Macroeconomics, Student Value Edition (6th Edition)
Macroeconomics, Student Value Edition (6th Edition)
6th Edition
ISBN: 9780134126081
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 13, Problem 13.4.10PA
To determine

The impact of raw materials’ price hike on airlines and automobile firms.

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The magazine Women of China reported that Chinese women in big cities spent 63% of their income on consumer goods last year, up from a meagre 26% in 2007. Clothing accounted for the biggest chunk of that spending, at nearly 30%, followed by digital products such as cellphones and cameras (11%) and travel (10%). Chinese consumption as a whole grew faster than the overall economy in the first half of the year and is expected to reach 42% of GDP by 2020, up from the current 36%.  Source: The Wall Street Journal, August 27, 2010    If the economy had been operating at a full employment equilibrium, (a) Describe the macroeconomic equilibrium after the rise in consumer spending.  (b) Explain and draw a graph to illustrate how the economy can adjust in the long run to restore a full-employment equilibrium.
In the fifty years before the covid-19 pandemic, the U.S. also suffered two deep recessions, in 1981-82 and 2007-2009. (As you know, the second was the Great Recession.) Based on the historical evidence in the chart, about how high does the unemployment rate rise in terrible recessions like those? Briefly explain.
Assume that a farmer rents a 20-acre farm in the White Creek Valley. During the current year, the farmer produces 100,000 bushels of wheat that he sells to a miller for $300,000 using various farming equipment. The farmer had to borrow from the bank to buy the farming equipment and pays $50,000 interest. Finally, the labor costs are $200,000 and the rent he pays to the owner of the land is $30,000. The miller produces and sells to “Bang Bakery” in Newark 1,000 lbs of flour worth $600,000. The flour is produced in a $100,000 mill in Hockessin; no rent is paid, the wage bill is $180,000 and interest payments are $70,000. Finally, “Bang Bakery” makes and sells bread to the Newark consumers for $1,000,000. The rent for their factory and their stores is $100,000 – their interest payments are $50,000 - their wage bill, $300,000. It was not a good year for “Bang Bakery.” Calculate the contribution to GDP of these transactions using three different methods:  The value added approach Value…
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