Chapter_13 Consumption and Saving(宏观经济学,多恩布什,第十版)ppt课件
中级宏观经济学试题-Chapter13
Solutions to the Problems in the TextbookConceptual Problems1.a. According to the life-cycle theory of consumption, people try to maintain fairly stable consumptionpaths over their lifetimes. Individuals save during their working years so they can keep up the same consumption stream after they retire. This implies that wealth increases steadily until retirement. But since consumption remains stable, we should expect the ratio of consumption to accumulated saving (wealth) to decrease over time up to retirement.1.b.The life-cycle hypothesis asserts that wealth is used up after retirement to finance consumption duringthe remaining years. This implies that the ratio of consumption to accumulated saving (wealth) increases after retirement, eventually approaching 1.2.a. Suppose that you and your neighbor both work the same number of years until retirement and youboth have the same annual income. If your neighbor is in bad health and does not expect to live as long as you, she will expect to have fewer retirement years in which to use accumulated wealth. Your neighbor's goal for retirement saving will not be as high as yours, and compared to you, she will havea higher level of consumption over her working years.Since planned annual consumption (C) is determined by the number of working years (WL), the number of years to live (NL), and income from labor (YL), we get the equation:C = [(WL)/(NL)](YL).WL and YL are the same for you and your neighbor, but NL is smaller for your neighbor. Therefore you will have a lower level of consumption (C).(Note: Students may come up with a variety of different answers. For one, your neighbor who is in bad health currently has much larger medical bills than you do. Therefore she may not be able to save as much for retirement, even if she might expect to live as long as you. On the other hand, she may not have large medical bills now, but expects them later, as she gets older. This may induce her to save more now. While such arguments are valid, instructors should point out that the answer should be related to the life-cycle theory and the equation used above.)2.b. If we assume for simplicity that the rate of return on Social Security is the same as the rate of returnon private saving, then the introduction of a Social Security system based on a trust fund should not have any effect on your level of consumption. Social Security may be considered a form of "forced saving," since you are forced to pay Social Security taxes during your working years and will, in return, receive benefits during your retirement years. However, most likely you would have voluntarily saved just as much as the government is now “forcing” you to save by levying the Social Security tax. Therefore your consumption behavior will not change. Still, the levying of a Social Security tax reduces disposable income during your working years, increasing the ratio of consumption to disposable income (the average propensity to consume).As we have just discussed, if private saving were simply replaced with government saving, national saving would not be affected. However, the Social Security system is actually not strictly financed through a trust fund, but largely on a pay-as-you-go basis. This means that most of the Social Security taxes are not "saved" but immediately used by the government to finance the benefits of current retirees. For this reason, many economists claim that the Social Security system has led to a decrease in the national savings rate and a decrease in the rate of capital accumulation. The magnitude of thisdecrease, however, has not been clearly established.The size of the Social Security trust fund was fairly insignificant until the system was amended in 1983. But now the trust fund is increasing and, in effect, largely contributed to the decreases in the federal budget deficits in the 1990s. However, because of our aging population, predictions are that the Social Security system will experience severe financial difficulties within the next 30 years unless it is reformed. If the credibility of the system becomes an issue, people may intensify their saving efforts, since they no longer feel they can rely on the public system to provide for them during retirement.3.a. If you expect to get a Christmas bonus every year from now on, you immediately treat it as part ofyour permanent income and spend accordingly, that is, ∆C = c(∆Y). In other words, your current consumption will change significantly.3.b. If you get a Christmas bonus for only this year but not for any future years, then you will consider itas transitory income. There is very little effect on your permanent income, so you will consume onlya small fraction of the bonus and save the rest. In other words, your current consumption will not besignificantly affected.4.Gamblers (or thieves) seldom have a very stable income. However, their consumption is determinedby their permanent income, that is, their expected average lifetime income. Since their permanent income is not significantly affected by any temporary change in income, their consumption pattern remains relatively stable, whether they do well or not in any given period.5.Both the life-cycle theory and the permanent-income theory try to explain why the short-run mpc issmaller than the long-run mpc. The life-cycle theory attributes the difference to the fact that people prefer a smooth consumption stream over their lifetime. Therefore the average expected lifetime income is the true determinant of current consumption. The permanent-income theory suggests that the difference is due to measurement errors. Measured income has two components—permanent and transitory income. But only permanent income is a true determinant of current consumption.6.a. One possible explanation for the low U.S. savings rate in the 1980s could be that the “baby boomers”were still in their dissaving phase. Since the households of the baby boom generation were still in their late twenties, they probably still had large expenses related to childcare and the purchase of houses. Therefore, they may not have been able to save for retirement.6.b.If the above explanation is correct, one can expect an increase in saving as these “baby boomers” age,become more financially solvent, and begin to prepare for retirement.7.The ranking from highest to lowest value should most likely be (a), (c), (d), and then (b). Clearly,(c) should be lower than (a), but it is not certain whether it should rank before or after (d); its exactranking depends largely on how severe the liquidity constraint is.8. A series follows a random walk when future changes cannot be predicted from past behavior. Inother words, it does not have a clear mean or long-run value and any major change results from a random shock. Hall asserted that changes in current consumption largely come from unanticipated changes in income. According to the life-cycle theory and permanent-income theory, people try to smoothen out their consumption stream in such a way that its expected value is always the same in each period. Therefore, we can express future consumption as the expected value plus some errorterm, that is, some random value that is unpredictable. This error term is a shock to future income that is spread over the remaining lifetime. Hall supported the permanent-income hypothesis by showing that lagged consumption is the most significant determinant of future consumption.9. The problem of excess sensitivity means that consumption responds more strongly to predictablechanges in current income than the life-cycle theory and permanent-income theories predict. The problem of excess smoothness means that consumption does not respond as strongly to unpredictable changes in current income as these theories predict. However, the existence of these problems does not invalidate the theories. It simply means that the theories can explain consumption behavior only to a certain degree.10.Precautionary (or buffer-stock) saving can be explained by uncertainty. It could be uncertainty inregard to one’s life expectancy or one’s time of retirement (affecting the accumulated saving needed to finance retirement), or uncertainty about future spending needs (which may be caused by a change in family composition or health). Clearly, if we account for such uncertainties, we bring the model closer to reality. For example, many elderly continue to save after retirement in anticipation of later high medical costs.11.a.It is unclear whether an increase in the interest rate leads to an increase or a decrease in saving. Onthe one hand, as the interest rate increases, the return on saving increases and people may therefore increase their savings effort (due to the substitution effect). On the other hand, a higher return on saving implies that a given future savings goal can now be reached with a smaller savings effort in each year (due to the income effect).11.b.The income effect and the substitution effect generally tend to go in different directions; the overalloutcome depends on the relative magnitude of these two effects. Until now, empirical evidence has not established a significant sensitivity of saving to changes in the interest rate. This would imply that the income and substitution effects have about the same magnitude.12.a. According to the Barro-Ricardo proposition, it does not matter whether an increase in governmentspending is financed by taxation or by issuing debt.12.b. The Barro-Ricardo proposition states that people realize that when the government finances its debtby issuing bonds, it simply postpones taxation. In other words, people know that the government will have to raise taxes in the future to pay back what they have borrowed now, and people want to be prepared to pay future taxes. Therefore, expansionary fiscal policy that results in an increase in the budget deficit will not stimulate the economy since it will lead to an increase in saving rather than consumption.12.c.There are two main objections to the Barro-Ricardo hypothesis. One is based on liquidity constraints,that is, people cannot consume out of their permanent income, since they can’t borrow. Therefore, a tax cut eases their liquidity constraints and they consume more rather than save the tax cut. The other argument is that those people who benefit from a tax cut or an increase in government spending are not the same as those who will have to pay the higher taxes to pay off the debt. This argument assumes that people are not concerned about the welfare of their descendants.Technical Problems1.a. If income remains constant over time, permanent income equals current income. Your permanentincome this year is YP0 = (1/5)(5*20,000) = 20,000.1.b.Your permanent income next year is YP1 = (1/5)(30,000 + 4*20,000) = 22,000.1.c.Since C = 0.9YP, your consumption this year is C0 = 0.9*20,000 = 18,000.Your consumption next year is C1 = 0.9*22,000 = 19,800.1.d.In the short run, the mpc = (0.9)(1/5) = 0.18; but in the long run, the mpc = 0.9.1.e. In 1.a. and 1.b., we have already calculated this and next year's permanent income. For each of thecoming years you add $30,000 and subtract $20,000. Therefore your permanent income (which is your average over a five year period) will increase by $2,000 each year until it reaches $30,000 after5 years.YP o=(1/5)(5*20,000) =20,000YP1 = (1/5)(1*30,000 + 4*20,000) = 22,000YP2 = (1/5)(2*30,000 + 3*20,000) = 24,000YP3 = (1/5)(3*30,000 + 2*20,000) = 26,000YP4 = (1/5)(4*30,000 + 1*20,000) = 28,000YP5=(1/5)(5*30,000) =30,0002.a.The person lives for NL = 4 periods and earns a lifetime income ofYL = 30 + 60 + 90 + 0 = 180.Therefore consumption in each period will beC i = (1/4)180 = 45, i = 1, 2, 3, 4.This implies that saving in each period is:S1 = 30 - 45 = - 15; S2 = 60 - 45 = + 15; S3 = 90 - 45 = + 45; S4 = 0 - 45 = - 45. 2.b. If there are liquidity constraints and the person cannot borrow in the first period, then she willconsume all of her income, that is, Y1 = C1 = 30.For the remaining three periods the person wants a stable consumption stream. Thus she will consume C(i) = (1/3)(60 + 90 + 0) = 50 in each of the remaining three periods i = 2, 3, 4.2.c. An increase in wealth of only $13 is not enough to offset the difference in consumption patternsbetween period 1 and the other periods. Therefore all of the increase in wealth will be consumed in period 1, such that C1 = 43. In the remaining three periods, consumption will be the same as in 2.b.An increase in wealth of $23 will be enough to offset the difference in consumption patterns.Lifetime consumption in each period will now be C i = (1/4)(180 + 23) = 50.75. This means that 20.75 (or almost all of the additional wealth) will be used up in the first period; the remaining 2.25 will be distributed over the next three years.3.a.According to the life-cycle theory and permanent-income hypothesis (LC-PIH), the change inconsumption equals the surprise element, that is, ∆C LC-PIH = є. According to the traditional theory, the change in consumption equals ∆C tr = c(∆YD). Therefore if a fraction λ of the population behaves according to the traditional theory and the other fraction behaves according to LC-PIH, the total change in consumption is∆C = λ(∆C tr) + (1 - λ)(∆C LC-PIH) = λc(∆YD) + (1 - λ)є = (0.7)(0.8)10 + (0.3) = 5.6 + (0.3)є.3.b.∆C = (0.3)(0.8)10 + (0.7)ε = 2.4 + (0.7)є3.c.∆C = (0)(0.8)10 + 1є = є4.a. If the real interest rate increases, the opportunity cost of consuming should increase.Therefore, the average propensity to save, that is, the fraction of total income that is saved, should increase.4.b. If you only save for retirement and your savings goal is fixed, then you actually will saveless. With a higher interest rate it will take less saving each year to achieve your goal.4.c. The first case (4.a.) describes the substitution effect, whereas the second case (4.b.)describes the income effect. Unless the magnitude of each of these effects is known, we cannot predict the overall effect of the interest rate increase on saving.5. One way to increase national saving would be to either privatize or eliminate the SocialSecurity system, so people would have to save for retirement on their own. (Eliminating Social Security is not a very popular measure, although the privatization of Social Security is often discussed.) This would do away with the negative effect on saving that comes from the pay-as-you-go nature of financing Social Security. Another way might be to make it more difficult to borrow. The U.S. tax system encourages people (and firms) to borrow rather than save. Finally, since national saving is equal to private saving plus government saving, lowering the budget deficit would increase national savings. However, to accomplish this, the government would have to either cut spending or raise taxes.。
曼昆宏观经济学第13章
E (u u )
n
where > 0 is an exogenous constant.
