ECON2105 Principles of Macroeconomics Past Papers PDF

ECON2105 Principles of Macroeconomics ECON2105: PRINCIPLES OF MACROECONOMICS In-Class Activity Handouts SPRING 2024 GEORGIA GWINNETT COLLEGE Dr. Grace Onodipe ECON2105 Principles of Macroeconomics 1 ...

ECON2105 Principles of Macroeconomics ECON2105: PRINCIPLES OF MACROECONOMICS In-Class Activity Handouts SPRING 2024 GEORGIA GWINNETT COLLEGE Dr. Grace Onodipe ECON2105 Principles of Macroeconomics 1  ECON2105 Principles of Macroeconomics Course Outline* *subject to change Date Topics Assignments Wednesday Jan 10 Welcome/Syllabus Review Pre-Class Work (PCW) Review Syllabus Quiz Chapter 1: 10 Principles of Economics Wednesday Jan 17 C h. 1 I In-Class Activity Handout Chapter 2: Thinking Like an Economist Wednesday Jan 24 Chapter 2: ctd. Chapter 3: Interdependence & Gains from Trade Wednesday Jan 31 Ch. 3 ICAH Test #1 Review Learner Log Wednesday Feb 7 Test #1 Chapter 4: Market forces of Supply and Demand Wednesday Feb 14 Chapter 5: How do Sellers behave? Chapter 6: Supply, Demand, Government Policies Wednesday Feb 21 Chapter 6: ctd. Chapter 7: Cons., Prod. & Efficiency of Markets Wednesday February 28 Chapter 7: ctd. Test #2 Review Learner Log Mar 6 Spring Break Wednesday Mar 13 Test #2 Chapter 10: Measuring a Nation’s Income Wednesday Mar 20 Chapter 10: ctd Chapter 10: ctd. Wednesday Mar 27 Chapter 11: Measuring the Cost of Living Chapter 15: Unemployment Wednesday Apr 3 Chapter 15: ctd. Test #3 Review Wednesday Apr 10 Test #3 Chapter 16: Monetary System Learner Log Wednesday April 17 Chapter 20: Aggregate Demand and Aggregate Supply Chapter 21: Monetary Policy Wednesday Apr 24 Chapter 21: Fiscal Policy Learner Log 04/30 – 05/06 Test #4 2 ECON2105 Principles of Macroeconomics 3 ECON2105 Principles of Macroeconomics 4  ECON2105 Principles of Macroeconomics Chapter 1: Principles of Economics 1. How does the study of economics depend upon the phenomenon of scarcity? 2. One tradeoff society faces is between efficiency and equality. Define each term. If the U.S. government redistributes income from the rich to the poor, explain how this action affects equality as well as efficiency in the economy. 3. Explain how government policies that redistribute income from the rich to the poor might reduce efficiency. 4. Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today? 5  ECON2105 Principles of Macroeconomics 5. You have the afternoon free. You have a choice between going to the movies with a friend or studying economics for three hours. If you go to the movies, you will spend $8.00 on a ticket and $4.50 on popcorn. If you choose to study economics for three hours, you will raise your exam grade by 10 points. a. What is your opportunity cost of going to the movies? b. What is your opportunity cost of studying economics? 6. Suppose that you have a choice between going to the movies with a friend for two hours or working at your job. If you go to the movies, you will spend $7 on a ticket and $5 on popcorn. If you choose to work, you will earn $10 an hour. a. What is your opportunity cost of going to the movies? b. What is your opportunity cost of working? 7. Debbie quits her job, which pays $30,000 a year, to finish her college degree. Her annual college expenses are $10,000 for tuition, $2,000 for books, and $700 for food. What is her opportunity cost of attending college for the year? 8. Zack quits his job at a consulting firm, which pays $40,000 a year, to enroll in a two-year graduate program. His annual school expenses are $30,000 for tuition, $2,000 for books, and $600 for food. What is his opportunity cost of attending the two-year graduate program? 9. It costs a company $35,000 to produce 700 graphing calculators. The company’s cost will be $35,070 if it produces an additional graphing calculator. The company is currently producing 700 graphing calculators. a. What is the company’s average cost? b. What is the company’s marginal cost? c. A customer is willing to pay $60 for the 701th calculator. Should the company produce and sell it? Explain. d. What is the minimum price the company will charge for the 701th calculator? 6  ECON2105 Principles of Macroeconomics 10. With the understanding that people respond to incentives, outline the possible outcome for teachers if the K-12 school year is extended to 11 months per year instead of the existing 9 months per year. 11. Rational people make decisions “at the margin” by comparing ----------------------------. 12. Under what conditions might government intervention in a market economy improve the economy’s performance? 13. Give an example of government intervention that is intended to reduce an externality. 14. Give an example of government intervention that is intended to improve equality. 15. Explain how trade with other countries is beneficial. 