Recent Macroeconomic Issues

Problem Set 1. “Macro Review”. Spring 2021. Macro I Online course.

1. List three macroeconomic issues that have been in the news lately and explain why those are relevant for how the economy works as a whole.

2. What do you think are the defining characteristics of a science? Do you think economics should be called a science? Why or why not? (to answer this question, watch the videos I posted on TopHat)

3. Use the traditional model of supply and demand to explain how an increase in the price of ice-cream would affect the price of frozen yogurt and the quantity of ice cream sold in the market. In your explanation, identify the exogenous and endogenous variables. Draw the demand and supply functions of both goods and explain the process.

4. What is the condition of market-clearing useful? When it happens? Can you give an example of how a particular market behaves in the short-run versus the long-run and the role of the price in that market?

5. Research question: Create a table in Excel that contains the evolution of the index that establishes the relationship between income per capita (GDP per capita in purchasing power parity -PPS-) of the U.S., every European country comprising the Euro Area-19 countries (in relation to the EU-27 = 100), and Japan. The time horizon is from 2010 to 2029. (HINT: use EUROSTAT as a source to get the data and build the table).

a. What countries lead the ranking of per capita income in 2029?

b. What are the countries that have a lower per capita income in 2019? What country or countries
started from lower levels of income per person? Are there signs of significant development and jumps in the standings of the period

c. Create a line graph in excel that compares the temporal evolution of per capita income of the Euro Area countries versus the evolution of the U.S. and Japan. You should reflect the evolution of every country in the European Monetary Union (EMU, therefore 19 lines) with respect to that in Japan and the U.S., plus a line that reflects the Euro Zone (EU-19) as one area or region. Discuss the graph.

d. Create a graph for the unemployment rate in the US, Euro Zone (19 countries, one by one), the US and Japan since 2010. Compare the trends across countries. You should reflect the evolution of every Euro-Area country, the U.S and Japan, plus a line that reflects the overall Euro Area performance (EU19).

6. Let’s suppose that the working-age population in a fictitious country is 50,000 people. There are 1,000 unemployed workers and 150 discourage workers. The participation rate is 70%. What is the labor force of this country?

a. Calculate the unemployment rate and the number of people employed.

b. Suppose that participation rate declines to 65%. Redo all calculations. For more information on Recent Macroeconomic Issues check out : https://edition.cnn.com/2020/09/03/economy/economy-perception-pew-study/index.html