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unemployment rates

Schiller Text, 10th edition The economy today bradley r schiller 10/e
Chapter 5 - page 112
1. The manuscript for this text was typed by a friend. Had I hired a secretary to do the same job, GDP would have
been higher, even though the amount of output would have been identical. Why is this? Does this make sense?

2. GDP in 1981 was $2.96 trillion. It grew to $3.07 trillion in 1982, yet the quantity of output actually decreased.
How is this possible?

3. If gross investment is not large enough to replace the capital that depreciates in a particular year, is net investment
greater or less than zero? What happens to our production possibilities?

Chapter 6 - page 131
1. Is it possible for unemployment rates to increase at the same time the number of employed persons is increasing?
How?

7. Why is frictional unemployment deemed desirable?

Chapter 7 - page 151
6. Would it be advantageous to borrow money if you expected prices to rise? Would you want a fixed-rate loan or one
with an adjustable interest rate?

8. Identify two groups that benefit from deflation and two that lose.

Chapter 11
5. Will consumers always spend the same percentage of any tax cut? Why might they spend more or less than usual?

Chapter 12
6. A constitutional amendment has been proposed that would require Congress to balance the budget eachyear. Is it possible to balance the budget every year? Is it desirable?

10. Which of the following options do you favor in resolving future social security deficits?
What are the advantages and disadvantages of each option?
(a) cutting Social Security benefits,
(b) raising payroll taxes,
(c) cutting non-Social Security programs,
(d) raising income taxes.

Solution Preview

1. The manuscript for this text was typed by a friend. Had I hired a secretary to do the same job, GDP would have
been higher, even though the amount of output would have been identical. Why is this? Does this make sense?

Yes If I hired a secretary to do the same job, the GDP will increase. This is because GDP includes value of all the final goods and services. Now If I myself do that job there will be no payment done hence no income is counted. This is because GDP doesn't include implicit costs. On the other hand the secretary will be paid and her income will be counted in the GDP.

2. GDP in 1981 was $2.96 trillion. It grew to $3.07 trillion in 1982, yet the quantity of output actually decreased.
How is this possible?
The product of quantity and price calculates GDP. Now there can be growth in GDP even if decline in quantity if there is increase in price. Here proportionate increase in price should be more than the proportionate decline in quantity.

3. If gross investment is not large enough to replace the capital that depreciates in a particular year, is net investment
greater or less than zero? What happens to our production possibilities?
The net investment will be less than zero for that particular year as Net investment Gross ...

Solution Summary

This explains the unemployment rates

$2.19