7  ECON2105 Principles of Macroeconomics Chapter 2: Thinking Like An Economist 1. Using the outline below, draw a circular-flow diagram representing the interactions between households and firms in a simple economy. Explain briefly the various parts of the diagram. 8  ECON2105 Principles of Macroeconomics 2. Figure 2-3 A. What is the name of the model depicted in the figure? B. What do the ovals represent in the figure? C. What do the rectangles represent in the figure? D. What do the outer arrows represent in the figure? E. What do the inner arrows represent in the figure? F. What does the arrow going from oval A to rectangle 2 represent in the figure? G. What does the arrow going from oval B to rectangle 2 represent in the figure? H. What are two elements not included in this figure that could be included in a more complex model? 9 ECON2105 Principles of Macroeconomics 10  ECON2105 Principles of Macroeconomics 3. Draw a production possibilities frontier showing increasing opportunity cost of hammers in terms of horseshoes. a. On the graph, identify the area of feasible outcomes and the area of infeasible outcomes. b. On the graph, label a point that is efficient and a point that is inefficient. c. On the graph, illustrate the effect of the discovery of a new vein of iron ore, a resource needed to make both horseshoes and hammers, on this economy. d. On a second graph, illustrate the effect of a new computerized assembly line in the production of hammers on this economy. 11  ECON2105 Principles of Macroeconomics 4. Figure 2-14 Consider the production possibilities curve for a country that can produce sweaters, apples (in bushels), or a combination of the two. A). The bowed outward shape of the production possibilities curve indicates that opportunity cost of apples in terms of sweaters is B). Which point(s) on the graph is(are) efficient production possibilities? C). Which point(s) on the graph show unemployment of resources? D). Which point(s) on the graph is(are) unattainable given current resources and technology? E). What is the opportunity cost of moving from point T to point R? F). What is the opportunity cost of moving from point R to point Q? 12  ECON2105 Principles of Macroeconomics 5. Figure 2-15 A. Consider the production possibilities frontier for an economy that produces only sofas and cars. As the economy moves from point A to point D, is the opportunity cost of cars increasing, constant, or decreasing? B. Consider the production possibilities frontier for an economy that produces only sofas and cars. The opportunity cost of one sofa is C. Consider the production possibilities frontier for an economy that produces only sofas and cars. The opportunity cost of one car is 6. Table 2-6 Mobile Phones Pizzas 0 10,000 200 8,000 500 6,000 900 4,000 1400 2,000 2000 0 A. Consider the production possibilities table for an economy that produces only mobile phones and pizzas. What is the opportunity cost of increasing production of mobile phones from 200 to 500? B. Consider the production possibilities table for an economy that produces only mobile phones and pizzas. What is the opportunity cost of increasing production of pizzas from 4,000 to 6,000? C. Consider the production possibilities table for an economy that produces only mobile phones and pizzas. Describe the shape of the production possibilities frontier. 13  ECON2105 Principles of Macroeconomics 7. Identify each of the following topics as being part of microeconomics or macroeconomics: a. the impact of a change in consumer income on the purchase of luxury automobiles b. the effect of a change in the price of Coke on the purchase of Pepsi c. the impact of a war in the Middle East on the rate of inflation in the United States d. factors influencing the rate of economic growth e. factors influencing the demand for tractors f. the impact of tax policy on national saving g. the effect of pollution taxes on the U.S. copper industry h. the degree of competition in the cable television industry i. the effect of a balanced-budget amendment on economic stability j. the impact of deregulation on the savings and loan industry 8. Which of the following statements are positive and which are normative? a. The minimum wage creates unemployment among young and unskilled workers. b. The minimum wage ought to be abolished. c. If the price of a product in a market decreases, then, other things equal, quantity demanded will increase. d. A little bit of inflation is worse for society than a little bit of unemployment. e. There is a tradeoff between inflation and unemployment in the short run. f. If consumer income increases, then, other things equal, the demand for automobiles will increase. g. The U.S. income distribution is not fair. h. U.S. workers deserve more liberal unemployment benefits. i. If interest rates increase, then investment will decrease. j. If welfare benefits were reduced, then the country would be better off. 14  ECON2105 Principles of Macroeconomics 9. Use the following graph to answer the following questions. a. How would point J be represented as an ordered pair? b. What type of curve is this? c. Does this curve show a positive or negative correlation between price and quantity? d. Compute the slope of D1 between points J and L. e. What is the slope of D1 between points L and N? Why would you not have to calculate this answer? f. What is it called if we move from D1 to D2? g. How do you know that the slope of D2 is the same as the slope of D1? 