# ANSWERS TO ONLINE REVIEW QUESTIONS

Management

Oct 28, 2013 (4 years and 8 months ago)

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CHAPTER 17

WHAT MACROECONOMICS TRIES TO EXPLAIN

VIEW QUESTIONS

2.

To make sense of the economy and to create workable models, macroeconomics uses
aggregation

the process of combining distinct things into a
single entity. There are
many examples of aggregation in macroeconomics, so answers will vary widely. One
example would be the interest rate

obtained by combining all the different interest rates
in the economy into a single aggregate. Another example is g
ross domestic product
(GDP)

obtained by combining all the different types of goods and services in the
economy into a single aggregate.

4.

In addition to the growth rate of output, we would need to know the growth rate of the
population. A rise in the ave
rage standard of living requires that output grow
faster

than
the population, so that
output per person
rises.

PROBLEM SET

2.

a.

Real GDP in 2000 would have been \$
4,917

billion x (1 + 0.08)
27

= \$39,277 billion.

b.

If the growth rate had been 8 percent per ye
ar, output per person in 2000 would have
been \$39,277 billion/281 million = \$139,776. That would have been \$139,776

\$
39,950

= \$99,826 higher than the actual output per person that year.

4
.

a.

Year

Real GDP (in
billions)

2000

\$5,000

2001

\$5,300

2002

\$5,618

2003

\$5,955

2004

\$6,312

2005

\$6,691

2006

\$7,093

No, the real GDP line becomes steeper over time because, as real GDP rises from an
increasingly higher and higher level, the same
percentage

growth rate causes greater
and greater
absolute

increases in GDP.

b.

Year

Real GDP (in billions)

2000

\$5,000

2001

\$5300

2002

\$5300 x 1.05 = \$5,565

2003

\$5565 x 1.04 = \$5,788

2004

\$5,961

2005

\$6,080

2006

\$6,141

No, the real GDP line becomes flatter. Because the growth rate is decreasing over

time, then the slope of the GDP line must also be decreasing.