University of Minnesota Spring 2008 Economics 1102H Principles of Macroeconomics HW4 Due March 31 at 12PM in Heller Hall 1035 Write Attention Lydia Pikyi Cheung on the top right hand corner Note The secretary writes the time at which the HW is received Additionally you can turn this in Thursday after lecture Test Yourself Questions from Baumol and Blinder 2007 10th Edition 13 7 14 1 14 2 14 3 14 5 Question related to Ch 15 Economists in Macroland believe that the full employment GDP is 7 500 and they calculate the structural deficit at that level In 1999 the economy was described as follows a b c d e Y C I G X IM C 100 0 8DI T 0 25Y Tr 0 I 800 G 1700 X IM 0 What was the equilibrium GDP in 1999 What was the multiplier What was the government s surplus or deficit What was the structural surplus or deficit The government decided to move the economy to full employment in 2000 a year in which the above structure of the economy did not change except for G What change in G was necessary f What was the government s surplus or deficit in 2000 g Does a comparison of the government s actual surpluses or deficits in 1999 and 2000 give a good indication of the change in fiscal policy Why or why not h Compare the structural deficits in the two years What does this comparison tell you about fiscal policy Expansionary Contractionary No Change Policy Question Democratic presidential candidate Sen Hillary Clinton announced a 110 billion health care reform plan to be enacted if elected The funding for these plans is always nebulous but let s assume that she is going to pay for the reform with fixed taxes Ignoring inflation how would this plan affect our nation s GDP This is the type of question that economists research Using our tools you can answer this question specifically Think about the multiplier affect from the health care and think about the multiplier affect from raising taxes to cover the reform Chapter 11 Appendix You need the marginal propensity to consume for the US as well as the approximate variable tax rate Essay Question This essay will concern the supply side tax cut debate Find an article within the last year that examines supply side tax cuts Answer the following questions and be sure to submit the article 1 Who is the author of the article Specifically is the author a policymaker An advisor to the president An economist How does the author s role influence his or her stance 2 What is the author s theory on supply side taxes What data does the author cite to support this theory Unemployment Inflation Nominal Real GDP 3 Is the article from an economist s perspective or a government perspective What if any are the contradictions of the author s argument Group Project Again I have emailed all groups regarding their projects Please answer any questions I raise and propose an outline for the presentation The outline should have approximate time values Additionally include a final list of sources Please email me this by April 11 2008