15  ECON2105 Principles of Macroeconomics 10. Figure 2-22 A. What are the coordinates of point C? B. What is the x-coordinate of point R? C. How are price and quantity related in this graph? D. What is the slope of the line with points A, B, and C? E. Is a move from point A to point B considered a shift of the curve or a movement along the curve? F. Is a move from point A to point R considered a shift of the curve or a movement along the curve? G. Given that price is measured on the vertical axis, quantity is measured on the horizontal axis, and that the curves are downward-sloping, what type of curves are depicted here? 16  ECON2105 Principles of Macroeconomics 11. Choose the correct answer from these choices Department of Labor; Office of Management and Budget; Federal Reserve; Department of the Treasury; Council of Economic Advisers; Department of Justice A. Since 1946, the president of the United States has received guidance from a group comprised of three members and a staff of a few dozen economists known as the B. Economists at which administrative department help formulate spending plans and regulatory policies? C. Economists at which administrative department help design tax policy? D. Economists at which administrative department analyze data on workers and those looking for work to help formulate labor-market policies? E. Economists at which administrative department help enforce the nation’s antitrust laws? F. The institution that sets the nation’s monetary policy is called the 17  ECON2105 Principles of Macroeconomics Chapter 3: Interdependence and Gains from Trade 1. The only two countries in the world, Alpha and Omega, face the following production possibilities frontiers. Alpha’s Production Possibilities Frontier Omega’s Production Possibilities Frontier a. Assume that each country decides to use half of its resources in the production of each good. Show these points on the graphs for each country as point A. b. If these countries choose not to trade, what would be the total world production of popcorn and peanuts? c. Now suppose that each country decides to specialize in the good in which each has a comparative advantage. By specializing, what is the total world production of each product now? d. If each country decides to trade 100 units of popcorn for 100 units of peanuts, show on the graphs the gain each country would receive from trade. Label these points B. 18  ECON2105 Principles of Macroeconomics 2. Julia can fix a meal in 1 hour, and her opportunity cost of one hour is $50. Jacque can fix the same kind of meal in 2 hours, and his opportunity cost of one hour is $20. Will both Julia and Jacque be better off if she pays him $45 per meal to fix her meals? Explain. 3. Gary and Diane must prepare a presentation for their marketing class. As part of their presentation, they must do a series of calculations and prepare 50 PowerPoint slides. It would take Gary 10 hours to do the required calculation and 10 hours to prepare the slides. It would take Diane 12 hours to do the calculations and 20 hours to prepare the slides. a. How much time would it take the two to complete the project if they divide the calculations equally and the slides equally? b. How much time would it take the two to complete the project if they use comparative advantage and specialize in calculating or preparing slides? 19  ECON2105 Principles of Macroeconomics 4. Suppose that Venezuela produces beef and oil and it can switch production between each at a constant rate. If the most beef it can produce is 300 million pounds and the most oil it can produce is 50 million barrels, then what is the opportunity cost of a pound of beef and what is the opportunity cost of a barrel of oil? 5. Frank can make 20 hot dogs an hour or 10 pints of potato salad an hour. Earnest can make 30 hot dogs an hour or 20 pints of potato salad an hour. Who has the comparative advantage making hot dogs and who has the comparative advantage making potato salad? 