## Macroeconomics Study Set 63

Business

## Quiz 6 :

An Introduction to Macroeconomics

_{2}percent rather than a negativE

_{2}percent, what would have been the average growth rate?

The average growth rate of Econoland over the 5 years is calculated below:
Thus, the average growth rate of Econoland over the five years is 0.6%.
In year 3, growth rate is -2% and this situation in the economy is terms as recession. When growth is lower than the average growth rate it is called as recession.
If in year 3, growth rate iS_{2}%, then, the average growth rate is calculated below:
Thus, the new growth rate iS_{3} percent.

_{2}6.1, page 527.

The graph below shows how economy behaves in long run and short run. In the long run, economy has an uptrend growth. In the short run, there are fluctuations around the long-run trend. When economy fluctuates from peak to trough, it experiences recession; when economy fluctuates from trough to peak, it experiences expansion. Economic fluctuations and economic growth are compatible concepts because economic fluctuations are centered on economic growth. Economic growth is the trend of economic fluctuations.

Change of real output measures the change in output without getting affected by price change. It uses the price of base year to calculate output values.
Thus, real output increased by 100% i.e. real output doubled.
Real output eliminates the effect of price change, thus, it would still have increasE_{1}00% if the price had not changed.

_{1}0 years (= 70/ 7) to double. Apply the rule of 70 to solve the following problem. Real GDP per person in Mexico in 2005 was about $11,000 per person, while it was about $44,000 per person in the United States. If real GDP per person in Mexico grows at the rate of 5 percent per year, about how long will it take Mexico's real GDP per person to reach the level that the United States was at in 2005? (Hint: How many times would Mexico'S

_{2}005 real GDP per person have to double to reach the United States' 2005 real GDP per person?)

_{1}0 new restaurants at a cost of $1 million per restaurant. It outfits each restaurant with an additional $200,000 of equipment and furnishings. To help partially defray the cost of this expansion, BBQ issues and sellS

_{2}00,000 shares of stock at $30 per share. What is the amount of economic investment that has resulted from BBQ's actions? How much purely financial investment took place?

_{2}3.1b and assume that price is fixed at $37,000 and that Buzzer Auto needs 5 workers for every 1 automobile produced. If demand is DM and Buzzer wants to perfectly match its output and sales, how many cars will Buzzer produce and how many workers will it hire? If instead, demand unexpectedly falls from DM to DL , how many fewer cars will Buzzer sell? How many fewer workers will it need if it decides to match production to these lower sales?