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study guide

1 Page
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Department
Philosophy
Course Code
PHL 302
Professor
Glen Hoffmann

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Question Set 1
1Which of the following problems are likely to be studied by a microeconomist and which
by a macroeconomist?
a. The rapid growth of Microsoft
b. Why unemployment in Canada rose from 1990 to 1991
c. Why Japan’s economy grew faster than the U.S. economy in the 1980s, but more
slowly in the 1990s
d. Why university tuition fees have risen so rapidly in recent years
2Explain what we mean by potential output (GDP). Explain why potential GDP does not
depend on the price level. Is it possible that real GDP might be larger or smaller than
potential GDP?
3What are the implications of differences between actual and potential GDP for the
unemployment rate and the rate of utilization of factories and machinery?
4Okun’s Law says that differences between the growth rate in potential output and the
growth rate in real GDP change the unemployment rate as follows:
u = - ½ (gY –gY
p
)
Based on the data in the following table, calculate the annual growth rates of potential
output and real GDP. If the unemployment rate in 2000 were 7.0 percent, what
unemployment rate would Okun’s Law predict for the years 2001, 2002, and 2003?
Year
Potential Output
(billions 1999$)
Real GDP
(billions 1999$)
1998 1,038 1,017
1999 1,069 1,030
2000 1,101 1,101
2001 1,134 1,160
2002 1,168 1,139
2003 1,203 1,130
2004 1,240 1,187
5Define aggregate demand and explain the difference between an aggregate demand
function and an aggregate expenditure function.
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Description
Question Set 1 1 Which of the following problems are likely to be studied by a microeconomist and which by a macroeconomist? a. The rapid growth of Microsoft b. Why unemployment in Canada rose from 1990 to 1991 c. Why Japans economy grew faster than the U.S. economy in the 1980s, but more slowly in the 1990s d. Why university tuition fees have risen so rapidly in recent years 2 Explain what we mean by potential output (GDP). Explain why potential GDP does not depend on the price level. Is it possible that real GDP might be larger or smaller than potential GDP? 3 What are the implications of differences between actual and potential GDP for the unemployment rate and the rate of utilization of factories and machinery? 4 Okuns Law says that differences between the growth rate in potential output and the growth rate in real GDP change the unemployment rate as follows: u = - (gY gY p Based on the data
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