6. Explain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why? 20  ECON2105 Principles of Macroeconomics 7. The production possibilities frontiers below show how much Greg and Catherine can each produce in 8 hours of time. Greg’s Production Possibilities Catherine’s Production Possibilities a) What is Greg’s opportunity cost of producing ice cream? Explain how you derived your answer. b) What is Greg’s opportunity cost of producing cake? Explain how you derived your answer. c) What is Catherine’s opportunity cost of producing ice cream? Explain how you derived your answer. d) What is Catherine’s opportunity cost of producing cake? Explain how you derived your answer. e) Which if any good(s) does Greg have an absolute advantage producing? f) Which if any good(s) does Catherine have an absolute advantage producing? g) Is it possible for Greg and Catherine to gain from trade? Defend your answer. 21  ECON2105 Principles of Macroeconomics 8. Figure 3-26 Mary’s Production Possibilities Frontier Kate’s Production Possibilities Frontier a. What is Mary’s opportunity cost of one muffin? b. What is Mary’s opportunity cost of one cookie? c. What is Kate’s opportunity cost of one muffin? d. What is Kate’s opportunity cost of one cookie? e. Who has a comparative advantage in making cookies? f. Who has a comparative advantage in making muffins? g. If Mary and Kate trade foods with each other, who will trade away muffins in exchange for cookies? 22  ECON2105 Principles of Macroeconomics Chapter 4: The Market Forces of Supply and Demand DEMAND 1. According to the law of demand, when price increases the quantity demanded of a good _______________________ 2. What is the difference between a "change in demand" and a "change in quantity demanded?" Graph your answer. 3. For each of the following changes, determine whether there will be a change in quantity demanded or a change in demand. i. a change in the price of a related good ii. a change in tastes iii. a change in the number of buyers iv. a change in price v. a change in consumer expectations vi. a change in income 23  ECON2105 Principles of Macroeconomics 4. The table below shows the quantities demanded of milk per month by four families at various prices. Price of Gallon of The The The Harris The Patel Milk Berman Johnson Family Family Family Family $3.00 9 15 12 14 $4.00 8 12 10 10 $5.00 7 9 8 6 $6.00 6 6 6 2 a. If the four families listed are the only demanders in this market and the price of a gallon of milk is $4.00, what is the market quantity demanded? b. If the four families listed are the only demanders in this market and the price of a gallon of milk increases from $4.00 to $5.00, what is the change in the market quantity demanded? 5. Figure 4-28 A. Using the points on the figure, describe the change that would occur if consumer incomes increase and this is an inferior good. B. Using the points on the figure, describe the change that would occur if the price of a substitute for this good becomes more expensive. C. Using the points on the figure, describe the change that would occur if the price of this good increases. D. Using the points on the figure, describe the change that would occur if a news report stated that the price of this good was expected to increase next week. 24  ECON2105 Principles of Macroeconomics 6. Studies show that lower cigarette prices are associated with greater use of marijuana; therefore, tobacco and marijuana are _______________ 7. If income rises in the market for an inferior good, will the demand curve for the inferior good shift to the right or to the left? 8. If income rises in the market for a normal good, will the demand curve for the normal good shift to the right or to the left? 9. Suppose goods A and B are substitutes. If the price of good A increases, will the demand for good B increase or decrease? 10. Suppose goods A and B are complements. If the price of good A increases, will the demand for good B increase or decrease? 11. Suppose consumers expect the price of a good to be higher in the future than it is today. Would the current demand for the good increase or decrease? 12. Suppose the number of buyers in a market decreases. As a result, would the demand curve in this market shift to the right or to the left? 25  ECON2105 Principles of Macroeconomics SUPPLY 13. What is the difference between a "change in supply" and a "change in quantity supplied?" Graph your answer. 14. For each of the following changes, determine whether there will be a change in quantity supplied or a change in supply. i. a change in input costs ii. a change in producer expectations iii. a change in price iv. a change in technology v. a change in the number of sellers EQUILIBRIUM 15. Given the table below, graph the demand and supply curves for flashlights. Make certain to label the equilibrium price and equilibrium quantity. Quantity Quantity Demanded Supplied Price Per Month Per Month $5 6,000 10,000 $4 8,000 8,000 $3 10,000 6,000 $2 12,000 4,000 $1 14,000 2,000 a. What is the equilibrium price and the equilibrium quantity? b. Suppose the price is currently $5. What problem would exist in the market? What would you expect to happen to price? Show this on your graph. c. Suppose the price is currently $2. What problem would exist in the market? What would you expect to happen to price? Show this on your graph. 