Hints for Homework #5

Here are some things that should help you with the homework:

These circular flow diagrams look a bit different than the ones drawn in class. They tell the same story, they just look different. Deciphering them both will add to your understanding, not confusion.

The answers to A, B, and C on both problems are calculations. These are not just definitions. For A, use the equation GDP = C + I + G + NX. You need to know (B) to answer (A) so you might just want to solve for NX first and then do the rest of (A).

Hints on problem #1: It should be obvious what the value of GDP is by looking at the monetary flows in and out of the factor markets. Also, if you're looking for "I" or savings, well have fun looking for nothing (that was a hint). You should clearly be able to find values for C and G.

Hints on problem #2: Note how "government transfers" are not part of GDP. Those funds flow back into households and are picked up as "consumption, C". For A, tho, just be careful. Watch all the arrows flowing into "Markets for goods and services". You should be able to see C, G, I, and NX. As a check, it is very clear to see the values of "incomes", which equals GDP, by looking at the arrow flowing into "factor markets" and coming out of "factor markets".

Good luck.

Thursday Office Hours

Office hours for Thursday, September 28, will be held 2:00 - 3:30.

I will not be in the office Thursday morning.

J

Midweek Update (Wednesday, September 27)

The homework assignment distributed today is due Friday, September 29. The handout said Friday the 30th. However Friday is the 29th. The 30th is Saturday. It is not due Saturday. My bad. It was a typo. If you did not get a copy of the assignment you can get a copy from the I-drive. Also, they are just problems 1 and 2 from the end of chapter problems on p. 183 in the Krugman and Wells text.

For those of you who did not get the whole explanation of the distribution of grades, here is a summary of the distribution of grades and what it means to you.

The overall mean was a 28.2 out of 40 points. That's about a 70.5%. (To find your percentage score you take your overall score and divide by 40.) It is your raw score that I enter into the grade book. It gets weighted appropriately (more explanation on that at some later point). Two other measures of "centrality" are the median (middle score), which was 27.75 and the mode (the most frequently occurring score), which was 26. This means the "curve" was a bit lopsided. (If the bell curve could ring it would probably have some awful sound.) The standard deviation was 4.5 points (about 11.3%) which means scores were scattered all around rather widely. The bell curve is looking like a cymbal.

So the following can be used as a guide for how well you did on the test.

A range: 33 and higher
B range: 28 - 32.5
C range: 24 - 27.5
D range: 20 - 23.5
If you got below a 20 that is not very good.

Please note: I do not enter this grade into my gradebook. I enter just the raw score. The only curve that will ultimately matter is the curve at the end of the semester with all the grades. Typically that gets closer to my desired mean of 80% and my desired standard deviation of 10%, allowing me to use the default scale as explained in the syllabus. (A: 90-100, B: 80-89.99, etc.)

I'll continue to explain this scaling after each test so that at least in preparation for the final you will have a pretty good idea of how much you need to prepare to get the desired grade.

Good luck.

Key to Test 1 Study Problems

Are these the answers?

1-C, 2-D*, 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.

Let me know if you think any of these is wrong.

*changed from A. I think C is acceptable too so D would be most appropriate. Plus this was a homework problem and it was scored D. Sorry. (Thanks Ando2798)

Calculating Opportunity Cost

“I saw how you did the Gilligan and Mary Ann example in class but I’m not sure how to answer this problem.”

First, find the opportunity cost of producing one unit of each good. The “cost” is in terms of the other good. The following example applies to Tivoli. You’re given that in one month they can produce either 30 pounds of spaghetti (no meatballs) or 50 pounds of meatballs (no spaghetti). You can find the opportunity cost by starting with the equation:

30 lbs spaghetti = 50 lbs meatballs

To get the opportunity cost of spaghetti in terms of meatballs, solve the above equation for 1 lb of spaghetti. That is, divide both sides by 30. So

30 lbs/30 = 50lbs/30 or 1 lb spaghetti = 5/3 lbs meatballs.

Similarly, the opportunity cost of a pound of meatballs can be found by dividing both sides by 50. So 30 lbs/50 = 50 lbs/30 or 1 lb meatballs = 3/5 spaghetti.

Do the same for Frivoli. When you have calculated the opportunity costs for both goods in both tribes, you can then compare who has the lowest opportunity costs and, hence, comparative advantages.

It doesn't matter if you draw the PPFs on the same set of axies or separate diagrams.

P.S. In referencing the text, I was mistaken when mentioning the opportunity cost/comparative advantage example. It is "Tom and Hank" as "Castaways". Your PPFs should look like Figure 2-4 on p. 26.

Krugman on Colbert Report

Here is the link to the Colbert Report's video page at Comedy Central.

Your textbook author, Paul Krugman, appeared recently on the show. Click through to view videos.

Sorry if it's too political for you. But he usually argues pretty well (it's a good trait). Try to refute him.

Be Cool. Stay in School. (And study economics)

Table P-32. Educational Attainment-Full-Time, Year-Round Workers 18
Years Old and Over by Mean Earnings, Age and Sex: 1991 to 2004

Its URL Address is
http://www.census.gov/hhes/www/income/histinc/p32.html


For High School Graduates
2004 Male Earnings Female Earnings
Total $39,117 $28,537
18 to 24 years 25,919 19,212
25 to 34 years 33,108 27,687
35 to 44 years 42,391 28,473
45 to 54 years 44,123 30,311
55 to 64 years 43,966 30,651
65 years and over 40,326 33,699


For Bachelors Degree Holders
2004 Male Earnings Female Earnings
Total $71,267 $48,289
18 to 24 years 33,893 30,316
25 to 34 years 55,539 41,924
35 to 44 years 78,422 54,502
45 to 54 years 80,301 53,186
55 to 64 years 79,623 47,264
65 years and over 62,156 52,855



Next, below is the data on average starting salaries nationwide in
Summer 2006 Spring 2006 College graduates by major. Data is from the
NACE Salary survey

Discipline (bachelor's degree level) Current Average
Accounting $45,656
Business Administration/ Management $42,048
Chemical Engineering $56,335
Civil Engineering $46,023
Computer Engineering $53,651
Computer Science $51,305
Economics/ Finance $45,112
English $30,906
Electrical/ Electronics Engineering $53,552
History $32,697
Marketing/ Marketing Management $37,851
Mechanical Engineering $51,732
MIS/ Business Data Processing $48,593
Sociology $30,944
Psychology $30,218

(Thanks to Dr. David Yerger for the compilation of information for this posting.)

So far...

so good.

I like the participation. Keep it up.

I hope you don't get too bored with how mundane your economic life is. I'm revealing it all and keeping it real.

Note to those who added after the first homework handout: I know who you are and I won't hold it against you. Sorry to have been a bit of a hard*** about that. You should not be at a disadvantage by playing within the rules. Welcome aboard.

JJ