MACROECONOMICS (LOOSELEAF)-PACKAGE
13th Edition
ISBN: 9781337492317
Author: Baumol
Publisher: CENGAGE L
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Question
Chapter 6.A, Problem 6TY
To determine
(a)
To calculate:
The expenditure weighted for each year.
To determine
(b)
To calculate:
The weighted average of the percentage increase.
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The figure below shows the average share of total household expenses for a good and the inflation-adjusted price of the same good. The share of all expenses line is calculated as expenditures on this good (that is the price of this good multiplied by the quantity of this good purchased) divided by total household expenses. This line shows how expenditures on this good changes over time, holding total spending constant. The other line is the price of this good adjusted for inflation (i.e., the increase in the price level for all goods). The specific units are obscured on purpose.
Use these data to characterize the price elasticity of demand. Explain using the definitions of price elasticity of demand and total expenditure. Notice that I am not asking you to calculate the price elasticity of demand. Use the data to talk about the size of price elasticity of demand in general terms. Is demand elastic or inelastic? Is the price elasticity of demand very large? Very small? Close to 1?…
The table below shows the total expenditure on a basket of goods and services; use this information to calculate the index
number for the cost of a basket of goods and services in periods 1, 2 and 4, assuming Period 3 is the base year. Write the
index numbers in order from Period 1 to Period 4. (Round to 1 decimal place. Include the index number for period 3 in your
answer.)
Provide your answer below:
Period 1
Period 2
Period 3
Period 4
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$12, 240
$12,900
$13,530
$14,250
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Answer choices for part 1 blanks:
Blank 1: shortage, surplus
Blank 2: falls, remains the same, rises
Blank 3: decrease, do not change, increase
Blank 4: decrease, do not change, increase
There is one last part to this question that did not fit in the picture:
Suppose the economy experiences domestic goods become relatively less expensive than foreign goods. Adjust the graph to show the effect of domestic goods become relatively less expensive than foreign goods on the economy.
Which of the following best describes the effect of domestic goods become relatively less expensive than foreign goods?
a.) The price level rises back to PE, and Real GDP increases from $30 trillion to $35 trillion.
b.) The price level rises even higher above PE, and Real GDP increases from $30 trillion to $35 trillion.
c.) The price level falls even further below PE, and Real GDP decreases from $30 trillion to $35 trillion.
d.) The price level falls but remains above PE and Real GDP…
Chapter 6 Solutions
MACROECONOMICS (LOOSELEAF)-PACKAGE
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