26  ECON2105 Principles of Macroeconomics 16. Suppose we are analyzing the market for hot chocolate. Graphically illustrate the impact each of the following would have on demand or supply. Also show how equilibrium price and equilibrium quantity would change. a. Winter starts, and the weather turns sharply colder. b. The price of tea, a substitute for hot chocolate, falls. c. The price of cocoa beans decreases. d. The price of whipped cream falls. e. A better method of harvesting cocoa beans is introduced. f. The Surgeon General of the U.S. announces that hot chocolate cures acne. g. Protesting farmers dump millions of gallons of milk, causing the price of milk to rise. h. Consumer income falls because of a recession, and hot chocolate is considered a normal good. i. Producers expect the price of hot chocolate to increase next month. j. Currently, the price of hot chocolate is $0.50 per cup above equilibrium. 27  ECON2105 Principles of Macroeconomics 17. Figure 4-30 a. In this market for iPhones, the technology improves while all other factors remain constant. Which curve(s) shift(s) and in which direction? Explain the change(s) in the equilibrium price and quantity. b. In this market for tablet computers, more suppliers enter the market and the price of laptops, a substitute good, increases, while all other factors remain constant. Which curve(s) shift(s) and in which direction? Explain the change(s) in the equilibrium price and quantity. 28  ECON2105 Principles of Macroeconomics Figure 4-31 18. Consider the market for 2-packs of light bulbs below. a. What are the values of the equilibrium price and quantity? b. At a price of $3, is there a shortage or surplus, and how large is the shortage/surplus? C. At a price of $6, is there a shortage or surplus, and how large is the shortage/surplus? d. Suppose there is an improvement in technology in this market and the price of lamps, a complementary good, increases. What changes do you predict in the equilibrium price and quantity? Table 4-16 19. The following table shows the supply and demand schedules in a market. Quantity Quantity Demanded Supplied Price ($) (units) (units) 0 50 0 2 40 15 4 30 30 6 20 45 8 10 60 10 0 75 a. What is the equilibrium price in this market? b. What is the equilibrium quantity in this market? c. At a price of $2, will there be a surplus or shortage of units in this market? d. At a price of $8, how large of a surplus will there be in this market? e. If the supply curve shifts to the right, will the price in this market rise or fall? 29  ECON2105 Principles of Macroeconomics Chapter 6 PRICE CEILING 1. Define a price ceiling. 2. When a price ceiling is binding, is the price ceiling set above or below the market equilibrium price? 3. Does a binding price ceiling result in a shortage or a surplus in the market? 30  ECON2105 Principles of Macroeconomics HOW PRICE CEILINGS AFFECT MARKET OUTCOMES 4. If the government set a price ceiling at $9, would there be a shortage or surplus, and how large would be the shortage/surplus? 5. If the government set a price ceiling at $15, would there be a shortage or surplus, and how large would be the shortage/surplus? 6. If the government set a price ceiling at $6, would there be a shortage or surplus, and how large would be the shortage/surplus? PRICE FLOOR 1. Define a price floor. 2. When a price floor is binding, is the price floor set above or below the market equilibrium price? 3. Will a binding price floor result in a shortage or a surplus in the market? 31  ECON2105 Principles of Macroeconomics HOW PRICE FLOORS AFFECT MARKET OUTCOMES 4. If the government set a price floor at $15, would there be a shortage or surplus, and how large would be the shortage/surplus? 5. If the government set a price floor at $9, would there be a shortage or surplus, and how large would be the shortage/surplus? 6. If the government set a price floor at $18, would there be a shortage or surplus, and how large would be the shortage/surplus? 7. The following table shows the demand and supply schedules in a particular market. Quantity Quantity Supplied Price Demanded $1 8 3 $3 6 6 $5 4 9 $7 2 12 $9 0 15 32  ECON2105 Principles of Macroeconomics a. If the government sets a price floor $2 above the equilibrium price, how many units will be sold in this market? Price ($) Quantity Demanded Quantity Supplied 0 21 0 1 18 4 2 15 8 3 12 12 4 9 16 5 6 20 6 3 24 7 0 28 b. If the government set a price ceiling at $2, would there be a shortage or surplus, and how large would be the shortage/surplus? c. If the government set a price ceiling at $4, would there be a shortage or surplus, and how large would be the shortage/surplus? d. If the government set a price floor at $4, would there be a shortage or surplus, and how large would be the shortage/surplus? e. If the government set a price floor at $2, would there be a shortage or surplus, and how large would be the shortage/surplus? f. In this market, over what range of prices would a price ceiling set by the government be binding? g. In this market, over what range of prices would a price floor set by the government be binding? 