Economics Homework – assignment

Macroeconomics: Assignment # 1

1.  Define Economics. Distinguish between Microeconomics and Macroeconomics.

2.  State against each of the following sentences whether they belong to micro or macro economics:-

a)  The U.S. GDP registered a growth rate of 1.8% in 2013.

b)  The U.S. unemployment rate stood at 6.7% in Dec. 2013.

c)  Compared to Fall  2013, in Spring 2014, the student enrollment at MSU increased by 5%.

d)  In 2013,  the U.S. inflation rate was 1.5%.

e)  Castle Toyota, a car dealer, retrenched 5 of its workers in Jan. 2014.

f)  Adverse weather conditions damaged the tomato output and raised its price.

3.  What are the goals of macroeconomic policies?

4.  What were the factors that led to the civil war?

5.  Discuss briefly the causes and consequences of the great depression?

6.  Write short notes on:

a)  The great expansion

b)  The great recession

c)  Kennedy Tax Cuts 

d)  Business Cycle and its different phases

e)  Stagflation

7.  List 5 factors that contributed to the emergence of U.S.A, as the largest economy of the world.

8.  What are the key economic problems? How are they addressed by different economic systems?

9.  Alice has $100 to spend on CDs and DVDs. A CD costs $10, and a DVD costs $20.

a)  Construct an opportunity set.

b)  Draw a budget line with DVDS measured along the horizontal axis.

c)  Find the slope of the budget line.

d)  If Alice has more money to spend what will happen to the budget line?

e)  If the price of the DVD falls to $10 a piece, what will be the slope of the new budget line?

10.  John purchases apples and oranges. Price per lb of apples and oranges are  $2 and $1 respectively.

If John measures apples along the horizontal axis, what will be the slope of his budget line?

11.  A country has the following production possibilities:

Type of goods

  Production Possibilities

  A  B  C  D  E

  0  5  10  15  20

  10  9  7  4  0

Consumer goods

Capital goods

If the country is at point C, what is the opportunity cost of producing an extra unit of

a)  Capital good 

b)  Consumer good

c)  How will further increase in the production of capital/consumer goods affect the opportunity cost?  

12.  Account for the law of increasing opportunity costs.

13.  a)  What is demand?

b)  State the law of demand.

c)  Draw a demand curve?

d)  What do movement along the demand curve and shift in demand curve indicate?

e)  List four factors that cause shifts in the demand curve? 

14.  What will be the effect of each of the following on demand for  SUVs:-

a)  SUVs become more popular.

b)  Gas price substantially increases.

c)  A recession hits the country.

d)  Newspapers report large number of fatal accidents involving small cars.

15.  a)  What is supply?

b)  State the law of supply.

c)  Draw a supply curve.

d)  What do movement along the supply curve and shift in supply curve indicate?

e)  List four factors that cause shifts in the supply curve? 

16.  What will be the effect of the following on supply of auto tires?

a)  A technological advance in the method of producing tires.

b)  An increase in the price of rubber.

c)  Levying of a per unit tax on tires.

d)  Expected fall in tire prices.

17.   Wheat Market

Thousands of bushels demanded

Price per bushel ($)

Thousands of bushels supplied

Amount of Surplus(+)/Shortage(-)













a)  What is the equilibrium price?

b)  What is the equilibrium quantity?

c)  At a price of $3 per bushel, what will be the surplus/ shortage? What will be its consequence on price?

d)  At a price of $6 per bushel, what will be the surplus/ shortage? What will be its consequence on price?

   18.  If  Qd = 6-P,  and   Qs= -2+P,  find the equilibrium price and quantity.


  19.  What does happen to the housing market when rent control is imposed? Show with a diagram.


   20.  Draw a circular flow of income diagram, and explain its various flows.