macroeconomics 17

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McEachern, W. A. (2012). ECON Macro 3 (3rd ed.). Mason, OH: South-Western.

Each response should be 75 words in length and cite the textbook as a reference.


1.  Why does investment spending not equal saving in the circular flow?

2.  Why does the consumer price index exaggerate the inflation rate?

3.  Discuss the limitations of national income accounting.

4.  Why do total leakages and total injections have to be equal?

5.  What is meant by industrial policy? Discuss the strengths and weaknesses of an industrial policy.

6.  What is the difference between anticipated and unanticipated inflation? How do they differ in their effects on economic agents? Does inflation have no effects on the economy if it is anticipated? Explain.

7.  Describe the four types of unemployment. How do the four types differ in their effects on the economy and on the unemployed?

8.  Explain how the law of diminishing marginal returns is related to the per-worker production function.

9.  What is meant by “quality of labor”? How does improvement in the quality of labor affect economic growth?

10.  Explain what would cause the government purchases function to increase. Will a change in social security spending affect government purchases?

11.  Suppose MPC is 0.8 initially. Households then change their behavior so that the MPC falls to 0.75. What happens to aggregate expenditures? Why?

12.  What is a consumption function? Describe the graph of a consumption function and explain its shape. If total spending is consumption plus investment spending, how does an increase in the interest rate affect total spending?

13.  For each of the following, explain whether it shifts the short-run aggregate supply curve, the long-run aggregate supply curve, or the aggregate demand curve (or more than one of these).
a. Households decide to save a smaller share of their disposable income.
b. There is an 8-week strike in the steel industry.
c. A drought in the Midwest causes poor wheat harvest.
d. The labor force participation rate increases.

14.  How is an aggregate demand curve derived? What would cause the aggregate demand curve to shift to the right?

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