Comments on Problem Set #2

Here are some comments on the homework assignment.

On problem #2

Again, be careful calculating GDP per capita. Turn population into billions of people so that when it is divided into GDP you will get regular dollar amounts. Pay attention to the footnote. And you should get answers something under $100,000 (which is a pretty big income for an average household). But it should be greater than $1! If you get an answer with 5 digits before the decimal, you probably figured it out!

On problem #3If you follow the arrows this seemingly complex flow diagram is quite simple.

Also, keep in mind, GDP can be found by summing incomes. And incomes in that diagram is pretty easy to see flowing into the "factor markets". To find spending (C+I+G+NX), follow the arroows going into "markets for goods and services". They should add up.

Disposable income: that term was defined in the text. It is essentially after tax income which is used for spending and saving. So find income, subtract taxes, but also include any transfer payments from the government to households.

For government financing of spending, follow the flows into the government. I should equal the flows out of government.

I hope this information is helpful.

Why major in econonomics?

Most lucrative college degrees.

Happy Valentine's Day

From CinciDood and NatalieDee

Answers to Study Questions for Test #1

Here is the key for the sample multiple choice problems found in my I-drive folder.

I had to re-solve these problems and I did it quickly. Let me know if you think there are any errors. (I know, some of these problems are very difficult. I hope to pick some problems that may not be so difficult, but you can always expect a few tough ones.)

1-C, 2-A, 3-A, 4-B, 5-B, 6-B,
7-C, 8-C, 9-B, 10-A, 11-D,
12-D. 13-B, 14-B, 15-B, 16-D, 17-A,
18-B, 19-D, 20-B, 21-A, 22-B, 23-B, 24-C,
25-B, 26-A, 27-A, 28-B, 29-D, 30-C,
31-A, 32-C, 33-B, 34-B, 35-D.

I'll post updates to this blog entry if I need to make changes or offer some explanations.

JJ