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 […]

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

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

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?

Comment on the assumption common to most economic models that all individuals are rational and make optimal decisions in response to economic incentives. According to the FBI Bank Crime Statistics, there were nearly 4,000 bank robberies in the United States in 2014. The FBI claims that banks have made themselves easy targets by refusing to

Why does scarcity imply that every society and every individual face trade-offs? In a mixed economy, does the government decide what goods and services should be produced? Briefly discuss the reasons for your answer.

Whether you like to eat hamburger or roast beef, the source of the meat is a rancher who raises cattle. A news story discussed how years of drought had raised the cost to ranchers of raising cattle. At the same time, consumer tastes have been changing, leading to a decline in the demand for beef.

What is a demand schedule? What is a demand curve?What do economists mean when they use the Latin expression ceteris paribus? What is the difference between a change in demand and a change in quantity demanded? What is the law of demand? Use the substitution effect and the income effect to explain why an increase

Are cappuccinos and croissants complementary goods? Briefly explain your reasons. For each of the following pairs of products, briefly explain the relationship between them. a. Cappuccinos and black coffees b. Cappuccinos and Swedish trucks c. Cappuccinos and cocoa powder d. Cappuccinos and orange juice

Is it always possible to ascertain whether two goods are substitutes, complementary goods, or that they do not bear any relationship with each other? Briefly explain.