英国宏观经济学作业

Answers to in-text Questions in Economics (7th edition)Chapter 14Page391 Would this argument still hold if prices rose?Money incomes would remain unchanged, but fewer goods could be purchased with it. Thus real incomes and output would fall. To keep output and real incomes the same (given that prices were rising), then either money would have to circulate faster, or extra money would have to be injected into the flow.392 Are the following net injections, net withdrawals or neither? If there is uncertainty, explain your assumptions.(a) Firms are forced to take a cut in profits in order to give a pay rise.(b) Firms spend money on research.(c) The government increases personal tax allowances.(d) The general public invests more money in banks and building societies.(e) UK investors earn higher dividends on overseas investments.(f) The government purchases US military aircraft.(g) People draw on their savings to finance holidays abroad.(h) People draw on their savings to finance holidays in the UK.(i) The government runs a budget deficit (spends more than it receives in tax revenues) and finances it by borrowing from the general public.(j) The government runs a budget deficit and finances it by printing more money.(a) Neither, there is merely a redistribution of factor payments on the left-hand side of the inner flow. (The only exception to this would be if a smaller proportion of wages were saved than of profits. In this case there would be a net reduction in withdrawals.)(b) Increase in injections (investment).(c) Decrease in withdrawals (taxes).(d) Increase in withdrawals (saving). Note that ‘investing’ in building societies is really savings not investment.(e) Fall in withdrawals (a reduction in net outflow abroad from the household sector).(f) Neither. The inner flow is unaffected. If, however, this were financed from higher taxes, it would result in an increase in withdrawals.(g) Neither. The inner flow is unaffected. The consumption of domestically produced goods and services remains the same.(h) Decrease in withdrawals (saving).(i) Neither. An increase in government expenditure (or decrease in taxes, or both) is offset by an increase in saving (i.e. people buying government securities).(j) Net injections. An increase in government expenditure (or decrease in taxes, or both) is not offset by changes elsewhere. Extra money is printed to finance the net injection.393 Now consider the situation where there is an initial excess of withdrawals over injections. What effect will there be on the four objectives?If withdrawals exceed injections, national income will fall. Other things being equal, this will have the following effects on the four objectives:Growth will be negative.Unemployment will rise.Inflation will fall.The current account of the balance of payments will tend to ‘improve’. The deficit will be reduced, or eliminated, or be transformed into a surplus. If it was already in surplus, the surplus will increase.394 By what would we need to divide GDP in order to get a measure of labour productivity per hour?The total number of hours worked in the year throughout the country.Page395 (Threshold Concept 12) When comparing two countries’ GD P growth rates, does it matter is we use nominal figures, provided we use them for both countries?Y es it does, since the two countries are unlikely to have the same inflation rate. The figures will overstate the GDP growth rate of the country with the higher inflation relative to that of the other country.396 If we were trying to get a ‘true’ measure of national production, which of the following activities would you include: (a) washing-up; (b) planting flowers in the garden; (c) playing an educational game with children in the family; (d) playing any game with children in the family; (e) cooking your own supper; (f) cooking the supper for the whole family; (g) reading a novel for pleasure; (h) reading a textbook as part of studying; (i) studying holiday brochures? Is there a measurement problem if you get pleasure from the do-it-yourself activity itself as well as from its outcome?The difficulty stems from separating production from consumption. In the paid-employment sector of the economy, the distinction is clear. With production, money flows from firms to households (as wages, etc.), and with consumption, money flows from households to firms. Many activities in the home, however, have both a production and consumption element. Although they all lead to a benefit when complete (e.g. washing-up leads to clean dishes), several, if not all, could give pleasure while they are actually being performed. If so, should two lots of benefits be recorded (or even three)? Playing an educational game with children can give pleasure to the children, future benefits to the children from the educational element, and pleasure to the parents. Then there is the cost element. Should this be deducted? It is not deducted for marketed output. In other words, the final value of goods and services sold is what is included, not the value minus the cost of producing them: costs such as the disutility (effort, boredom, etc.) experienced by workers.Ideally, a true measure of national welfare, as opposed to national production, should be only a net measure (i.e. benefits from consumption, minus costs of production). If thisprinciple was used to measure welfare in the household, then all pleasurable activities should be included with a positive sign (including things such as reading a novel for pleasure) and anything causing displeasure should be recorded with a negative sign. Most of the above activities would have elements of both benefits and costs. However, when marketed national production is recorded, costs are ignored, and so for comparative purposes, household production should be recorded on the same basis, and only the benefits recorded.All the above items bring pleasure, either directly (such as reading a novel) or indirectly (such as doing the washing-up), and in this sense they should all be included, but whether activities that give direct pleasure should count as production or merely as consumption, is a question of definition.397 Name some external benefits that are not included in GDP statistics?Thr ee examples are: the pleasure people get from seeing other people’s attractive houses and gardens, aesthetically pleasing architecture, improved health from a better diet.400 Figure 14.3 shows a decline in actual output in recessions. Redraw the diagram, only this time show a mere slowing down of growth in phase 4.The curve would still slope upwards during phase 4, but its slope would be less than in the other phases. Its slope would also be less than that of the potential output curve, with the result that the gap between actual and potential output would widen.If the average percentage (as opposed to the average level) of potential output that was unutilised remained constant, would the trend line have the same slope as the potential output line?No, it would be less steep. The ratio of the vertical distance between the trend output line and the potential output line to the vertical distance between horizontal axis and the potential output line would have to remain constant (assuming that the vertical axis starts at zero).Page402 (Threshold Concept 13) 1. If people believe that the economy is about to go into recession (i.e. that real GDP will fall), how may their actions aggravate the problem?Firms may cut down on investment (an injection) and consumers may try to save more in order to prepare for possible cuts in overtime or even for unemployment. The effect is to reduce injections and hence reduce aggregate demand, thereby aggravating the fall in national income.(Threshold Concept 13) 2. Why will some people suffer more from others from a recession?Because some people will lose their jobs while others will not; some people will face cuts in incomes while others will not; firms selling luxury goods will find sales falling, while those selling basic everyday goods are likely to find sales holding up.404 (Threshold Concept 14) 1. Give some examples of supply-side policy.Policies to increase incentives to invest in research and development (e.g. tax breaks or subsidies); increased spending on education and training and on improvements in transport infrastructure; reduced bureaucracy and ‘red tape’.(Threshold Concept 14) 2. If there is an increase in aggregate supply, will this result in an increase in potential growth?Not necessarily. There would need to be a faster increase in aggregate supply than previously if the potential rate of economic growth is to increase.For what reasons might the productivity of land increase over time?Because of the increase in quantity and quality of complementary factors. Thus a hectare of land yields more agricultural output today than 100 years ago because of the increased mechanisation of agriculture and the increased amount of chemicals used.412 If a retailer buys a product from a wholesaler for £80 and sells it to a consumer for £100, then the £20 of value that has been added will go partly in wages, partly in rent and partly in profits. Thus £20 of income has been generated at the retail stage. But the good actually contributes a total of £100 to GDP. Where then is the remaining £80 worth of income recorded?At the wholesale stage and earlier. Each stage adds value – value that is partly in wages, partly in rent, etc. When the values added at all the stages are summed, this gives the final value of the good.。