CHAPTER 13
Aggregate Supply
14
Deriving the Phillips Curve from SRAS
(1 ) (2 ) (3 ) Y Y (P E P ) P E P (1 ) (Y Y ) P E P (1 ) (Y Y )
so she produces more. With many producers thinking this way, Y will rise whenever P rises above EP.
CHAPTER 13
Aggregate Supply
11
Summary & implications
Aggregate Supply
CHAPTER 13
6
The sticky-price model
P s [ E P ] (1 s )[ P a (Y Y )]
price set by sticky price firms price set by flexible price firms
Subtract (1s)P from both sides:
sP s [ E P ] (1 s )[ a (Y Y )]
Divide both sides by s :
P EP
CHAPTER 13
(1 s ) a s
(Y Y )
7
Aggregate Supply
The Phillips curve states that depends on expected inflation, E. cyclical unemployment: the deviation of the actual rate of unemployment from the natural rate supply shocks, (Greek letter “nu”).
宏观经济学ch13
The greater the fraction of flexible price firms,
the smaller is s and the bigger is the effect of Y on P.
CHAPTER 13 Aggregate Supply
slide 13
The sticky-price model
and hence reduce their demand for labor. ▪ The leftward shift in labor demand causes
the real wage to fall.
CHAPTER 13 Aggregate Supply
slide 15
Summary & implications
before they know how P and Y will turn out: p P e a (Y e Y e )
CHAPTER 13 Aggregate Supply
slide 10
The sticky-price model
p P e a (Y e Y e )
▪ Assume firms w/ sticky prices expect that
slide 12
The sticky-price model
▪ High P e High P
P
Pe
(1
s s
)
a
(Y
Y )
If firms expect high prices, then firms who must set
prices in advance will set them high.
▪ Supplier doesn’t know price level at the time
经济学原理-宏观-功课2
《经济学原理——宏观经济学》PRINCIPLES OF ECONOMICS: MACROECONOMICSAssignment 2 (Week 3) Consumption, Saving and Investment1. (a) The relationship between consumption expenditure and disposable income is called the____________. The relationship between saving and disposable income is called the ____________. Negative saving is called ____________. (b) The ratio of consumption expenditure to disposable income is called the____________ to consume, and the ratio of saving to disposable income is called the ____________ to save. (c) The fraction of the last yuan of disposable income that is spent on consumption is called the ____________. (d) As disposable income increases, consumption expenditure ___________ and saving ___________.2. (a) The observed interest rate minus the expected ____________ rate gives the realinterest rate. As the real interest rate rises, planned investment expenditure ___________. The curve showing the relationship between the real interest rate and the level of planned investment (holding other things constant) is called the ____________ curve. (b) The higher the expected profitability of new capital equipment, the ____________ is the amount of investment. The more depreciation that takes place, the ____________ is the volume of investment that is needed to replace that worn-out capital. Thus a rise in the expected profitability or an increase in depreciation will cause the investment demand curve to shift to the ____________. (c) The _____accelerator_______ principle states that the investment demand curve will shift in response to changes in the level of real GDP.3. Consider an economy of 1 million identical households, each of which has aconsumption function as illustrated in the graph of the above question. Suppose further that net taxes are one third of real GDP.(a) What is the marginal propensity to consume out of disposable income?(b) What is the marginal propensity to consume out of real GDP?(b) Draw the aggregate consumption function for this economy.4. The following graph illustrates the consumption function for a household. Thedisposable income is at the moment Ұ20,000.(a) Compute the average propensities to consume (APC) and to save (APS).(b) Compute the marginal propensities to consume (MPC) and to save (MPS).(c) Compute the level of saving.(d) Given the form of the consumption functions as: C = a + bY d , where C is the consumption expenditure, and Y d the disposable income. What are the meanings of ‘a’ and ‘b’?(e) Express the saving function in terms of a, b, and Y d , and find the MPS.(f) Draw a graph under the one given in the question to illustrate the saving function.45o lineConsumption f unction1218Yd(?,000)C (?,000)Yd(?,000)S (?,000)5. Use the data for an economy given below to response to the following:Consumption expenditure (C) Ұ600 bn Taxes (TX) 400 bn Transfer Payments (TR)250 bn Exports (EX) 240 bn Imports (IM)220 bn Government spending on goods and services (G) 200 bn Gross Investment (I) 150 bn Depreciation (Depr)60 bn(a) Compute GNP. Which approach you are using? (b) Compute net investment. (c) Compute net exports.(d) Compute disposable income (Y d ). (e) Compute saving (S).(f) Compute total leakages from and total injections into the circular flow of income. Arethey equal?。
13 - Saving, Investment, and the Financial System
Learn about some of the important financial
institutions in the U.S. economy
Consider how the financial system is
related to key macroeconomic
variables
U.S. ecoREAL ECONOMY IN THE LONG RUN
financial system the group of institutions in the economy that help to match one person’s saving with another person’s investment
CHAPTER 13 SAVING, INVESTMENT, AND THE FINANCIAL SYSTEM
267
FINANCIAL MARKETS
Financial markets are the institutions through which a person who wants to save can directly supply funds to a person who wants to borrow. The two most important financial markets in our economy are the bond market and the stock market.
The financial system consists of those institutions in the economy that help to match one person’s saving with another person’s investment. As we discussed in the previous chapter, saving and investment are key ingredients to long-run economic growth: When a country saves a large portion of its GDP, more resources are available for investment in capital, and higher capital raises a country’s productivity and living standard. The previous chapter, however, did not explain how the economy coordinates saving and investment. At any time, some people want to save some of their income for the future, and others want to borrow in order to finance investments in new and growing businesses. What brings these two groups of people together? What ensures that the supply of funds from those who want to save balances the demand for funds from those who want to invest?
巴罗宏观经济学：现代观点第7章
Macroeconomics Chapter 7
15
Consumption and Saving
Choosing consumption: the intertemporal-substitution effect.
C1 + (B1/P + K1) − ( B0/P+K0) = (w/P)1·L + i0·(B0/P +K0)
Consumption in year1 + real saving in year1 = real income in year 1
Macroeconomics Chapter 7
π /P = 0 C+(1/P)·∆B+∆K=(w/P)·L+i·(B/P+K) consumption+ real saving = real income
Macroeconomics Chapter 7
2
Consumption and Saving
Macroeconomics Chapter 7
C1 + C2/(1+i1) = (1+ i0)·(B0/P+K0) + (w/P)1·L+(w/P)2·L/(1+i1)−(B2/P+K2)/(1+i1)
Macroeconomics Chapter 7
9
Consumption and Saving
Present value
If the interest rate, i1, is greater than zero, $1 received or spent in year 1 is equivalent to more than $1 in year 2.
宏观经济学之消费consumption(精品PPT课件共46页)
CHAPTER 16 Consumption
slide 7
The basic two-period model
Period 1: the present
Period 2: the future
Notation
Y1 is income in period 1 Y2 is income in period 2 C1 is consumption in period 1 C2 is consumption in period 2 S = Y1 - C1 is saving in period 1 (S < 0 if the consumer borrows in period 1)
CHAPTER 16 Consumption
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How C responds to changes in r
An increase in r
C2
pivots the budget
line around the
point (Y1,Y2 ).
B
As depicted here,
A
C1 falls and C2 rises.
consume more
MPC > 0
save more
MPC < 1
save a larger fraction of their income
APC as Y
Very strong correlation between income and
consumption income seemed to be the main determinant of consumption
Chapter 13 Introduction
Chapter 13Consumption and Saving Multiple Choice Questions1. Consumption is an important element of aggregate demand because ita. Is the most volatile componentB. Accounts for roughly 70 percent of aggregate demandc. Is very interest sensitived. Is greatly affected by stock market activitye. All of the aboveDifficulty: Easy2. When the aggregate consumption function is defined as C = C o + cYD, thena. The mpc increases with higher levels of disposable incomeB. The mpc is constant at all levels of disposable incomec. The apc is constant at all levels of disposable incomed. The apc increases with higher levels of disposable incomee. The expenditure multiplier is less than oneDifficulty: Easy3. According to the simplified life-cycle theory of consumption, a retired person with zero income from labor woulda. Only consume the interest on accumulated wealthB. Consume a fraction of accumulated wealth based upon her/his life expectancyc. Have to decrease consumption sharply in order not to run out of funds too soond. Expect to be financially supported by her/his childrene. Consume more than during her/his working years since she/he does not expect to live much longerDifficulty: Medium4. The long-run marginal propensity to consume (mpc) isA. Larger than the short-run mpcb. Slightly smaller than the short-run mpcc. About half the size of the short-run mpcd. Identical to the short-run mpce. Always equal to 1Difficulty: Easy5. The debate about different consumption theories can be viewed as a debate over whethera. The consumption of durable or non-durable goods should be consideredb. Random events that can change consumption behavior really do occurc. Liquidity constraints do ever existD. The marginal propensity to consume is large or smalle. The average propensity to consume is less or greater than 1Difficulty: Easy6. The life-cycle theory of consumption implies thata. The mpc out of wealth is very smallb. The mpc out of permanent income is larger than the mpc out of transitory incomec. A large change in stock values can affect the economy, but the effect is fairly smalld. An individual's mpc out of permanent income changes with ageE. All of the aboveDifficulty: Medium7. According to the life-cycle theory of consumption, an individual'sa. Mpc out of wealth is fairly largeb. Mpc out of labor income increases with increasing age, until it becomes zero at retirement ageC. Mpc out of transitory income is fairly smalld. Level of consumption will decrease if his/her retirement age is increasede. None of the aboveDifficulty: Medium8. The life-cycle theory of consumption can be summarized as follows:a. Retired people need less so they can save more than working peopleb. People want instant gratification and seldom worry about the futurec. People always tend to consume almost all of their current incomeD. People plan their consumption and saving patterns to optimize the lifetime benefit from their disposable incomee. People adjust their current consumption constantly to keep a stable saving pattern over their lifetimeDifficulty: Medium9. According to the life-cycle theory of consumption, what should have occurred after the stock market crash of 1987?A. A decrease in current consumptionb. No change in current consumption since only nominal wealth was lostc. No change in aggregate consumption since most people do not invest in the stock marketd. An increase in consumption since people were afraid to savee. Both B and CDifficulty: Medium10. In 1968, President Johnson and Congress implemented a temporary surcharge on personal and corporate income taxes. What was the effect of this?a. Economic activity declined sharply and the economy entered a recessionb. Consumption and investment spending declined significantlyC. Households decreased their savings and aggregate demand was hardly affected at alld. Consumption and saving declined, while investment was not affectede. Both A and BDifficulty: Medium11. If we compare the life-cycle theory of consumption with the permanent-income theory we can conclude that they bothA. Pay careful attention to microeconomic foundationsb. Agree that temporary tax cuts can be used to stimulate the economyc. Have similar theoretical bases but disagree widely in their policy implicationsd. Explain why large changes in current income cause large changes in current consumptione. None of the aboveDifficulty: Medium12. Which of the following theories of consumption behavior was introduced by Milton Friedman?a. The absolute-income hypothesisb. The relative-income hypothesisC. The permanent-income hypothesisd. The life-cycle hypothesise. The random-walk hypothesisDifficulty: Easy13. The life-cycle theory of consumption was first advanced bya. James Duesenberryb. Milton Friedmanc. Robert Halld. John Maynard KeynesE. Franco ModiglianiDifficulty: Easy14. The permanent-income theory of consumption implies thatA. The short-run multiplier is smaller than the long-run multiplierb. The short-run multiplier is larger than the long-run multiplierc. The short-run multiplier is identical to the long-run multiplierd. The long-run multiplier is equal to 1e. The short-run multiplier is less than 1Difficulty: Easy15. According to the permanent-income theorya. Increases in current income lead to proportionate increases in consumption and savingb. A rise in income affects consumption only after a delay of several yearsc. A person's consumption in any given year will be strongly affected by interest rate changesd. A person's consumption in any year will always be closely tied to his/her highest previous level of consumptionE. None of the aboveDifficulty: Medium16. If you are age 20, have no accumulated wealth, and have an expected average annual income of $36,000, how much should you consume each year if you want to retire at age 65 and expect to live until age 80? You desire to leave no estate and to consume an equal amount in each of the next 60 years.a. $36,000b. $31,000C. $27,000d. $22,000e. $20,000Difficulty: Medium17. Assume a worker at age 25 with annual earnings of $45,000 who wants to retire at age 