33  ECON2105 Principles of Macroeconomics TAXES 1. a. If the government imposes a tax of $6 per unit in this market, how many units will be bought and sold in the market after the tax is imposed? b. If the government imposes a tax of $6 per unit in this market, how much will sellers receive per unit after the tax is imposed? c. If the government imposes a tax of $6 per unit in this market, what price will buyers pay per unit after the tax is imposed? d. If the government imposes a tax of $6 per unit in this market, how much is the burden of the tax on the buyers in this market? e. If the government imposes a tax of $6 per unit in this market, how much is the burden of the tax on the sellers in this market? f. If the government imposes a tax of $6 per unit in this market, who will bear the greater burden of the tax - the buyers, the sellers, or will the burden be shared equally? 2. If the demand curve is more price elastic than the supply curve, will the buyers or the sellers bear a greater burden of a tax? Draw a diagram to illustrate your answer. 34  ECON2105 Principles of Macroeconomics 3. If the supply curve is more price elastic than the demand curve, will the buyers or the sellers bear a greater burden of a tax? Draw a diagram to illustrate your answer. 4. Using a supply and demand diagram, show a labor market with a binding minimum wage. Use the diagram to show those who are helped by the minimum wage and those who are hurt by the minimum wage. 35  ECON2105 Principles of Macroeconomics 5. a. Using the graph shown, analyze the effect a $300 price ceiling would have on the market for ten- speed bicycles. Would this be a binding price ceiling?’ b. Using the graph shown, analyze the effect a $700 price floor would have on this market for ten- speed bicycles. Would this be a binding price floor? c. Why would policymakers choose to impose a price ceiling or price floor? 36  ECON2105 Principles of Macroeconomics 6. Using the graph shown, answer the following questions. a. What was the equilibrium price in this market before the tax? b. What is the amount of the tax? c. How much of the tax will the buyers pay? d. How much of the tax will the sellers pay? e. How much will the buyer pay for the product after the tax is imposed? f. How much will the seller receive after the tax is imposed? g. As a result of the tax, what has happened to the level of market activity? 37  ECON2105 Principles of Macroeconomics 7. Using the graph shown, in which the vertical distance between points A and B represents the tax in the market, answer the following questions. a. What was the equilibrium price and quantity in this market before the tax? b. What is the amount of the tax? c. How much of the tax will the buyers pay? d. How much of the tax will the sellers pay? e. How much will the buyer pay for the product after the tax is imposed? f. How much will the seller receive after the tax is imposed? g. As a result of the tax, what has happened to the level of market activity? 38  ECON2105 Principles of Macroeconomics Chapter 7: Consumers, Producers, and the Efficiency of Markets 1. DEMAND AND CONSUMER SURPLUS a. What is consumer surplus, and how is it measured? b. Other things equal, what happens to consumer surplus if the price of a good falls? Why? Illustrate using a demand curve. 2. If John’s willingness to pay for a good is $20 and the price of the good is $15, how much is John’s consumer surplus from purchasing the good? 3. The following table shows the willingness to pay for a good for the only four consumers in a market. Consumer Willingness to Pay A $25 B $40 C $15 D $30 a. If the price of the good is $20, how many units will be demanded? b. If the price of the good is $20, how much is the total consumer surplus? 39  ECON2105 Principles of Macroeconomics 4. a. If the market equilibrium price is $120, how much is total consumer surplus? b. If the market equilibrium price falls from $120 to $80, how much is the change in total consumer surplus in the market? c. If the market equilibrium price falls from $120 to $80, how much is the increase in consumer surplus to the consumers who were initially in the market at the $120 price? d. If the market equilibrium price falls from $120 to $80, how much consumer surplus do consumers entering the market after the price drop receive? 