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The following graph shows the marginal product of capital and the user cost of capital. Assume that the economy is currently at point A, with the capital stock equal to K* a. All other things being equal, how would you expect Federal Reserve policy that increases the money supply to change the user cost of capital? What […]

In 2009, the stock market value of most firms was lower than it was in 2006. a. Why would the market value of most firms have fallen?                       b. The growth rate of non-residential investment steadily fell from 8.0% in 2006 to -18.1% in 2009. Is this decline consistent with Tobin’s q model of investment? Briefly explain.

For the United States, the chapter showed that consumption is less volatile than GDP, but that investment is more volatile than GDP. Using the St. Louis Federal Reserve Bank’s FRED database (http://research.stlouisfed. org/fred2/) examine the behavior of consumption and investment spending in Japan. a. For 1994 to the present, download quarterly data on real private

Using the St. Louis Federal Reserve Bank’s FRED database (http://research.stlouisfed.org/ fred2/) examine the differences in consumption behavior between the United Kingdom and the United States. a. Download annual data from 1955 to the present on nominal private final consumption expenditure in the United Kingdom (GBRPFCEADSMEI) and the United States (USAPFCEADSMEI). For the same time period,

Based on rapidly falling prices of competitors’photovoltaic modules used in the production of solar panels, General Electric (GE) announced in July 2012 that it was stopping production on what was supposed to be the largest solar factory in the United States. In a Forbes article, Danielle Merfeld, GE’s general manager for solar technologies, is quoted

John Maynard Keynes described firms as having “animal spirits,” meaning that they often make decisions based on emotion as much as on more objective factors. a. How might animal spirits explain the volatility of investment relative to consumption? b. Are consumers also sometimes motivated by emotion? If so, why isn’t consumption more volatile?

Fairness is often in the eye of the beholder. My favorite exercise to provoke a discussion of fairness is to suggest a grading system for the course in which students with A’s, B+’s, and B’s at the end of the course will have points taken away from them and redistributed to those with C’s,D’s, and

Both the permanent-income hypothesis and the life-cycle hypothesis predict that consumption is less volatile than income. Using the St. Louis Federal Reserve Bank’s FRED database (http://research.stlouisfed.org/fred2/) evaluate this prediction for the United States. a. Download quarterly data for real consumption (PCECC96) and real GDP (GDPC1) from 1947 to the present and calculate the compound average

Draw a PPF for the choice between military goods and consumer goods. Use that to start a discussion about economies during the Cold War. How have things changed since the Cold War ended?

The text refers to an increase in output per capita as if it automatically becomes an improvement in the standard of living. Ask the class whether they can think of circumstances in which higher output per capita would cause their standard of living to fall. They should come up with higher pollution levels, increased crowding