In an article in the Wall Street Journal, a professor of financial planning noted the effect of rising prices on purchasing power: “Today, $2,000 a month seems reasonable [as an income for a retired person in addition to the person’s Social Security payments], but 40 years from now that’s going to be three cups of coffee […]

Briefly explain why the total value of saving in the economy must equal the total value of investment. What are loanable funds? Why do businesses demand loanable funds? Why do households supply loanable funds?

On a saving supply and investment demand diagram, show what happens to equilibrium real interest rate and equilibrium quantity. a. Households increase their expenditures on goods that are domestically produced. b. Firms become more pessimistic about the economy in the near future and so decrease their investment c. Government increases its spending on public investment

Suppose the current financial crisis in Greece causes many banks to fail as depositors no longer save, but withdraw their money from these institutions. Explain what is likely to happen to real and to nominal interest rates.

An article in the Wall Street Journal about Australian economy noted that “Rising government debt is holding back public spending at a time when business also aren’t investing” Does this information indicate that the Australian economy was approaching an economic recession? Briefly explain.

Briefly explain whether you agree with this statement: “Real GDP in 2014 was $16.1 trillion. This value is a large number. Therefore, economic growth must have been high during 2014.”

It is a wellknown fact that modern economies are characterized by business cycles. Does this mean that it is very easy for firms to decide whether to expand or not, since entrepreneurs can easily forecast future economic growth? Briefly explain the reasons for your answer. Q73: Go to the Web site of the Federal Reserve

The economic growth model makes a prediction about aneconomy’s initial level of real GDP per capita relative to other economies and how fast the economy will grow in the future. Consider the statistics in the following table: Are these statistics consistent with the economic growth model? Briefly explain. Now consider the statistics in the following

Why is the assumption of diminishing returns to capital crucial in the growth model illustrated in the Chapter? Is it possible to maintain a sustained long-run growth despite diminishing returns to capital?

The new growth theory is sometimes referred to as endogenousgrowth theory. Briefly explain the reasons for this alternative label.