FINAL MATH PROBLEMS

Assume a bank has $30,000 in deposits, and the reserve requirement is 20%. How much of that 30,000 must it keep as required reserves?

30,000(0.2)=6,000

Suppose that a customer is going on a vacation and withdraws $1,500 from her checking account. How much would the bank be able to lend out now?

30,000-1500= 28500 (0.2)= 5700. 6000-5700= 300

Suppose real GDP is roughly $750 billion and the population is approximately 50 million people. Real GDP per capita is $

(Real GDP per capita = real GDP/Population;Real GDP per capita = $750 billion/50 million)= 15,000

With an MPC of 0.5, the tax multiplier will equal

-1

With an MPC of 0.8, the tax multiplier will equal

-4

Let's say the loan is $10,000, and for simplicity's sake imagine the interest compounds once. How much will you end up repaying after interest?

10,000 (0.08) = 800 10,000+800=10800

Suppose the government imposes a tax on suppliers of plastic drink cups equal to $1 per 100 cups. Before the tax 10,000 cups were sold. After the tax, 8,000 cups are sold. The tax revenue is equal to

10,000/8,000=80

Suppose that $10 billion in goods and services was exported to other countries; $5 billion in goods and services was imported; expenditures by federal state and local governments on goods and services totaled $35 billion; over the course of the year firms purchased $20 billion worth of new capital; and consumers spent $14 billion on durable goods, $30 billion on nondurable goods, and $25 billion on services. GDP was $

129

Suppose that the government runs a budget deficit of $75 billion in year 1. Assume that the year began with a national debt of $25 billion. In year 2 the government ran a budget surplus of $50 billion. In year 3, the government spent $100 billion more than it collected in taxes. The debt is $

150

Suppose that $15 billion in goods and services was exported to other countries; $8 billion in goods and services was imported; expenditures by federal state and local governments on goods and services totaled $30 billion; over the course of the year firms purchased $25 billion worth of new capital; and consumers spent $15 billion on durable goods, $35 billion on nondurable goods, and $40 billion on services. GDP was $

152 ($15Bn+$35Bn+$40Bn=$90 Bn,'X'=$15 Bn and 'M"=$8 Bn Hence, GDP=90+25+30+15-8=$152 Billions)

Suppose real GDP is roughly $800 billion and the population is approximately 50 million people. Real GDP per capita is $

16,000

A company currently producing 10 air conditioners each day has daily total costs of $1,500. Producing an additional air conditioner will increases costs by $250 daily. What are the total daily costs for the firm if they produce the 11th air conditioner

1750

Suppose real GDP is roughly $900 billion and the population is approximately 50 million people. Real GDP per capita is $

18,000

If nominal income increases by 3 percent and prices by 1 percent, the percentage change in real income will be

2

With an MPC of 0.6, the expenditures multiplier will equal

2.5

Suppose that the government runs a budget deficit of $75 billion in year 1. Assume that the year began with a national debt of $0. In year 2 the government ran a budget surplus of $50 billion. In year 3, the government spent $200 billion more than it collected in taxes. The debt is $

225

As of the 3rd quarter of 2020, RGDP per capita was $56,252.If the growth rate is 3%, what will RGDP per capita be in 2092?

225,000x2= 450,00

As of the 3rd quarter of 2020, RGDP per capita was $56,252.If the growth rate is 3%, how long will it take to double this?

24 yers

Suppose a snowboard manufacturer increases it output by 1 snowboard per day. As a result, the total cost of producing snowboards each day rises from $120 to $145. The marginal cost of producing an extra snowboard is 25

25

If 160 million workers are in the labor force and of those workers 2.5 million are frictionally unemployed and 3.5 million are structurally unemployed, the natural rate of unemployment is

3.75%

Suppose at the beginning of the year there are ten cranes in the economy. During the course of the year, two cranes wear out and are replaced. At the same time, net investment is equal to two cranes. Gross investment is equal to

4 cranes

Suppose there are 150 million workers in the labor force of an economy. Out of those workers, 2.5 million are frictionally unemployed and 3.5 million are structurally unemployed. The natural rate of unemployment in the economy is

4%

With an MPC of 0.8, the expenditures multiplier will equal

5

As of the 3rd quarter of 2020, RGDP per capita was $56,252.If the growth rate is 2%, what will RGDP per capita be in 2092?