65 and expects to live until age 75. How much would the worker consume annually?a. $40,000B. $36,000c. $32,000d. $30,000e. $28,000Difficulty: Medium18. The permanent-income theory of consumption asserts that people prefer a stable level of consumption throughout their lives anda. Will forego temporary or transitory opportunities to obtain higher income and consumption B. Calculate their level of consumption from the information they have regarding their average expected lifetime incomec. Will only change their consumption behavior significantly if there is a transitory change in their incomed. This implies that the short-run mpc is greater than the long-run mpce. Therefore always save the same fraction of their current incomeDifficulty: Easy19. According to the permanent-income theory of consumption, a person whose income fluctuates widely from year to year will havea. A higher apc in high-income years than in low-income yearsB. A lower apc in high-income years than in low-income yearsc. A consistently high apc year after yeard. A consistently low apc year after yeare. An apc that is equal to 1Difficulty: Medium20. According to the permanent-income theory, if individuals A and B have the same average annual income but A's income fluctuates greatly from year to year while B receives an almost even flow of income each year, thena. A will spend less than B out of permanent incomeb. B will spend less than A out of permanent incomeC. A will weigh current income less heavily in making consumption decisions than Bd. B will weigh current income less heavily in making consumption decisions than Ae. A's consumption will always be less than B'sDifficulty: Easy21. According to the permanent-income theory, which of the following would have the greatest impact on the current consumption of a 45 year-old tenured college professor?A. A promotion to full professor combined with a $5,000 raiseb. A $5,100 advance payment for a book that will take two years to writec. Winning $5,200 in the Reader's Digest Sweepstakesd. A loss of a stamp collection worth $5,400e. An inheritance of $5,500 from a distant uncleDifficulty: Easy22. If a worker gets a large one-time Christmas bonus, most likely the following will occur:a. An immediate substantial increase in family consumptionb. Permanent family income will increase substantiallyc. Transitory family income will not be affectedD. Family saving will increase that yeare. All of the aboveDifficulty: Easy23. What does the permanent-income theory of consumption predict you would most likely do with $25,000 that you just won on a TV game show?a. Travel throughout Europe and eat in five-star restaurantsb. Invite all your friends to a big bashC. Put the money in the bank to finance your next year in colleged. Take a trip to Las Vegas to try and double your winningse. None of the aboveDifficulty: Easy24. Assume you unexpectedly inherit $20,000. Which of the following fits the life-cycle or permanent-income theory of consumption?a. You buy yourself some blue chip stocksb. You pay back part of your student loanc. You spend $600 on a new Playstation and use the rest to buy government bondsd. You deposit $1,000 in your checking account and $19,000 in your savings accountE. All of the aboveDifficulty: Medium25. According to the permanent-income theory of consumptiona. Permanent income is always lower than transitory incomeb. The mpc out permanent income is close to zeroc. The mpc out of transitory income is close to 1d. All of the aboveE. None of the aboveDifficulty: Medium26. A temporary tax change will significantly affect current consumptiona. But only if it does not come as a surpriseB. If liquidity constraints existc. But only for the elderlyd. As long as it does not lead to a budget deficite. None of the aboveDifficulty: Medium27. Assume you define your permanent income as the average of your income over the most recent five years, and you always consume 90% of your permanent income. What is your current consumption if your income was $30,000 in the first of these five years and each year from then on you got a raise of $2,000?a. $36,000b. $34,200C. $30,600d. $28,800e. $27,000Difficulty: Difficult28. The random-walk theory of consumption predicts thatA. The slope of a line relating C(t+1) to C(t) is equal to 1b. The slope of a line relating C(t+1) to C(t) is equal to 0c. The slope of a line relating C(t+1) to C(t) is close to 0d. The slope of a line relating C(t) to Y(t) is close to 1e. None of the aboveDifficulty: Medium29. Robert E. Hall's theory of consumption behavior is calleda. The absolute-income hypothesisb. The permanent-income theoryC. The random-walk theoryd. The buffer-stock theorye. The life-cycle theoryDifficulty: Easy30. Hall's random walk-theory of consumption states that consumption tomorrow should equala. Income tomorrow minus income today plus some random errorb. Income today minus consumption today plus some random errorC. Consumption today plus some random errord. Permanent income plus some random errore. Income tomorrow plus some random errorDifficulty: Easy31. The random-walk theory of consumption asserts that changes in consumption arise from unexpected changes in income. This approacha. Clearly contradicts Modigliani's theoryb. Clearly contradicts Friedman's theoryc. Contradicts Modigliani's theory but supports Friedman's theoryd. Supports Modigliani's theory but contradicts Friedman's theoryE. Supports Modigliani's and Friedman's theoriesDifficulty: Medium32. Actual consumption behavior exhibits both "excess smoothness" and "excess sensitivity," which means thata. Consumption responds too strongly to surprise changes in incomeb. Consumption responds too little to predictable changes in incomec. Consumption always follows a random walkd. Consumption always adjusts with long lagsE. None of the aboveDifficulty: Medium33. The fact that consumption exhibits "excess sensitivity" implies that consumptionA. Responds too strongly to predictable changes in incomeb. Responds too little to predictable changes in incomec. Responds too little to surprise changes in incomed. Is never affected by liquidity constraintse. Never behaves as Keynes predictedDifficulty: Medium34. The sensitivity of current consumption to changes in current income arises fromA. Liquidity constraintsb. The close relation between current consumption and permanent incomec. Income changes that tend to be mostly random and unpredictabled. The close relation between current and lagged consumptione. None of the aboveDifficulty: Medium35. The sensitivity of current consumption to changes in current income can be explained byA. Myopiab. The absence of liquidity constraintsc. The fact that consumers have the opportunity to borrowd. The fact that consumers always realize when a permanent change in income has occurrede. None of the aboveDifficulty: Medium36. Buffer-stock savingA. Is consistent with the life-cycle hypothesis if uncertainty about future needs is includedb. Disproves the life-cycle hypothesisc. Is the result of a permanent increase in income that is not immediately consumedd. Explains the wealth effecte. None of the aboveDifficulty: Medium37. If uncertainty about future income and future needs is incorporated into the life-cycle theory of consumption, thena. Buffer-stock saving can no longer be explainedb. The fact that consumption is interest sensitive can be explainedC. The fact that people rarely use up their lifetime saving can be explainedd. The fact that saving is interest sensitive can be explainede. It is significantly different from the permanent-income theoryDifficulty: Medium38. Empirical studies of aggregate consumption have shown thata. 100% of the variation in consumption can be explained by changes in current incomeB. Wealth effects generally account for only a small amount of consumer expendituresc. Wealth effects generally are very large, which explains the large variations in consumption from year to yeard. Changes in wealth have a bigger impact on consumption than changes in incomee. The marginal propensity to consume out of wealth is close to oneDifficulty: Medium39. The theory of consumption of durable goodsA. Is basically a theory of investment applied to householdsb. States those durable goods purchases are very insensitive to interest rate changesc. Can be explained very well by the life-cycle theory, since people spread their durable goods purchases equally over their lifetimesd. Suggests that expenditures on durable goods do not increase utility as much as expenditures on other consumption goodse. None of the aboveDifficulty: Medium40. Liquidity constraints explaina. Why consumers may spend less than the permanent-income theory predicts as their current income fallsb. Why consumption may increase more than the life-cycle hypothesis predicts when income recovers after a recessionc. Why consumers may sometimes behave in a manner predicted by the simple Keynesian consumption functionD. All of the abovee. None of the aboveDifficulty: Medium41. Assume the government announces an income tax surcharge of 10% for next year only and the Fed announces that it will keep interest rates constant. What effect do you think this will have on the economy?a. Households will immediately curtail their spending and aggregate demand will decline significantly, causing a recessionb. Households will reduce their spending significantly starting next yearC. Households will not significantly alter their spending behavior this or next year and the effect on the economy will be minimald. Households will spend a lot more this year, causing a temporary boome. Households will save a lot more this year so they won't have to reduce their spending next yearDifficulty: Medium42. If the interest rate increases,a. Consumption of non-durable goods will decrease substantiallyb. Saving will increase substantiallyc. Consumption of durable goods will increase substantiallyd. Both B and CE. None of the aboveDifficulty: Medium43. There is empirical evidence for the fact thata. An increase in interest rates significantly reduces the level of consumption of non-durable goodsb. An increase in wealth has no effect on the level of consumptionC. The effects of interest rate changes on saving are small and hard to determined. An increase in interest rates significantly increases the level of savinge. None of the aboveDifficulty: Difficult44. When examining the impact of changes in the interest rate on saving, which of the following is true?a. Higher interest rates may make saving more attractiveb. Higher interest rates allow individuals to save less each year to reach their retirement saving goalc. Empirical evidence does not suggest that interest rate changes significantly affect saving D. All of the abovee. None of the aboveDifficulty: Medium45. In the Fisher diagram, which gives a microeconomic explanation of why an increase in the rate of interest (i) can lead to either an increase or a decrease in current consumption, the budget constraint can be formulated asA. C later = (1 + i) (Y now - C now)b. C later = (1 + i) (Y later - Y now)c. C later = i (Y now - C now)d. C later = (Y now - C now)/ (1 + i)e. C later = (Y now - C now)Difficulty: Difficult46. Any policy designed to increase business saving will most likelya. Not affect national saving since personal saving will decline proportionallyb. Not affect national saving since the resulting budget deficit will reduce government saving C. Increase national saving since personal saving will decrease by less than the increase in business savingd. Reduce national saving since personal saving will decrease by more than the increase in business savinge. Reduce national saving due to the decline in personal and government savingDifficulty: Medium47. The Barro-Ricardo equivalence propositiona. States that debt-financing merely postpones taxation and therefore in many instances is equivalent to current taxationb. Relies on the absence of liquidity constraints and the presence of an operational bequest motivec. Implies that a cut in current taxes that carries with it an implied increase in future taxes will lead to an increase in private savingd. Was not supported by events of the 1980s as taxes were cut, budget deficits increased, and private saving declinedE. All of the aboveDifficulty: Medium48. The proposition that financing debt by issuing bonds merely postpones taxation and is therefore in many instances equivalent to current taxation is known as thea. Balanced budget theoremb. Rational expectations propositionC. Barro-Ricardo equivalence propositiond. Reagan theory of taxatione. None of the aboveDifficulty: Easy49. The Barro-Ricardo equivalence proposition relies ona. The presence of an operational bequest motiveb. The absence of liquidity constraintsc. The presence of liquidity constraintsD. Both A and Be. Both A and CDifficulty: Medium50. The Barro-Ricardo equivalence proposition implies that tax cutsa. Always lead to a reduction in the budget deficitb. Always lead to the crowding out of investment spendingC. That lead to higher budget deficits do not stimulate consumption since people will save in anticipation of future tax increasesd. Provide important incentives for economic growthe. Ease people's liquidity constraints so they consume moreDifficulty: Medium。
Ch 13 Savings, Investment, Financial System,宏观经济
Financial markets: institutions through which
savers can directly provide funds to borrowers. Examples:
The Bond Market.
A bond is a certificate of indebtedness.
SAVING, INVESTMENT, AND THE FINANCIAL SYSTEM
4
National Saving
National saving
= private saving + public saving
= (Y – T – C ) + (T – G)
=
Y – C – G
= the portion of national income that is not used for consumption or government purchases
SAVING, INVESTMENT, AND THE FINANCIAL SYSTEM
13
The Meaning of Saving and Investment Investment is the purchase of new capital.
