ECON 110 Connect Homework 5 Government Intervention The Business Cycle Assignment solutions answers

ECON 110 Connect Homework 5 Government Intervention The Business Cycle Assignment solutions complete answers 

 

Question 1

Refer to the News Wire to answer two questions.

NEWS WIRE
EXTERNALITIES
Secondhand Smoke Kills More Than 600,000 People a Year: Study

Secondhand smoke globally kills more than 600,000 people each year, accounting for 1 percent of all deaths worldwide, according to a new study.

Researchers estimate that "passive smoking" causes about 379,000 deaths from heart disease, per year, worldwide. Passive smoking also kills 165,000 people each year due to lower respiratory disease, 36,900 deaths from asthma, and 21,400 deaths from lung cancer.

Children account for about 165,000 of the deaths. Forty percent of children and 30 percent of adults regularly breathe in secondhand smoke.

 

How much global output is lost annually as a result of adult deaths from secondhand smoke if the average adult produces

a. $35,000 of output per year?

b. $40,000 of output per year?

 

Question 2

Identify the market and optimal outcomes on the production possibilities curve and answer one question about optimal production.

 

Instructions: Use the tools provided 'M' and 'X' to illustrate the market outcome (M) and the optimal outcome (X) on the production possibilities curve. Then click on the dropdown boxes to identify these points as 'M' or 'X.'

 

The market tends       to public goods and       private goods.

 

Question 3

Refer to the News Wire to answer two questions.

NEWS WIRE
PUBLIC GOODS
Israel's "Iron Dome" Works!

Israel’s Iron Dome is an air defense system designed to intercept and destroy incoming missiles and mortars fired across the border by Hamas and other Palestinian factions. It works. Israel’s Defense Minister claims the Iron Dome has been 90 percent effective in shielding population centers in the latest barrage of artillery fired into Israel by Hamas.

Suppose the annual cost of the Iron Dome is $500 million. What is the opportunity cost of this defense spending in terms of private housing, assuming a new home can be constructed for

a. $50,000?

b. $80,000?

 

Question 4

Graph the following data on social and market demand and then answer two questions about externalities. 

Price
Market Quantity Demanded
Social Quantity Demanded
($)
(units per month)
(units per month)
20
10
20
18
20
30
16
30
40
14
40
50
12
50
60
10
60
70
 

a. Graph social and market demand.   

Instructions: Use the tools provided 'DS' and 'DM' to plot the social demand (DS) and market demand (DM) curves (plot 6 points total for each curve).

b. Does this product have external benefits or external costs?

c. How large ($) is that externality?

 

Question 5

Policy Perspectives Refer to the table to answer one question.

Income Transfers: The market mechanism might leave some people with too little income and others with too much. The government uses taxes and transfers to redistribute income more fairly.

Program
Recipient Group
Number of Recipients
Value of Transfers
Social Security
Retired and disabled workers
67 million
$1,002 billion
Medicare
Individuals over age 65
59 million
$620 billion
Medicaid
Medically needy individuals
75 million
$400 billion
Unemployment compensation
Unemployed workers
6 million
$30 billion
Food stamps
Low-income households
42 million
$63 billion
Earned Income Tax Credit
Low-wage workers
30 million
$70 billion
Temporary Aid to Needy Families
Poor families
3 million
$17 billion
 

Calculate the average benefit a recipient of Temporary Aid to Needy Families receives.  

Instructions: Round your response to the nearest dollar.

 

Question 6

How much more (or less) output will the average American have next year if the $20 trillion GDP grows (or contracts) by:

Instructions: If the economy contracts be sure to include a negative sign (-) in front of your answer.

Assume a population of 340 million.

a. 2.5 percent?

b. 1 percent?

c. 3 percent?

c. If GDP changes by 3 percent over the next year, U.S. GDP will change to $20.6 trillion (= $20 

 

Question 7

Annual Inflation Rate
Year
2 Percent
4 Percent
6 Percent
8 Percent
10 Percent
2019
$1,000
$1,000
$1,000
$1,000
$1,000
2020
980
962
943
926
909
2021
961
925
890
857
826
2022
942
889
840
794
751
2023
924
855
792
735
683
2024
906
822
747
681
621
2025
888
790
705
630
564
2026
871
760
665
584
513
2027
853
731
627
540
467
2028
837
703
592
500
424
2029
820
676
558
463
386
Using the table, what will the real value of $100 be in 10 years if you hide the money under your mattress and the inflation rate is:

Instructions:
Round your responses to two decimal places.
Assume you hid the money under your mattress in 2019.

a. 0%

b. 2%

c. 8%

 

Question 8

In Zimbabwe the rate of inflation hit 90 sextillion percent in 2009, with prices increasing tenfold every day. At that rate, how much would a $3 loaf of bread cost five days later?

Hint: Use the following equation to calculate future price: Future price = (current price) × (inflation rate)t, where t is the number of days in the future.

Instructions: Round your response to one decimal place.

 

Question 9

The following table lists the prices of a small market basket purchased in both 2008 and 2018. Assuming that this basket of goods is representative of all goods and services, compute the price of the market basket in (a) 2008 and (b) 2018 and then answer two questions about price levels and real income. 

 
 
Price per Unit
 
a. Cost of Market Basket in 2008
 
b. Cost of Market Basket in 2018
Item
Quantity
2008
2018
 
(Quantity*2008 price)
 
(Quantity*2018 price)
Coffee
20 pounds
$7
$8
 
 
 
 
Tuition
1 year
7,000
11,000
 
 
 
 
Pizza
100 pizzas
20
13
 
 
 
 
Movie download
90 movies
3
1
 
 
 
 
Gasoline
1,000 gallons
3
4
 
 
 
 
 
 
 
 
Total 2008
 
Total 2018
 
Instructions: Round your response to two decimal places.

c. By how much has the average price level risen between 2008 and 2018?

Hint: Compare the total basket cost in 2018 to the total basket cost in 2008.

 

d. The average household’s nominal income increased from $40,000 to $60,000 between 2008 and 2018. What happened to its real income?

 

Question 10

Policy Perspectives Use the following table to answer five questions about U.S. recessions.

Business Slumps, 1929-2009
Dates
Duration
Percentage
Peak
(Year recession began)
(Months)
Decline in Output
Unemployment Rate
1929
43
-26.7%
24.9%
1937
13
-18.2
19.0
1945
8
-12.7
5.2
1948
11
-1.7
7.9
1953
10
-2.6
6.1
1957
8
-3.7
7.5
1960
10
-1.6
7.1
1969
11
-0.6
6.1
1973
16
-3.2
9.0
1980
6
-2.2
7.8
1981
16
-2.7
10.8
1990
8
-1.4
7.8
2001
8
-0.3
6.3
2007
18
-5.1
10.0
Since 1940,

a. the longest recession began in

b. the shortest recession began in

c. the recession with the highest unemployment rate began in

d. the recession with the biggest decline in output began in

e. the recession with the smallest decline in output began in