56,252(2)=112000(2)= 225,000

Imagine that in 2020, China's RGDP per capita was 4 times as large as ours, but their growth rate was only 1%. In what year would we catch up to them if ours is 3%?

56,252(4)=225,008(2)= 450,016 (2092)

How much of the $800 represents the return to the bank?

5=x - 3500

Suppose that the growth rate of real GDP per capita is 12 percent per year. It will take

6 years for real GDP per capita to double.

Suppose that the real interest rate equals 4% and the expected rate of inflation equals 3%. Under these conditions, the nominal interest rate equals

7%

Suppose the bank has $7500 in total reserves. How much may it loan out?

7500-6000=1500 Tr-Rr=Er

Suppose the government imposes a tax on suppliers of energy drinks equal to $1 per can. Before the tax, 10,000 cans were sold. After the tax, 8,000 cans are sold. The tax revenue is equal to $

8,000

Suppose the Federal Reserve has set the reserve requirement at 12%. What is the money multiplier?

8.33

Suppose the Federal Reserve wants to decrease the money supply by $400 billion. If the reserve requirement (rr) is 0.2, calculate the change in reserves that the Federal Reserve must make.

80

Suppose the Federal Reserve wants to decrease the money supply by $400 billion. If the reserve requirement (rr) is 0.2, calculate the change in reserves that the Federal Reserve must make. $

80

At equilibrium, economic surplus is represented by the area

A+B+C+D+E+F

Referring to the graph, which point(s) is/are considered allocatively efficient?

B+C

A person who has been managing a dry cleaning store for $30,000 per year decides to open her own dry cleaning store. The expenses are $35,000 for salaries (excluding the owner's), $10,000 for supplies, $8,000 for rent, $2,000 for utilities, and $5,000 for interest on a bank loan. The revenues of the store during the first year of operation are $100,000. The total accounting profit is

Calculate: the accounting profit Accounting profit = TR - explicit costs = 100000 - 60000 = $40000

If there is a 1:1 ratio of a change in the money supply to a change in investment, in order to contract AD by $2 billion, by how much would you need to change the money supply if the marginal propensity to consume is .8?

Change in AD= Me x Change in I-2bil= 1/1-0.8 x CHange in I = -400 mil

Remember that the desired change in the money supply is $400 million. If the Fed wants to change the amount of reserves by using the reserve requirement instead of by selling bonds, what would the reserve requirement need to be in order to change the amount of reserves by $50 million? (Your answer will be a percentage, not a dollar amount.)

Change in AD= mm x Change in R-400 = 1/rr x 50-8= 1/rrrr= ⅛ = 12.5%

If the reserve requirement is .05, how many dollars worth of bonds would the Federal Reserve need to sell in order to bring about this $400 million contraction?

Change in I = Mm x Change in R-400= 1/.05 x Change in R= -20 mil

Suppose you want to increase the money supply by 7.5 million. if the rr is 10%, by how much would you need to increase reserves?

Change in MS= 1/rr x Change in R7.5 = 1/0.1 x change in R=0.75 = 750,000

Suppose the reserve requirement is 5% and the total amount of reserves grows by $100,000. By how much will the money supply grow?

Change in MS= 1/rr x change in R ( 20 x 100,000 = 2,000,000)

A person who has been managing a dry cleaning store for $30,000 per year decides to open his own dry cleaning store. The expenses are $35,000 for salaries (excluding the owner's), $10,000 for supplies, $8,000 for rent, $2,000 for utilities, and $5,000 for interest on a bank loan. The total economic cost

Economic profit ($) = Business profit - Implicit cost= 40,000 - 35,000= 5,000

And what if the inflation had been 6%?

Ir = 7-6=1%

Suppose the reserve requirement is 5%. Calculate the money multiplier.

Mm= 1/.05= 20

Suppose that the economy is in a long-run equilibrium at a price level of 100 and full-employment real GDP of $500 billion. A recession occurs resulting from a $60 billion decrease in aggregate demand. In order to restore the economy to full employment given a MPC of 0.75, taxes would need to:

decrease by $20 billion.

Suppose that the economy is in a long-run equilibrium at a price level of 100 and full-employment real GDP of $500 billion. An expansion occurs resulting from a $100 billion increase in aggregate demand. In order to restore the economy to full employment given a MPC of 0.80, government purchases would need to:

decrease by $20 billion.