Examples of investment: General Motors spends $250 million to build
SAVING, INVESTMENT, AND THE FINANCIAL SYSTEM
14
The Market for Loanable Funds
A supply-demand model of the financial system
13宏观经济学英文版(多恩布什)课后习题答案全解
Chapter 13Solutions to the Problems in the Textbook:Conceptual Problems:1.a. According to the life-cycle theory of consumption, people try to maintain a fairly stable consumption pathover their lifetime. Individuals save during their working years so they can keep up the same consumption stream after they retire. This implies that wealth increases steadily until retirement while consumption remains stable. We should therefore expect the ratio of consumption to accumulated saving (wealth) to decrease over time up to retirement.1.b. After retirement, wealth is used up to finance consumption during the remaining years. Therefore the ratioof consumption to accumulated saving (wealth) increases again after retirement, eventually approaching 1.2.a. Suppose that you and your neighbor both work the same number of years until retirement and you bothhave the same annual income. If your neighbor is in bad health and does not expect to live as long as you do, she will expect to have fewer retirement years in which to use accumulated wealth to finance a steady consumption stream. Your neighbor's goal for retirement saving will not be as high as yours, and compared to you, she will have a higher level of consumption over her working years.Since planned annual consumption (C) is determined by the number of working years (WL), the number of years to live (NL), and income from labor (YL), we get the equation:C = [(WL)/(NL)](YL).WL and YL are the same for you and your neighbor, but NL is smaller for your neighbor. Therefore you will have a lower level of consumption (C).(Note: Students may come up with a variety of different answers. For one, your neighbor, who is in bad health, currently has much larger medical bills than you do. Therefore she may not be able to save as much for retirement, even if she might expect to live as long as you. On the other hand, she may not have large medical bills now, but expects them later, as she gets older. This may induce her to save more now.While such arguments are valid, instructors should point out that the answer should be related to the life-cycle theory.)2.b. If we assume for simplicity that the rate of return on Social Security is the same as the rate of return onprivate saving, then the introduction of a Social Security system based on a trust fund should not have any effect on your level of consumption. Social Security may be considered a form of "forced saving," since you are forced to pay Social Security taxes during your working years and will, in return, receive benefits during your retirement years. However, most likely you would have voluntarily saved as much as the government is now “forcing” you to save with levying a Social Security tax. Therefore your consumption behavior will not change. Still, the levying of a Social Security tax reduces disposable income during your working years, increasing the ratio of consumption to disposable income (the average propensity to consume). If private saving were simply replaced with government saving, national saving would not be affected.In reality, however, the Social Security system is not strictly financed through a trust fund, but largely on a pay-as-you-go basis. The size of the Social Security trust fund was fairly insignificant until the system was amended in 1983. Now the trust fund is increasing and, in effect, contributing to the federal budget surplus. But because of our aging population, predictions are that the Social Security system will experience severe financial difficulties within the next 20-30 years. If the credibility of the system becomes an issue, people may intensify their saving efforts, since they no longer feel they can rely on the1public system to provide for them during retirement. In the past, most of the Social Security taxes were not "saved" but immediately used by the government to finance the benefits of the current retirees. This is why most economists claim that the Social Security system has led to a decrease in the national savings rate and a decrease in the rate of capital accumulation. The magnitude of this decrease, however, has not been clearly established.3.a. If you get a yearly Christmas bonus, you immediately treat it as part of your permanent income and spendit accordingly, that is, ∆C = c(∆Y). In other words, your current consumption will change significantly. 3.b. If you get a Christmas bonus for only this year, you will consider it as transitory income. Since yourpermanent income is hardly affected, you will consume only a small fraction of it and save the rest. In other words, your current consumption will not be significantly affected.4. Gamblers (or thieves) seldom have a very stable income. However, their consumption is determined bytheir permanent income, that is, their expected average lifetime income. Whether they have a large or small income during any given period, their consumption pattern remains relatively stable, since their permanent income is not significantly affected by temporary changes in earnings.5. Both theories, in their own way, try to explain why the short-run mpc is smaller than the long-run mpc.The life-cycle theory attributes the difference to the fact that people prefer a smooth consumption stream over their lifetime. Therefore the average expected lifetime income is the true determinant of current consumption. The permanent income theory suggests that the difference is due to measurement errors.Measured income has two components, that is, permanent and transitory income. But only permanent income is a true determinant of current consumption.6.a. One possible explanation could be that the “baby boomers” were still in their dissaving phase. In otherwords, if households of the baby boom generation still had to buy houses or pay for expenses related to childcare in their late twenties, they may not have been able to save for retirement yet.6.b. If the above explanation is correct, one can expect an increase in saving as these “baby boomers” age,become more financially solvent, and begin to prepare for retirement.7. The ranking from highest to lowest value should be first (a), then (d), and then (b). Clearly, (c) shouldbe lower than (a), but where exactly it ranks after that depends largely on the severeness of the liquidity constraint.8. A series follows a random walk when future changes cannot be predicted from past behavior. In otherwords, it does not have a mean or clear long-run value. Any major change comes about because of random shocks. Hall asserted that changes in current consumption largely come from unanticipated changes in income. According to the life-cycle theory or permanent-income theory, people try to smoothen out their consumption stream in such a way that its expected value is always the same in each period. Therefore, we can express future consumption as the expected value plus some error term, that is, some random value that is unpredictable. This error term is a shock to future income that is spread over the remaining lifetime.Hall supported the permanent-income hypothesis by showing that lagged consumption is the most2significant determinant of future consumption.9. The problem of excess sensitivity means that consumption responds more strongly to predictable changesin current income than the life-cycle theory and permanent-income theories predict. The problem of excess smoothness means that consumption does not respond as strongly to unpredictable changes in current income as these theories predict. However, the existence of these problems does not invalidate the theories.It simply means that the theories can explain consumption behavior only to a certain degree.10. Precautionary (or buffer stock) saving can be explained by uncertainty. It could be uncertainty in regardto one’s life expectancy or one’s time of retirement (af fecting the accumulated saving needed to finance retirement), or uncertainty about future spending needs (which may be caused by a change in family composition or health). Clearly, if we account for such uncertainties, we bring the model much closer to reality. For example, many elderly still continue to save after retirement in anticipation of predicted high medical costs not covered by Medicare.11.a. It is unclear whether an increase in the interest rate leads to an increase or a decrease in saving. On the onehand, as the interest rate increases, the return on saving increases and people may therefore increase their savings effort (due to the substitution effect). On the other hand, a higher return on saving implies that a given future savings goal can now be reached with a smaller savings effort in each year (due to the income effect).11.b. The income effect and the substitution effect generally tend to go in different directions, and the overalloutcome depends on the relative magnitude of these two effects. Until now, empirical evidence has not established a significant sensitivity of saving to changes in the interest rate. This would imply that the income and the substitution effects have about the same magnitude.12.a. According to the Barro-Ricardo hypothesis, it does not matter whether an increase in government spendingis financed by taxation or by issuing debt.12.b. The Barro-Ricardo hypothesis states that people realize that government debt financing by issuing bondssimply postpones taxation. In other words, people know that the government will have to raise taxes in the future to pay back what they have borrowed now. Therefore, expansionary fiscal policy that results in an increase in the budget deficit will no stimulate the economy since it will lead to an increase in saving rather than consumption. People want to be prepared to pay future taxes.12.c. There are two main objections to the Barro-Ricardo hypothesis. One is based on liquidity constraints, thatis, people may want to consume more but may not be able to borrow as much as they like. Therefore, if there is a tax cut, they will consume more, rather than save the tax cut. The other argument is that those people who benefit from a tax cut or an increase in government spending are not the same as those who will have to pay the higher taxes to pay off the debt. This argument assumes that people are not concerned about the welfare of their descendants.Technical Problems:1.a. If income remains constant over time, permanent income equals current income. Your permanent income3this year is YP0 = (1/5)(5*20,000) = 20,000.1.b. Your permanent income next year is YP1 = (1/5)(30,000 + 4*20,000) =1.c. Since C = 0.9YP, your consumption this year is C0 = 0.9*20,000 = 18,000.Your consumption next year is C1 = 0.9*19,000 = 17,100.1.d. In the short run, the mpc = (0.9)(1/5) = 0.18; but in the long run, the mpc = 0.9.1.e. We have already calculated this and next year's permanent income. In each of the coming years you add$30,000 and subtract $20,000, and therefore your permanent income (which is your average over a five year period) will increase by $2,000 each year until it reaches $30,000 after 5 years.YP o = (1/5)(5*20,000) = 20,000YP1 = (1/5)(1*30,000 + 4*20,000) = 22,000YP2 = (1/5)(2*30,000 + 3*20,000) = 24,000YP3 = (1/5)(3*30,000 + 2*20,000) = 26,000YP4 = (1/5)(4*30,000 + 1*20,000) = 28,000YP5 = (1/5)(5*30,000) = 30,000Y30,00028,00026,00024,00022,00020,0000 1 2 3 4 5 time2.a. The person lives for NL = 4 periods and earns a lifetime income ofYL = 30 + 60 + 90 + 0 = 180.Therefore consumption in each period will be C i = (1/4)180 = 45, i = 1, 2, 3, 4.This implies that saving in each period is:S1 = 30 - 45 = - 15; S2 = 60 - 45 = + 15; S3 = 90 - 45 = + 45; S4 = 0 - 45 = - 45.2.b. If liquidity constraints exist and the person cannot borrow in the first period, then she will consume all ofher income, that is, Y1 = C1 = 30.For the remaining three periods the person wants a stable consumption stream. Thus she will consume C(i) = (1/3)(60 + 90 + 0) = 50 in each of the remaining three periods i = 2, 3, 4.42.c. An increase in wealth of only $13 is not enough to offset the difference in consumption patterns betweenperiod 1 and the other periods. Therefore all of the increase in wealth will be consumed in period 1, such that C1 = 43. In the remaining three periods, consumption will be the same as in 2.b.An increase in wealth of $23 will be enough to offset the difference in consumption patterns. Lifetime consumption in each period will now be C i = (1/4)(180 + 23) = 50.75. This means that 20.75 (or almost all of the additional wealth) will be used up in the first period; the remaining 2.25 will be distributed over the next three years.3.a. According to the life-cycle theory and permanent income hypothesis (LC-PIH), the change in consumptionequals the surprise element, that is, ∆C LC-PIH= ε. According to the traditional theory, the change in consumption equals ∆C tr = c(∆YD). Therefore if a fraction λ of the population behaves according to the traditional theory and the other fraction behaves according to LC-PIH, then the total change in consumption is∆C = λ(∆C tr) + (1 - λ)(∆C LC-PIH) = λc(∆YD)+ (1 - λ)cε = (0.7)(0.8)10 + (0.3)ε = 5.6 + (0.3)ε3.b. ∆C = (.3)(.8)10 + (.7)ε = 2.4 + (.7)ε3.c. ∆C = (0)(.8)10 + 1ε = ε4.a. If the real interest rate increases, the opportunity cost of consuming should increase. Therefore, theaverage propensity to save, that is, the fraction of total income that is saved, should increase.4.b. If you only save for retirement and your savings goal is fixed, then you actually will save less. With ahigher interest rate it will take less saving each year to achieve your goal.4.c. The first case (4.a.) describes the substitution effect, whereas the second case (4.b.) describes the incomeeffect. Unless the magnitude of each of these effects is known, we cannot predict the overall effect of this interest rate increase on saving.5. One way to increase saving would be to either privatize or eliminate the Social Security system, so peoplewould have to save for retirement on their own. (Eliminating Social Security is not a very popular measure, but the privatization of Social Security is often discussed.) This would do away with the negative effect on saving that comes from the pay-as-you-go nature of financing Social Security. Another way might be to make it more difficult to borrow. The U.S. tax system encourages people (and firms) to borrow rather than save.5Additional Problems:1. As a share of GDP, how large is consumption compared to the other three main components.Would you expect consumption's share to increase or decrease in a recession?Consumption expenditures are roughly two thirds of total GDP, which is higher than the other