer spending
a. 5 points note: This problem is asking for the relationship of GDP to C
b. 5 points note: This problem is asking for the relationship of C to GDP
c. 5 points
d. 5 points
Page 67 # 5.4
a) 5 points
b) 10 points
c) 3 points
d) 3 points