40  ECON2105 Principles of Macroeconomics 5. SUPPLY AND PRODUCER SURPLUS a. What is producer surplus, and how is it measured? b. Other things equal, what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve. c. Suppose John’s cost for performing some carpentry work is $120. If John is paid $200 for the carpentry work, what is his producer surplus? 6. The following table shows the cost of producing a good for the only four producers in a market. Producer Cost W $40 X $30 Y $20 Z $10 a. If the market price is $28, which producers will supply units in the market? b. If the market equilibrium price is $28, what is total producer surplus in the market? 41  ECON2105 Principles of Macroeconomics 7. Answer the following questions based on the graph that represents J.R.'s demand for ribs per week at Judy's Rib Shack. a. At the equilibrium price, how many ribs would J.R. be willing to purchase? b. How much is J.R. willing to pay for 20 ribs? c. What is the magnitude of J.R.'s consumer surplus at the equilibrium price? d. At the equilibrium price, how many ribs would Judy be willing to sell? e. How high must the price of ribs be for Judy to supply 20 ribs to the market? f. At the equilibrium price, what is the magnitude of total surplus in the market? g. If the price of ribs rose to $10, what would happen to J.R.'s consumer surplus? h. If the price of ribs fell to $5, what would happen to Judy's producer surplus? i. Explain why the graph that is shown verifies the fact that the market equilibrium (quantity) maximizes the sum of producer and consumer surplus. 42  ECON2105 Principles of Macroeconomics 8. How much are consumer surplus, producer surplus, & total surplus at the market equilibrium price? 9. a. How much is total consumer surplus in this market at the equilibrium price? b. How much is total producer surplus in this market at the equilibrium price? c. How much is total surplus in this market at the equilibrium price? d. Suppose demand shifts such that consumers wish to purchase 12 fewer units at every price. How much is total consumer surplus in this market at the new equilibrium price? 43  ECON2105 Principles of Macroeconomics e. Suppose demand shifts such that consumers wish to purchase 12 fewer units at every price. How much is total producer surplus in this market at the new equilibrium price? f. Suppose demand shifts such that consumers wish to purchase 12 fewer units at every price. How much is total surplus in this market at the new equilibrium price? Policy Effects of Price Floor 10. a. Suppose the government imposes a price floor at $10 per unit in this market. With the price floor, how much is total consumer surplus? b. Suppose there is initially a price floor set at $10 in this market. If the government removed the price floor, by how much would total consumer surplus increase? 44  ECON2105 Principles of Macroeconomics c. Suppose there is initially a price floor set at $10 in this market. If the government removed the price floor, by how much would total consumer surplus increase for those consumers who were purchasing the good when the price floor was in place? d. Suppose there is initially a price floor set at $10 in this market. If the government removed the price floor, by how much would total consumer surplus increase for those consumers who enter the market after the price floor is removed? 45  ECON2105 Principles of Macroeconomics Policy Effects of a Price Ceiling 11. a. Suppose there is initially a price ceiling set at $4 in this market. How much is total producer surplus with the price ceiling in place? b. Suppose there is initially a price ceiling set at $4 in this market. If the government removed the price ceiling, by how much would total producer surplus change? c. Suppose there is initially a price ceiling set at $4 in this market. If the government removed the price ceiling, by how much would total producer surplus increase for those producers entering the market after the price ceiling is removed? 46  ECON2105 Principles of Macroeconomics Chapter 10: Measuring a Nation’s Income 1. GDP a. List the four components of GDP. b. Consumption is $5.5 trillion, investment is $1 trillion, government expenditures are $1.5 trillion, transfer payments are $.5 trillion, exports are $.75 trillion and imports are $1.25 trillion. What is GDP? c. Consumption is $7 trillion, investment is $1.5 trillion, government expenditures are $2 trillion, government transfer payments are $1 trillion, exports are $1.50 trillion and imports are $1.25 trillion. What is GDP? d. Calculate GDP for an economy with exports of $5 trillion, investment of $1.5 trillion, consumption spending of $11 trillion, imports of $6 trillion, and government purchases of $3 trillion. e. Last quarter Newton computers produced 3,000 computers. Two thousand of these computers were sold to households, 750 were sold to businesses, and 250 were added to Newton’s inventory. How many of the computers should have been included in last quarter’s GDP? f. Identify which of the following are included in the government purchases component of GDP. a. the salary paid to a state court judge; b. unemployment insurance benefits; c. the payment made by the federal government for a jet fighter; d. social security payments; e. a county builds a jail building g. Foreign countries buy $1.2 trillion of U.S. goods and services. U.S. residents purchase $1.8 trillion of foreign goods and services. What is net exports? 