three components (investment, government purchases, and net exports) taken together. The ratio of consumption to GDP, however, does not always remain constant. In a recession, for example, when income is below trend, we should expect the consumption-to-GDP ratio to increase, while in a boom, when income is above trend, we should expect the ratio to decrease. The reason is that current consumption is based on permanent rather than current income and when current income is greater than permanent income, the ratio of consumption to income (the apc) goes down. This argument is reinforced by the concept of automatic stability. When GDP falls, personal disposable income falls by less and thus consumption does not fall dramatically.2. True or false? Why?"The marginal propensity to consume out of transitory income is greater than the marginal propensity to consume out of permanent income."False. The permanent-income hypothesis argues that consumption is related to permanent disposable income. Individuals will only revise their consumption behavior significantly if they perceive a change in income as permanent. Very often people are uncertain as to whether a rise in income is permanent or transitory, so they do not significantly revise their consumption patterns immediately. This suggests a lower marginal propensity to consume out of transitory income than out of permanent income.3. Do you think that the marginal propensity to consume out of current income would differ betweentenured professors who have a high degree of job security and professional gamblers who never know when luck will strike?Tenured professors have a high degree of job security and their income does not vary a great deal. They can therefore relatively accurately estimate their permanent income. This means that their current consumption is largely based on current income, implying that their short-run mpc is fairly high. Gamblers, on the other hand, never know what their income in any given year is going to be. Therefore, they base their consumption decisions on their average expected lifetime income (permanent income) rather than on current income. This implies that their short-run mpc is fairly low.4. Is the short-run marginal propensity to save different between farmers and government employees?Why or why not?Government employees generally have very stable incomes and high job security. Therefore they base their consumption decision to a large extent on current income so their short-run mpc is high, while their short-run mps is low. Farmers, on the other hand, have highly variable incomes, depending on weather conditions. Therefore they tend to base their consumption decisions on their permanent income. Their short-run mpc is low, while their short-run mps is high.5. "If most people base their consumption decisions on their current rather than their permanentincome, then the short-run multiplier is greater than the long-run multiplier." Comment on this6statement.If most people follow the traditional theory and base their consumption decisions mostly on current income, then their mpc out of current income is high, making the value of the short-run multiplier high. But if most people follow the permanent-income theory and base their consumption decisions primarily on permanent income, then the short-run mpc is low, making the value of the short-run multiplier low. In either case, as long as some people follow the permanent-income theory, then the short-run multiplier should always be smaller than the long-run multiplier.6. Assume you define your permanent income as the average of this and the past four years’ incomesand you always consume 4/5 of your permanent income. Your earnings record over these years has been: Y t= 40,000, Y t-1 = 38,000, Y t-2 = 34,000, Y t-3 = 32,000, Y t-4 = 31,000.If next year your income increases to Y t+1= 46,000, by how much will your consumption change between year t and year t+1?YP t= (1/5)(40,000 + 38,000 + 34,000 + 32,000 + 31,000) = (1/5)175,000 = 35,000C t= (4/5)YP t = (4/5)35,000 = 28,000YP t+1 = (1/5)(46,000 + 40,000 + 38,000 + 34,000 + 32,000) = (1/5)190,000 = 38,000C t+1 = (4/5)YP t+1 = (4/5)38,000 = 30,400Therefore your consumption will change by C = 2,400.7. Assume a distant aunt gives you several thousand dollars and you use the money to pay back part ofyour student loan. Does your behavior correspond to the prediction of the permanent-income theory?Why or why not?Paying back your debts actually can be seen as an act of "saving." Therefore, since you use some unexpected income to save (rather than consume), your behavior fits the permanent income theory nicely.8. "Early retirement raises aggregate consumption." Comment on this statement.Early retirement reduces lifetime income and increases the length of retirement. The life-cycle model states that individuals consume on the basis of their average lifetime income to maintain a stable consumption path throughout their lives. In an economy with a constant population and no technological progress, aggregate consumption will fall if retirement age drops because people who retire earlier have to accumulate funds for more retirement years over fewer working years. As this can only be accomplished with greater saving, consumption has to be reduced.However, if the population is growing and retirement benefits are financed through taxes levied on workers currently employed, then aggregate consumption may actually rise. In this case, the working population will be paying for the reduction in lifetime earnings experienced by those who have retired early, and there is less need for retirement saving.9. The simple life-cycle hypothesis predicts that people save over their working years but dissave7during their retirement years. Do we actually observe such behavior? If not, can you explain why not?Most elderly actually do not dissave, but they do save less than they did during their working years. One of the reasons that the elderly still save may be the fact that they anticipate large medical bills as they grow older and therefore prefer to keep a certain buffer stock of saving. The elderly may also hope to leave some of their savings as bequests to their children or grandchildren.10. On October 19, 1987, the Dow Jones industrial average dropped about 500 points, or a little morethan 23%. What effect should a decline in stock values of this magnitude have had on aggregate demand according to the life-cycle theory of consumption?According to the life-cycle theory, any change in wealth should affect consumption behavior. The decline in stock values constituted roughly a $500 billion decline in wealth. However, we did not see a huge decrease in consumption in 1987, since the wealth effect tends to be fairly small. In addition, the Fed reacted promptly, announcing that liquidity would be provided if needed.11. Does the random walk model of consumption disprove the permanent income hypothesis? Why orwhy not?Robert Hall tried to disprove the permanent income theory by applying the concept of rational expectations to the theory of consumption. He asserted that consumption patterns may follow a random walk, that is, changes in consumption may come from unanticipated changes in income. However, by concluding that lagged consumption is the most significant determinant of future consumption, Hall actually supported the predictions of the permanent-income hypothesis.12. How is Hall’s random walk model of consumption related to the permanent-income hypothesis andwhat are the implications of these theories for fiscal policy?Hall asserted that changes in current consumption largely come from unanticipated changes in income. Any major change in consumption comes about because of random shocks. According to the permanent-income theory, people try to smoothen out their consumption stream in such a way that its expected value is always the same in each period. Therefore, we can express future consumption as the expected value plus some error term, that is, some random value that is unpredictable. This error term is a shock to future income that is spread over the remaining lifetime. Hall supported the permanent-income hypothesis by showing that lagged consumption is the most significant determinant of future consumption. The implication for fiscal policy is that a temporary tax change will not significantly affect current consumption, unless there are liquidity constraints.13. True or false? Why?"A temporary tax surcharge never has a significant effect on current consumption."False. If individuals know that the tax surcharge is temporary they will not alter their spending patterns as the tax change has little impact on their permanent income. However, when liquidity constraints exist, individuals may be forced to adjust their consumption behavior immediately. If individuals barely earn enough to finance their current consumption, for example, they may be forced to cut their current consumption if a temporary tax surcharge is levied.814. "As a response to a temporary increase in personal and corporate income taxes consumers willreduce their spending and firms will cut production and increase prices. Therefore all we will get is stagflation, that is, an increase in both unemployment and inflation, and tax revenues won't increase." Comment on this statement.The life-cycle/permanent-income theory of consumption predicts that temporary changes in income will not significantly affect the level of consumption. Thus a temporary tax surcharge should not significantly affect aggregate demand. A similar argument can be made about firms, since changes in production are often costly and therefore a temporary surcharge on corporate income taxes should not affect the level of output and prices. The levels of national income and prices should not be affected significantly but we should see a (temporary) increase in tax revenues due to the surcharge. (Note, however, that if consumers and firms face liquidity constraints, they may react to a temporary surcharge in the way described in the statement.)15. "Any tax cut that results in an increase in the budget deficit will fail to stimulate aggregatedemand." Comment on this statement. In your answer explain the effect of such a tax cut on interest rates, money supply, and private domestic saving.The Barro-Ricardo proposition states that a tax cut that results in a budget deficit increase leads to higher saving. Since people will anticipate a future tax increase to finance the higher deficit, permanent income will not be affected. Thus consumption will not be affected; instead people will save the tax cut. Since this is purely a fiscal policy measure, money supply is not affected. The increase in the budget deficit will lead to higher interest rates due to the increased demand for credit. (Note that evidence from the 1980s does not support this hypothesis. The Reagan tax cuts in 1981 resulted in a large increase in the budget deficit but there was no subsequent increase in saving.)916. Assume the government announces plans for fiscal expansion that are likely to result inincreased government borrowing. What effect should this have on aggregate consumption, money supply, the income velocity of money, the trade deficit, and savings?The Barro-Ricardo proposition states that if fiscal expansion results in a budget deficit, the public will anticipate a future tax increase to finance the deficit. They believe that their permanent income will not be affected and choose to save rather than consume more. Therefore, we should expect an increase in private saving but no significant change in consumption. Thus there is no significant change in national income and, since this is solely a fiscal policy, money supply is also not affected. Therefore there is no change in the income velocity. The trade deficit may also not be significantly affected, since domestic saving supports the budget deficit. However, evidence from the 1980s does not lend support for this hypothesis. Saving did not increase after the Reagan tax cuts that resulted in a huge increase in the budget deficit. Instead, we saw an increase in consumption and the trade deficit, since higher interest rates caused an inflow of funds, leading to an appreciation of the U.S. dollar. The income velocity also increased, due to the increase in economic activity.10。
ch13Aggregate Demand,Aggregate Supply(宏观经济学-Karl Case, Ray Fair)
© 2004 Prentice Hall Business Publishing
• Aggregate supply is the total supply of all goods and services in the economy.
Factors That Shift the Aggregate Demand Curve
Expansionary monetary policy Ms AD curve shifts to the right Contractionary monetary policy Ms AD curve shifts to the left
© 2004 Prentice Hall Business Publishing
Principles of Economics, 7/e
Karl Case, Ray Fair
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Shifts of the Aggregate Demand Curve
CHAPTER 13: Aggregate Demand, Aggregate Supply, and Inflation
© 2004 Prentice Hall Business Publishing
Principles of Economics, 7/e
Karl Case, Ray Fair
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Deriving the Aggregate Demand Curve
(完整word版)曼昆宏观经济学名词解释 (中英文)
宏观经济学第十五章MEASUREING A NATION’S INCOME一国收入的衡量Microeconomics the study of how households and firms make decisions and how they interact in markets.微观经济学:研究家庭和企业如何做出决策，以及他们如何在市场上相互交易。
Macroeconomics the study of economy-wide phenomena,including inflation,unemployment，and economic growth宏观经济学：研究整体经济现象，包括通货膨胀、失业和经济增长.GDP is the market value of final goods and services produced within a country in a given period of time.国内生产总值GDP：给定时期的一个经济体内生产的所有最终产品和服务的市场价值Consumption is spending by households on goods and services， with the exception of purchased of new housing.消费：除了购买新住房,家庭用于物品与劳务的支出。
Investment is spending on capital equipment inventories， and structures, including household purchases of new housing。
投资:用于资本设备、存货和建筑物的支出，包括家庭用于购买新住房的支出.Government purchases are spending on goods and services by local, state, and federal government.政府支出：地方、州和联邦政府用于物品和与劳务的支出.Net export is spending on domestically produced goods by foreigners (exports） minus spending on foreign goods by domestic residents （imports)净出口：外国人对国内生产的物品的支出(出口)减国内居民对外国物品的支出(进口）。
曼昆中级宏观经济学(英文) (13)
K K and L L
In chapters 7 and 8 (Economic Growth I and II), we will relax these assumptions
Determining GDP
Output is determined by the fixed factor supplies and the fixed state of technology:
l Intuition: L while holding K fixed
fewer machines per worker lower productivity
Check your understanding:
Which of these production functions have diminishing marginal returns to labor?
Factors of production
K = capital, tools, machines, and structures used in production
L = labor, the physical and mental efforts of workers
to keep our model simple
a) F (K ,L) 2K 15L b) F (K ,L) K L c) F (K ,L) 2 K )
L
Suppose W/P = 6.