Suppose that the economy is in a long-run equilibrium at a price level of 100 and full-employment real GDP of $500 billion. An expansion occurs resulting from a $50 billion increase in aggregate demand. In order to restore the economy to full employment given a MPC of 0.6, government purchases would need to:

decrease by $20 billion.

Suppose that the economy is in a long-run equilibrium at a price level of 100 and full-employment real GDP of $500 billion. An expansion occurs resulting from a $100 billion increase in aggregate demand. In order to restore the economy to full employment given a MPC of 0.75, government purchases would need to:

decrease by $25 billion.

Suppose that an economy is in long-run equilibrium at a price level of 100 and a full-employment real GDP of $520 billion. A recession occurs resulting from a $120 billion decrease in aggregate demand. In order to restore the economy to full employment given an MPC of 0.75, taxes would need to:

decrease by $40 billion.

Suppose that the economy is in a long-run equilibrium at a price level of 100 and full-employment real GDP of $500 billion. An expansion occurs resulting from a $50 billion increase in aggregate demand. In order to restore the economy to full employment given a MPC of 0.6, investment would need to:

decrease by 20 billion

A person who has been managing a dry cleaning store for $30,000 per year decides to open her own dry cleaning store. The expenses are $35,000 for salaries (excluding the owner's), $10,000 for supplies, $8,000 for rent, $2,000 for utilities, and $5,000 for interest on a bank loan. The revenues of the store during the first year of operation are $100,000. The total economic profit is

economic profit = TR - explicit costs - implicit costs . 100000 - 60000 - 30000 = $10000

A person who has been managing a dry cleaning store for $30,000 per year decides to open his own dry cleaning store. The expenses are $35,000 for salaries (excluding the owner's), $10,000 for supplies, $8,000 for rent, $2,000 for utilities, and $5,000 for interest on a bank loan. The explicit costs are $

explicit costs =salaries + supplies + rent + utilities + interest on the bank loan. 35000 + 10000 + 8000 + 2000 + 5000 = $60000.

Suppose that an economy is in long-run equilibrium at a price level of 100 and a full-employment real GDP of $500 billion. An expansion occurs resulting from a $30 billion increase in aggregate demand. In order to restore the economy to full employment given an MPC of 0.75, taxes would need to:

increase by $10 billion.

Suppose that the economy is in a long-run equilibrium at a price level of 100 and full-employment real GDP of $500 billion. A recession occurs resulting from a $100 billion decrease in aggregate demand. In order to restore the economy to full employment given a MPC of 0.80, government purchases would need to:

increase by $20 billion.

Suppose that the economy is in a long-run equilibrium at a price level of 100 and full-employment real GDP of $500 billion. A recession occurs resulting from a $100 billion decrease in aggregate demand. In order to restore the economy to full employment given a MPC of 0.75, government purchases would need to:

increase by $25 billion.

Suppose that the economy is in a long-run equilibrium at a price level of 100 and full-employment real GDP of $500 billion. An expansion occurs resulting from a $50 billion increase in aggregate demand. In order to restore the economy to full employment given a MPC of 0.50, taxes would need to:

increase by $50 billion.

Suppose that the economy is in a long-run equilibrium at a price level of 100 and full-employment real GDP of $500 billion. A recession occurs resulting from a $50 billion decrease in aggregate demand. In order to restore the economy to full employment given a MPC of 0.6, government purchases would need to:

increase by 20 billion

If the actual inflation rate ended up being 1.5% over the course of the loan, what was the actual interest rate you paid on that loan?

ir = 7.0-1.5 = 5.5%

Suppose you apply for a car loan. If the bank wants a real return on their loan of 5%, and expected inflation is 3%, what is the minimal nominal interest rate the bank would offer you?

ir(real) =in(nominal) -piE 5=x -3 = 8%

Suppose the country experiences a bout 8% of unexpected inflation and that actual inflation rate ends up being 9%. What was the real rate of interest you paid on your loan?

ir= 8% - 9% = -1%

If you take out a loan for a home improvement project and the bank gives you a loan at 7% interest, and inflationary expectations are that prices will rise 2.5% over the course of the loan, what is the real interest rate on that loan?

ir= in- pi E = Cr= 7.0-2.5 = 4.5

A person who has been managing a dry cleaning store for $30,000 per year decides to open his own dry cleaning store. The expenses are $35,000 for salaries (excluding the owner's) $10,000 for supplies, $8,000 for rent, $2,000 for utilities, and $5,000 for interest on a bank loan. The implicit costs include:

the owners foregone salary (30,000)