Intro to Macro Homework

Intro to Macro Homework
Honors Economics
1) Draw a Supply and Demand diagram to show how demand side policy can be used to cure inflation.
2) Draw a Supply and Demand diagram to show how supply side policy can be used to cure a recession.
3) GDP went up last year from 11.0 Trillion dollars to 11.8 Trillion dollars. Great for the economy? Why or
why not?
4) Circle all of the following which are counted as part of GDP for a home construction company: wood,
nails, glass, windows, pipes, plumbing, wages of the workers, the bathroom, the kitchen, the house.
5) What type of unemployment is represented by each of the following situations?
A- you work for McDonnell Douglas making B2 bombers. Congress cuts funding and you lose your
B- you are in home construction. Interest rates rise so your boss has no new business, you are laid off.
C- you are a welder for Ford. The company introduces a new robot to do your job. You are fired.
D- You graduate from college and can not find a job for eight months after your graduation.
E- You work at McDonald’s, Congress raises the minimum wage, your boss needs to cut workers, you
are one of them.
6) Let’s say you borrow $2000 from your parents to pay off part of next years’ tuition with an agreement to
pay it off one year after graduation. If inflation were 10% now and 5 % when you graduate, are your
parents better off or worse off for having borrowed you the money and why?
7) Why do inflation and unemployment move in opposite directions? Try to come up with a connection why
more inflation leads to higher unemployment down the road.