0
1
d. If L = 3, should firm hire
2
more or less labor? Why? 3
How factor prices are determined
布兰查德宏观经济学第七版第7版英文版chapter (13)
Macroeconomics, 7e (Blanchard)Chapter 13: Technological Progress: The Short, the Medium, and the Long Run13.1 Productivity, Output, and Unemployment in the Short Run1) Technological unemployment is a macroeconomic phenomenon that occurs whenA) unemployment changes due to the effects of technology in high-technology industries.B) unemployment changes due to the effects of monetary and fiscal policy in the New Economy.C) hysterisis.D) Eurosclerosis.E) unemployment changes as a result of technological change.Answer: EDiff: 12) Which of the following statements about the United States during the twentieth century is correct?A) Output growth has been approximately equal to employment growth.B) Output growth has been slower than employment growth.C) Output growth has been faster than employment growth.D) Output has increased largely due to monetary and fiscal policy.E) Output has decreased largely due to monetary and fiscal policy.Answer: CDiff: 13) Suppose an economy experiences an increase in technological progress. This increase in technological progress willA) allow more output to be produced with the same number of workers.B) allow the same amount of output to be produced with fewer workers.C) lead to changes in the types of goods produced.D) all of the aboveE) none of the aboveAnswer: DDiff: 24) Some believe that technological progress leads to higher unemployment in the medium run. This claim that technological progress results in an increase in unemployment in the medium is supported byA) economic theory, but contradicted by the evidence.B) theory and evidence.C) the evidence, but contradicted by theory.D) neither theory nor evidence.E) none of the aboveAnswer: DDiff: 15) The evidence suggests that recent technological changeA) permanently increased the natural rate of unemployment.B) is different from past technological change, in that it has no impact on productivity.C) has increased productivity in the service sector only.D) has increased productivity in the manufacturing sector only.E) has increased the wage gap between skilled and unskilled workers.Answer: EDiff: 26) When the production function is represented by Y = NA, labor productivity is represented by which of the following expressions?A) 1/AB) NAC) A/YD) Y/AE) none of the aboveAnswer: EDiff: 27) When the unemployment rate is on the horizontal axis and the real wage is on the vertical axis, an increase in productivity will cause which of the following to occur?A) The wage-setting and price-setting curves will both shift downward.B) The wage-setting and price-setting curves will both shift upward.C) The price-setting curve to shift downward, and no shift in the wage-setting curve.D) The wage-setting curve to shift upward, and the price-setting curve to shift downward.E) The wage-setting curve to shift downward, and the price-setting curve to shift upward. Answer: BDiff: 28) The number of workers employed will not change as a result of an increase in productivity when which of the following occurs?A) The AS curve shifts downward.B) Output growth exceeds productivity growth.C) Productivity growth is equal to output growth.D) The AD curve shifts to the right.E) none of the aboveAnswer: CDiff: 29) An increase in productivity will cause which of the following according to the price-setting behavior of firms?A) a reduction in prices set by firmsB) an increase in the real wage paid by firmsC) a reduction in the markup set by firmsD) all of the aboveE) none of the aboveAnswer: DDiff: 210) Based on price setting behavior, which of the following will cause an increase in the price level?A) a reduction in productivityB) an increase in the nominal wageC) an increase in the markupD) all of the aboveE) none of the aboveAnswer: DDiff: 211) Based on our understanding of the wage setting equation, which of the following will not cause a reduction in the nominal wage?A) an increase in unemploymentB) a reduction in the expected price levelC) a reduction in expected productivityD) all of the aboveE) none of the aboveAnswer: EDiff: 212) Suppose workers' and firms' expectations of the price level and productivity are accurate. In this case, an increase in productivity will cause which of the following?A) an increase in both the real wage and the natural rate of unemploymentB) a decrease in both the real wage and the natural rate of unemploymentC) an increase in the real wage and no change in the natural rate of unemploymentD) a decrease in the real wage and an increase in the natural rate of unemploymentE) none of the aboveAnswer: CDiff: 213) The empirical evidence suggests that periods of high productivity growth will cause which of the following in the short run?A) higher markupsB) lower unemploymentC) constant real wagesD) greater equality in wagesE) none of the aboveAnswer: BDiff: 214) For this question, assume that firms' of productivity are accurate while workers' expectations of productivity adjust slowly over time. In this case, an increase in productivity will cause which of the following?A) an increase in both the real wage and the natural rate of unemploymentB) a decrease in both the real wage and the natural rate of unemploymentC) an increase in the real wage and a reduction in the natural rate of unemploymentD) a decrease in the real wage and an increase in the natural rate of unemploymentE) none of the aboveAnswer: CDiff: 215) For this question, assume productivity has been increasing by 5% per year. Also assume that workers' expectations of productivity growth adjust slowly over time. For this economy, a reduction in productivity growth from 5% to 2% will most likely cause which of the following to occur?A) an increase in the natural rate of unemploymentB) a reduction in the real wageC) an increase in the markup over labor costsD) all of the aboveE) none of the aboveAnswer: ADiff: 216) A major explanation for the decline in employment projected in textiles isA) increases in income.B) social problems in the U.S.C) shifts in production toward low-wage countries.D) inaccurate expectations about productivity growth.E) inaccurate expectations about the price level.Answer: CDiff: 117) Assume an economy experiences, for a given period, a 4% increase in output and a 2% increase in productivity. Given this information, we know that which of the following occurred for this economy during this period?A) The unemployment rate increased during this period.B) The unemployment rate decreased during this period.C) The unemployment rate did not change during this period.D) The effects on the unemployment rate are ambiguous.E) none of the aboveAnswer: BDiff: 218) Assume an economy experiences, for a given period, a 4% increase in output and a 4% increase in productivity. Given this information, we know that which of the following occurred for this economy during this period?A) The unemployment rate increased during this period.B) The unemployment rate decreased during this period.C) The unemployment rate did not change during this period.D) The effects on the unemployment rate are ambiguous.E) none of the aboveAnswer: CDiff: 219) Assume an economy experiences, for a given period, a 1% increase in output and a 5% increase in productivity. Given this information, we know that which of the following occurred for this economy during this period?A) The unemployment rate increased during this period.B) The unemployment rate decreased during this period.C) The unemployment rate did not change during this period.D) The effects on the unemployment rate are ambiguous.E) none of the aboveAnswer: ADiff: 220) Because of labor hoarding, an increase in output may signalA) an increase in employment.B) a reduction in employment.C) no change in employment.D) a reduction in productivity.Answer: CDiff: 121) Because of labor hoarding, a reduction in output may signalA) an increase in employment.B) a reduction in employment.C) no change in employment.D) a reduction in productivity.Answer: CDiff: 122) Suppose the aggregate production function is represented by Y = AN. Which of the following expressions represents the number of additional workers required to increase production by one unit?A) 1/AB) Y/NC) 1/ND) 1/YE) none of the aboveAnswer: ADiff: 123) For this question, assume that the aggregate production function is represented by Y = A. Which of the following represents the marginal cost of producing an additional unit of output?A) WB) W/AC) A/WD) (1 + A)WE) 1/WAnswer: BDiff: 224) For this question, assume that the aggregate production function is represented by Y = AN. Which of the following represents the price setting relation for this economy?A) (1 + m)AB) (1 + m)A/WC) (1 + m)WD) W/AE) none of the aboveAnswer: EDiff: 225) Which of the following represents the wage setting relation when changes in labor productivity are allowed to occur?A) W = P e F(u,z)B) W = P(1 + m)C) W = P e F(u,z)/AD) W = AP/(1 + m)E) none of the aboveAnswer: EDiff: 226) For this question, assume that expectations of P and A are correct. Based on price setting behavior, the real wage will be equal to which of the following?A) A/(1 + m)B) AP/(1 + m)C) APF(u,z)D) P(1 + m)E) none of the aboveAnswer: ADiff: 227) Which of the following is not believed to cause recent increases in wage inequality?A) international tradeB) contractionary monetary policyC) skill-biased technological progressD) all of the aboveE) none of the aboveAnswer: BDiff: 128) For this question, assume that expectations of P and A are correct. Now suppose that there isa 4% increase in A. Given this information, which of the following will occur?A) The PS relation will shift up by 4%.B) The WS relation will shift up by less than 4%.C) The WS relation will shift down by 4%.D) The PS relation will shift down by 4%.Answer: ADiff: 229) For this question, assume that expectations of P and A are correct. Now suppose that there isa 1% increase in A. Given this information, which of the following will occur?A) a 1% increase in the real wage and a reduction in the natural rate of unemploymentB) a 1% increase in the real wage and no change in the natural rate of unemploymentC) no change in the real wage and an increase in the natural rate of unemploymentD) no change in the real wage and a reduction in the natural rate of unemploymentAnswer: BDiff: 230) For this question, assume expectations of P and A are correct. Now suppose that there is a 3% reduction in A. Given this information, which of the following will occur?A) The PS relation will shift up by 2%.B) The WS relation will shift down by less than 2%.C) The WS relation will shift down by 2%.D) There will be no change in the real wage.Answer: CDiff: 231) For this question, assume that expectations of productivity are slow to adjust. Further assume that A had been increasing by 6% a year. Now suppose that A only increases by 2% in period t. This slowdown in productivity growth will causeA) the PS relation to shift up more than the WS relation.B) the WS relation to shift up more than the PS relation.C) the natural rate of unemployment to fall.D) the real wage to fall.Answer: BDiff: 232) For this question, assume that expectations of productivity are slow to adjust. Further assume that A had been increasing by 2% a year. Now suppose that A increases by 5% in period t. This increase in productivity growth will causeA) the real wage to rise and no change in the natural rate of unemployment.B) the WS relation to shift up more than the PS relation.C) the natural rate of unemployment to fall.D) the real wage to fall.Answer: CDiff: 233) For this question, assume that expectations of productivity are slow to adjust. An increase in productivity growth from 1% to 3% will causeA) an increase in the real wage of 1% and an increase in u n.B) an increase in the real wage of 1% and a reduction in u n.C) an increase in the real wage of 3% and an increase in u n.D) an increase in the real wage of 3% and a reduction in u n.Answer: DDiff: 234) Among the reasons that the poor countries have been unable to close the "technology gap" with the rich countries isA) poorly established property rights.B) poorly developed financial markets.C) low education levels.D) all of the aboveE) none of the aboveAnswer: DDiff: 135) When was the last year that GDP per capita in North Korea was approximately equal to GDP per capita in South Korea?A) 1950B) 1970C) 1990D) 2000E) none of the aboveAnswer: BDiff: 136) Based on price setting behavior, which of the following will cause a reduction in the price level?A) an increase in productivityB) a reduction in the nominal wageC) a reduction in the markupD) all of the aboveE) none of the aboveAnswer: DDiff: 237) There are some concerns that technological progress can lead to an increase in unemployment. Explain the two related but separate dimensions of technological progress. Answer: First, TP allows for a greater quantity of goods produced with the same inputs. Second, TP results in the production of new goods and the disappearance of old ones.Diff: 238) Joseph Schumpeter argued that growth was a process of creative destruction. Explain what is meant by the phrase, "creative destruction."Answer: When TP occurs and new goods are developed, old goods will disappear. In those industries that produced these "old" goods, employment will decrease. It is this process of technological progress causing the destruction of old jobs that is referred to as "creative destruction."Diff: 239) For this question, assume that expectations of productivity growth adjust slowly. Now, suppose that there is a 3% reduction in productivity. Explain how this 3% reduction in productivity can cause changes in the unemployment rate.Answer: The PS curve will shift up as productivity growth occurs; however, it will not shift up as much. If expectations of productivity are slow to adjust, the WS curve continues to shift up by a larger amount (based on past increases in A). The real wage will rise by the actual change in productivity. The unemployment rate will, however, increase because of the larger shift in the WS curve.Diff: 240) For this question, assume that expectations of productivity growth adjust slowly. Now, suppose that there is a 5% increase in productivity. Explain how this 5% increase in productivity can cause changes in the unemployment rate.Answer: The PS curve will shift up as productivity growth occurs; however, it will now shift up by a greater amount. If expectations of productivity are slow to adjust, the WS curve continues to shift up by a smaller amount (based on past increases in A). The real wage will rise by the actual change in productivity. The unemployment rate will, however, decrease because of the smaller shift in the WS curve.Diff: 213.2 Productivity and the Natural Rate of Unemployment1) For this question, assume that workers expectations of the price level and productivity are accurate. Now suppose that the economy experiences an increase in productivity. Which of the following will occur in the medium run?A) no change in unemploymentB) an increase in unemploymentC) a reduction in unemploymentD) no change in the natural level of output if the unemployment rate does not changeE) none of the aboveAnswer: ADiff: 22) Since 1971, the annual growth rate of real wages has beenA) remarkably high.B) positive, but low.C) zero.D) negative.E) impossible to measure accurately, and so has not been reported.Answer: DDiff: 13) In recent years, real wages of the least educated workersA) have increased faster than the real wages of college-educated workers.B) have increased, but by less than the real wages of college-educated workers.C) have decreased, but by less than the real wages of college-educated workers.D) have decreased, while the real wages of college-educated workers have increased.E) have decreased at about the same rate as the real wages of college-educated workers. Answer: DDiff: 24) In recent years, the increasing relative wage of skilled labor has been mostly due toA) a decrease in the supply of skilled labor that exceeds the decrease in demand.B) an increase in the demand for skilled labor that exceeds the increase in supply.C) a decrease in the supply of, and increase in the demand for, skilled labor.D) government laws promoting the hiring of skilled labor.E) government subsidies provided to college students.Answer: BDiff: 15) Which of the following would increase the gap in wages between skilled and unskilled workers?A) less technological progress of the kind we've experienced in the past 15 yearsB) new types of production technology that require workers to have more skillsC) an increase in the costs of going to collegeD) all of the aboveE) none of the aboveAnswer: DDiff: 26) Which of the following is not true about technological progress?A) allow for the production of a larger quantity of goods using the same number of workersB) lead to the production of new goodsC) lead to the disappearance of old goodsD) cause a reduction in employment in the short runE) none of the aboveAnswer: EDiff: 17) Suppose the aggregate production function is represented by the following: Y = AN. Given this information, labor productivity is given byA) Y.B) N/A.C) A/N.D) A.E) none of the aboveAnswer: DDiff: 18) Assume an economy experiences an increase in productivity that occurs as a result of a more widespread implementation of a major technological breakthrough. Given this information, we would expect which of the following to occur?A) aggregate demand would not changeB) aggregate demand would shift to the rightC) aggregate demand would shift to the leftD) both the aggregate demand and aggregate supply curves would shift to the leftAnswer: BDiff: 29) Assume an economy experiences an increase in productivity that occurs as a result of the more efficient use of existing technologies. Given this information, we would expect which of the following to occur?A) aggregate demand would not changeB) aggregate demand would shift to the rightC) aggregate demand would shift to the leftD) both the aggregate demand and aggregate supply curves would shift to the leftAnswer: CDiff: 210) When the unemployment rate is on the horizontal axis and the real wage is on the vertical axis, a reduction in productivity will cause which of the following to occur?A) The wage-setting and price-setting curves will both shift downward.B) The wage-setting and price-setting curves will both shift upward.C) The price-setting curve to shift downward, and no shift in the wage-setting curve.D) The wage-setting curve to shift upward, and the price-setting curve to shift downward.E) The wage-setting curve to shift downward, and the price-setting curve to shift upward. Answer: ADiff: 211) Based on price setting behavior, which of the following will cause a reduction in the price level?A) an increase in productivityB) a reduction in the nominal wageC) a reduction in the markupD) all of the aboveE) none of the aboveAnswer: DDiff: 212) Suppose workers' and firms' expectations of the price level and productivity are accurate. In this case, a reduction in productivity will cause which of the following?A) a decrease in both the real wage and the natural rate of unemploymentB) an increase in both the real wage and the natural rate of unemploymentC) a decrease in the real wage and no change in the natural rate of unemploymentD) an increase in the real wage and a decrease in the natural rate of unemploymentE) none of the aboveAnswer: CDiff: 213) Assume an economy experiences, for a given period, a 5% increase in output and a 1% increase in productivity. Given this information, we know that which of the following occurred for this economy during this period?A) The unemployment rate increased during this period.B) The unemployment rate decreased during this period.C) The unemployment rate did not change during this period.D) The effects on the unemployment rate are ambiguous.E) none of the aboveAnswer: BDiff: 214) Suppose an economy experiences a reduction in productivity. Explain both the short-run and medium-run effects of this reduction in productivity on output, employment, and the unemployment rate.Answer: In both the short run and medium run, TP will cause a reduction in output (assuming, of course, that any change in AD, if it occurs, is offset by the shift in the AS curve). What happens to employment in the medium? Given that Y will fall by the full change in TP in the medium, we know that N and u will not be affected in the medium run. In the short run, N will fall and u will rise if the percentage change in Y is less than the percentage change in TP. Diff: 215) Some commentators will argue that increases in productivity may have no effect or even a negative effect on employment in the short run. Explain what must occur for an increase in productivity to have no effect or even a negative effect on employment in short run. Answer: An increase in productivity will have no effect on employment if the percentage change in output equals the percentage change in productivity. Employment will fall if the percentage change in output is less than the percentage change in productivity. This can be seen from Y = AN which implies that N = Y/A.Diff: 216) Explain what effect a reduction in productivity has on wage setting behavior, price setting behavior, the equilibrium real wage, the natural rate of unemployment, and the natural level of output.Answer: A reduction in A will cause a reduction in the real wage based on WS behavior; therefore, the WS curve shifts down by the change in A. The reduction in A increases the marginal cost of an additional unit of output so firms will raise the price. Hence, the real wage based on PS behavior will fall by A and the PS curve shifts down by A. Given the size of the shifts in the WS and PS curves, u does not change; however, the real wage does fall.Diff: 217) Explain how technological change can cause changes in wage inequality.Answer: If the technological progress favors skilled workers, the demand for skilled workers will rise and the demand for relatively unskilled workers will fall. This would cause the wage gap to increase.Diff: 218) Explain some of the causes of increased wage inequality.Answer: Possible causes: skill-biased technological progress and international trade.Diff: 219) First, explain each of the following: hysterisis and Eurosclerosis. Second, explain how each of them can be used to explain the relatively high natural rate of unemployment in Europe. Answer: Hysteresis suggests that the natural unemployment rate is not independent of the actual unemployment rate. In Europe, high unemployment would result in an increase in unemployment benefits that would cause an increase in the natural rate. Eurosclerosis suggests that the high natural rate is a result of structural problems such as high minimum wage, reluctance of labor unions to accept wage cuts.Diff: 220) Suppose an economy experiences an increase in productivity. Explain both the short-run and medium-run effects of this increase in productivity on output, employment, and the unemployment rate.Answer: In both the short run and medium run, TP will cause an increase in output (assuming, of course, that any change in AD, if it occurs, is offset by the shift in the AS curve). What happens to employment in the medium? Given that Y will rise by the full change in TP in the medium, we know that N and u will not be affected in the medium run. In the short run, N will rise and u will fall if the percentage change in Y is greater than the percentage change in TP. Diff: 221) Assume expectations of both prices and productivity are accurate,use the PS/WS relations, graphically illustrate and explain the effects of an increase in the productivity on the natural rate of unemployment.Answer: An increase in productivity shifts both the wage and the price-setting curves by the same proportion and thus has no effect on the natural rate.Diff: 222) Assume expectations of prices are correct but expectations of productivity adjust slowly. Use the PS/WS relations, graphically illustrate and explain the effects of a decrease in productivity growth on the natural rate of unemployment.Answer: The PS relation shifts up by a factor A. The WS relation shifts up by a factor Ae. If Ae>A, the PS curve shifts up by less than the WS relation shifts up, leading to an increase in the natural rate of unemployment for some time.Diff: 223) Suppose an economy is characterized by the equations below:Price setting: P= (1 + m) (W/A)Wage setting: W=AP(1 - u)Solve for the natural rate of unemployment if the markup (m) is equal to 4%.Answer: u = 4%Diff: 213.3 Technological Progress, Churning, and Inequality1) "Churning" refers toA) changes in the real wage over the business cycle.B) changes in the markup over the business cycle.C) structural change associated with technological progress.D) the increase in productivity caused by an increase in output.E) the increase in output caused by an increase in productivity. Answer: CDiff: 1。
宏观经济学原理(第七版)曼昆名词解释(带英文)
宏观经济学原理曼昆名词解释微观经济学( microeconomics )，研究家庭和企业如何做出决策，以及它们如何在市场上相互影响。
宏观经济学( macroeconomics )，研究整体经济现象，包括通货膨胀、失业和经济增长。
国内生产总值GDP( gross domestic product )，在某一既定时期，一个国家内生产的所有最终物品与服务的市场价值。
消费( consumption )，家庭除购买新住房之外，用于物品与服务的支出。
投资( investment )，用于资本设备、存货和建筑物的支出，包括家庭用于购买新住房的支出。
政府购买( government purchase )，地方、州和联邦政府用于物品与服务的支出。
净出口( net export )，外国人对国内生产的物品的支出(出口) ，减国内居民对外国物品的支出(进口) 。
名义GDP(nominal GDP,按现期价格评价的物品与服务的生产。
真实GDP(real GDP,按不变价格评价的物品与服务的生产。
(总之，名义GDP是用当年价格来评价经济中物品与服务生产的价值，真实GDP是用不变的基年价格来评价经济中物品与服务生产的价值。
)GDF平减指数(GDP, deflator )，用名义GDP与真实GDP的比率乘以100计算的物价水平衡量指标。
消费物价指数CPI(consumer price index )，普通消费者所购买的物品与服务的总费用的衡量指标。
通货膨胀率( inflation rate )，从前一个时期以来，物价指数变动的百分比。
生产物价指数( producer price index )，企业所购买的一篮子物品运服务的费用的衡量指标。
指数化( indexation )，根据法律或合同按照通货膨胀的影响，对货币数量的自动调整。
名义利率( nominal interest rate )，通常公布的、未根据通货膨胀的影响，校正的利率。
宏观经济学 斯蒂芬威廉森chap13
Macroeconomics, 3e (Williamson)Chapter 13 I nternational Trade in Goods and Assets1) A small open economy is an economyA) i n which both imports and exports are less than 5% of GDP.B) w hose firms and consumers are individually, but not collectively price takers.C) w hose firms and consumers are collectively, but not individually price takers.D) w hose firms and consumers are individually and collectively price takers.Answer: DQuestion Status: P revious Edition2) I n an open, two-good economy in a two-good world, the relative price of one good in termsof the other is called theA) r elative advantage.B) a bsolute advantage.C) t erms of trade.D) i nternational purchasing price index.Answer: CQuestion Status: P revious Edition3) W hich of the following pairs of terms can be used interchangeably?A) t he terms of trade and comparative advantageB) c omparative advantage and purchasing power parityC) p urchasing power parity and the real exchange rateD) t he real exchange rate and the terms of tradeAnswer: DQuestion Status: P revious Edition4) I n a two-good economy, the production possibilities frontier isA) c oncave because the marginal rate of transformation increases as we move down thePPF.B) c oncave because the marginal rate of transformation decreases as we move down thePPF.C) c onvex because the marginal rate of transformation increases as we move down thePPF.D) c onvex because the marginal rate of transformation decreases as we move down thePPF.Answer: AQuestion Status: P revious Edition5) C omparative advantage is determined by theA) s lope of the representative consumer's indifference curve.B) s lope of the country's production possibilities frontier.C) c urvature of the representative consumer's indifference curve.D) c urvature of the country's production possibilities frontier.Answer: BQuestion Status: P revious Edition6) I n a competitive, one-period, two-good economy without tradeA) t he marginal rate of substitution equals the marginal rate of transformation.B) t he marginal rate of substitution equals the real interest rate.C) t he marginal rate of transformation equals the real interest rate.D) a ll of the above are true.Answer: AQuestion Status: N ew7) O nce an economy opens to tradeA) t he production mix stays the same.B) t he firm obtains monopoly power.C) t he firm produces more of all goods.D) t he household consumes a preferred bundle of goods.Answer: DQuestion Status: N ew8) O nce an economy opens to tradeA) b oth economies lose.B) t he economy with the higher terms of trade loses.C) t he economy with the lower terms of trade loses.D) n o economy loses.Answer: DQuestion Status: N ew9) C omparative advantage means thatA) t he economy produces more with trade because it is better at everything.B) t he terms of trade are invariant to conditions inside the small open economy.C) t he economy specializes in what it is good at producing.D) t here is no free lunch.Answer: CQuestion Status: N ew10) T he terms of trade move in favor of a country when theA) a bsolute price of imports decreases.B) a bsolute price of exports increases.C) r elative price of imports increases.D) r elative price of imports decreases.Answer: DQuestion Status: P revious Edition11) T he real exchange moves in favor of a country when theA) a bsolute price of imports decreases.B) a bsolute price of exports increases.C) r elative price of exports increases.D) r elative price of exports decreases.Answer: CQuestion Status: N ew12) I n a two-good, one-period model, when the terms of trade move in your favorA) e xports unambiguously increase and imports unambiguously decrease.B) e xports unambiguously increase and the effect on imports is uncertain.C) t he effect on exports is uncertain and imports unambiguously decrease.D) t he effects on both exports and imports are uncertain.Answer: BQuestion Status: P revious Edition13) T o improve its terms of trade, a small open economy shouldA) p roduce more of every good.B) p roduce more of the exported good.C) p roduce more of the imported good.D) T here is nothing it can do about the terms of trade.Answer: DQuestion Status: N ew14) I n a two-good, one-period model, when the terms of trade move against youA) e xports unambiguously decrease and imports unambiguously increase.B) e xports unambiguously decrease and the effect on imports is uncertain.C) t he effect on exports is uncertain and imports unambiguously increase.D) t he effects on both exports and imports are uncertain.Answer: BQuestion Status: P revious Edition15) I n a two-good, one-period model, when the terms of trade move in your favor, theA) c urrent account surplus unambiguously increases.B) c urrent account balance unambiguously decreases.C) e ffect on the trade balance is uncertain.D) t rade balance is unchanged.Answer: DQuestion Status: P revious Edition16) I n a two-good, one-period model, when the terms of trade move in your favor, the welfareof the representative consumerA) u nambiguously increases.B) u nambiguously decreases.C) m ay either increase or decrease.D) i s unchanged.Answer: AQuestion Status: P revious Edition17) A ccording to a study by Enrique Mendoza, for all of the economies in the world, on average,terms of trade shocks account forA) a n imperceptible amount of the variation in real GDP.B) a bout 10% of the variation in real GDP.C) a bout 50% of the variation in real GDP.D) a lmost all of the variation in real GDP.Answer: CQuestion Status: P revious Edition18) T he current account surplus is notA) t he trade balance.B) t he excess of national savings over investment.C) p rivate saving less government deficit.D) o utput less taxes and trade deficit.Answer: DQuestion Status: N ew19) I n a two-good, two-period model, holding everything else constant, an increase in current-period incomeA) u nambiguously increases the current account surplus.B) u nambiguously decreases the current account surplus.C) h as an uncertain effect on the current account surplus.D) h as no effect on the current account surplus.Answer: AQuestion Status: P revious Edition20) I n a two-good, two-period model, holding everything else constant, an increase ingovernment spendingA) u nambiguously increases the current account surplus.B) u nambiguously decreases the current account surplus.C) h as an uncertain effect on the current account surplus.D) h as no effect on the current account surplus.Answer: BQuestion Status: P revious Edition21) I n a two-good, two-period model, holding everything else constant, an increase in currenttaxesA) u nambiguously increases the current account surplus.B) u nambiguously decreases the current account surplus.C) h as an uncertain effect on the current account surplus.D) h as no effect on the current account surplus, as long as Ricardian equivalence holds.Answer: DQuestion Status: P revious Edition22) I n a two-good, two-period model, holding everything else constant, an increase in futuretaxesA) u nambiguously increases the current account surplus.B) u nambiguously decreases the current account surplus.C) h as an uncertain effect on the current account surplus.D) h as no effect on the current account surplus, as long as Ricardian equivalence holds.Answer: DQuestion Status: N ew23) I n a two-good, two-period model, as long as wealth effects are small, an increase in theworld real interest rateA) i ncreases consumption and increases the current account surplus.B) i ncreases consumption and decreases the current account surplus.C) d ecreases consumption and increases the current account surplus.D) d ecreases consumption and decreases the current account surplus.Answer: CQuestion Status: P revious Edition24) T heory predicts that current account surpluses should be ________; U.S. experience since1970 suggests that current account surpluses have been ________.A) p rocyclical; procyclical.B) p rocyclical; countercyclical.C) c ountercyclical; procyclical.D) c ountercyclical; countercyclical.Answer: BQuestion Status: P revious Edition25) L ack of evidence of a pattern of international consumption smoothing is best explained byA) g overnment policies to fight trade deficits.B) t he failure of consumers in less advanced economies to act rationally.C) a tendency for business cycles to be a worldwide phenomenon.D) R icardian equivalence.Answer: CQuestion Status: P revious Edition26) T he behavior of the current account deficit and the government budget deficit in the UnitedStates in the 1980s is often referred to as theA) i nterrelated deficits.B) R eagan deficits.C) t win deficits.D) r everse deficits.Answer: CQuestion Status: P revious Edition27) T win deficits areA) t he current account deficit and the trade deficit.B) t he current account deficit and the government budget deficit.C) t he current account deficit and the private saving deficit.D) t he current account deficit and the future account deficit.Answer: BQuestion Status: N ew28) I n the 1980s in the United States, the current account surplus and the government budgetsurplus moved inA) t he same direction, which is almost always the case.B) t he same direction, which has not been typical.C) o pposite directions, which is almost always the case.D) o pposite directions, which has not been typical.Answer: BQuestion Status: P revious Edition29) C urrently in the United States, there isA) a current account surplus and a government budget surplus.B) a current account surplus and a government budget deficit.C) a current account deficit and a government budget surplus.D) a current account deficit and a government budget deficit.Answer: DQuestion Status: N ew30) R icardian equivalence suggests that government budget deficits generated by decreases incurrent taxesA) i ncrease the current account surplus.B) d ecrease the current account surplus.C) h ave no effect on the current account surplus.D) h ave unpredictable effects on the current account surplus.Answer: CQuestion Status: P revious Edition31) I ncluding investment and production in the two-good, two-period model with tradeA) a llows the country to equalize absorption and output demand.B) r enders terms of trade endogenous.C) a llows the country to react to changes in the interest rate.D) a llows the government to run budget deficits.Answer: CQuestion Status: N ew32) I n a two-good, two-period model with trade, an increase in the world real interest rateA) i ncreases domestic output and increases the current account surplus.B) i ncreases domestic output and decreases the current account surplus.C) d ecreases domestic output and increases the current account surplus.D) d ecreases domestic output and decreases the current account surplus.Answer: AQuestion Status: P revious Edition33) I n a two-good, two-period model with trade, a temporary increase in domestic governmentspendingA) i ncreases domestic output and increases the current account surplus.B) i ncreases domestic output and decreases the current account surplus.C) d ecreases domestic output and increases the current account surplus.D) d ecreases domestic output and decreases the current account surplus.Answer: BQuestion Status: P revious Edition34) I n a two-good, two-period model with trade, a permanent increase in domestic governmentspendingA) i ncreases domestic output and increases the current account surplus.B) i ncreases domestic output and decreases the current account surplus.C) d ecreases domestic output and increases the current account surplus.D) d ecreases domestic output and decreases the current account surplus.Answer: AQuestion Status: N ew35) I n a two-good, two-period model with trade, an increase in current domestic total factorproductivityA) i ncreases domestic output and increases the current account surplus.B) i ncreases domestic output and decreases the current account surplus.C) d ecreases domestic output and increases the current account surplus.D) d ecreases domestic output and decreases the current account surplus.Answer: AQuestion Status: P revious Edition36) I n a two-good, two-period model with trade, an anticipated future increase in domestictotal factor productivityA) i ncreases domestic output and increases the current account surplus.B) i ncreases domestic output and decreases the current account surplus.C) h as no effect on domestic output and increases the current account surplus.D) h as no effect on domestic output and decreases the current account surplus.Answer: DQuestion Status: P revious Edition37) I n the nineteenth century, the United States had a period of significant current accountdeficits, which contributed to economic growth. These deficits most notablyA) f inanced the Civil War.B) a llowed for a substantial increase in government spending's share of GDP.C) f inanced construction of railroads.D) f inanced the development of land-grant universities.Answer: CQuestion Status: P revious Edition38) W hen current account deficits are used to finance investment spending, such deficits may beself-correcting becauseA) t hey promote more responsible government policies.B) t he resulting increase in the capital stock over time shifts the output supply curve tothe right.C) t he resulting increase in the capital stock over time shifts the output demand curve tothe right.D) t he resulting increase in national indebtedness increases labor demand.Answer: BQuestion Status: P revious Edition。
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[Insert Figure 13-3 here]
13-6
Life Cycle Theory
• The life cycle hypothesis views individuals as planning their consumption and savings behavior over long periods with the intention of allocating their consumption in the best possible way over their entire lifetimes
assets to current consumption
13-11
Permanent Income Theory
• Permanent income theory of consumption is like the life cycle hypothesis in that current consumption is not dependent upon current income, but on a longer-term estimate of income
• Different MPC out of permanent income, transitory income, and wealth compared to the Keynesian theory with a single MPC
• Key assumption: most people choose stable lifestyles, or smooth out consumption over their lifetime
The extra $3,000 for each 45 years spread out over 60 years of life increases consumption by$3,00045$2,250
60
The marginal propensity to consume out of permanent income is
• In this chapter we seek to understand consumption and the link between consumption and income
Consumption theory
• The debate over different consumption theories = debate over the size of the marginal propensity to consume (MPC)
Under this newer version of consumption theory, changes in consumption arise from surprise changes in income
• Continuing with the example, can compute different marginal propensities to consume for various measures of income: permanent and transitory income
• Suppose income increases permanently by $3,000:
Life cycle hypothesis and permanent income hypothesis are very similar, and are often combined as the PILCH.
13-12
Consumption Under Uncertainty
• If permanent income were known, according the PILCH, consumption would never change
[Insert Figure 13-4 here]
• Figure 13-4 traces out the path of consumption and saving using the life cycle theory
Wealth peaks at retirement
Wealth is zero at death
of
transitory
income
is
1 60
0.017
13-10
Life Cycle Theory
• The MPC out of permanent income is large • The MPC out of transitory income is small and fairly
close to zero • The life-cycle theory implies that the MPC out of wealth
Accumulate savings in working years, but dissave through retirement
Income is positive in working years, and zero in retirement
13-9
Life Cycle Theory
Milton Friedman called this permanent income Permanent income is the steady rate of expenditure a person
could maintain for the rest of his/her life, given the present level of wealth and the income earned now and in the future The consumption function is then: CcYP(2), where YP is permanent disposable income
WL 450.75 NL 60
• Suppose income increased by $3,000 for only one year:
The extra $3,000 over 60 years would increase consumption by
$3,000 1 $50
The
60
MPC out
13-7
Life Cycle Theory
• Suppose an individual:
• Starts life at age 20
• Plans to work until age 65
• Will die at age 80
• Has annual labor income of YL = $30,000
• Individuals do not like consumption to change dramatically from year to year
• The simplest form of this assumption is to consume the same amount in every year
do not.
13-4
Introduction
• Figure 13-2 compares
[Insert Figure 13-2 here]
consumption this quarter to the
previous quarter:
C t $2.2 9 11.00 C t 3 1
Consumption is almost perfectly predicted by previous consumption
The general formula is C WLYL
The
marginal
propensity
to
NL
consume
is
WL
NL
13-8
Life Cycle Theory
• Once we have a theory of consumption, we have a theory of savings (savings is income less consumption)
should equal the MPC out of transitory income
WHY?
Spending out of wealth is spread out over remaining years of life The MPC out of wealth is used to link changes in the value of
Introduction
• Consumption accounts for about 70% of AD
• Fluctuations in C are proportionately smaller than the fluctuations in GDP
• Consumption is relatively stable
This relationship is an outcome of the link between current consumption and expected future consumption
Used in the modern theories of consumption
13-5