47  ECON2105 Principles of Macroeconomics 2. Nominal vs. Real GDP The country of Batavia produces only chocolates and watches. Below is a table with recent information on Batavia production and prices. The base year is 2009. Prices and Quantities Price of A Box of Boxes of Quantity of Price of Watches Year Chocolates Chocolate Watches s 2008 $4 100 $50 10 2009 $5 90 $50 15 2010 $5 100 $60 15 2011 $6 80 $65 12 a. Explain how real GDP differs from nominal GDP. b. Write the formula for calculating a GDP deflator using only nominal and real GDP. c. Write the formula for calculating a country’s inflation rate using the GDP deflator. d. What was nominal GDP, real GDP, and the GDP deflator for 2008? 48  ECON2105 Principles of Macroeconomics e. What was nominal GDP, real GDP, and the GDP deflator for 2009? Show your work. f. What was nominal GDP, real GDP, and the GDP deflator for 2010? Show your work. g. What was nominal GDP, real GDP, and the GDP deflator for 2011? Show your work. h. What was the inflation rate for 2010? Show your work. i. What was the inflation rate for 2011? Show your work. 49  ECON2105 Principles of Macroeconomics 3. A country produces only ice cream and cake in the quantities and prices listed below. Use 2011 as the base year. Price of Ice Cream Quantity of Ice Quantity of Cake Year Cream Price of Cake 2011 $2.00 200 $10 40 2012 $2.30 250 $14 50 2013 $2.75 280 $18 80 a. Calculate real and nominal GDP for the year 2012. b. Calculate real and nominal GDP for the year 2013. c. Calculate the GDP deflator for 2012 and 2013. d. Calculate the rate of inflation for 2012. 50  ECON2105 Principles of Macroeconomics 4. Why should policy makers care about GDP? 5. Explain the pattern seen between GDP per person and quality of life measures such as life expectancy, literacy, and Internet usage. 51  ECON2105 Principles of Macroeconomics Extra Exercise: The country of Grizzliville produces two goods: footballs and basketballs. Below is a table showing prices and quantities of output for three years: Year Price of Quantity of Price of Quantity of Footballs Footballs Basketballs Basketballs Year 1 $10 120 $12 200 Year 2 12 200 15 300 Year 3 14 180 18 275 NOMINAL GDP: Nominal GDP in Year 1 = Nominal GDP in Year 2 = Nominal GDP in Year 3 = REAL GDP: Using Year 1 as the Base Year: Real GDP in Year 1 = Real GDP in Year 2 = Real GDP in Year 3 = (Note that nominal GDP rises from Year 2 to Year 3, but real GDP falls.) GDP DEFLATOR: GDP deflator for Year 1 = GDP deflator for Year 2 = GDP deflator for Year 3 = INFLATION RATE: Inflation rate for Year 2 = Inflation rate for Year 3 = 52  ECON2105 Principles of Macroeconomics Why Should We Be Glad When the GNP Goes Up? By Donella Meadows –March 3, 1988– With that special, kindly sparkle in his eyes the President said in his news conference that there would be good economic tidings the next day. The tidings turned out to be the GNP figure for the last quarter of 1987, which had been revised upward to a growth rate of 4.5 percent. That is supposed to be cause for rejoicing, a rising stock market, and gratitude to the party in power. No index of national progress — not Olympic medals, not the unemployment rate, not the SAT scores of high-schoolers — is watched more carefully than the GNP. Economists forecast it. Government statisticians revise and polish it. It is so important that not only Presidents but prime-time newscasters regularly alert us the day before a new GNP figure is going to be released. So quick now, what does GNP stand for? What does it mean? Why should we be glad when it goes up? I wonder how many Americans know the answers to any of those questions, especially the last one. GNP stands for Gross National Product. It means the dollar value of all the final goods and services purchased by the nation’s consumers and government and investors. The GNP includes such a complicated mix of apples and oranges, consultants and computers, ATV’s and doctors’ fees, that it is just about impossible to think about. I find it easier to understand on the level of the transactions of our daily lives. Here are a few examples to illustrate the many kinds of economic activity the GNP represents and the ridiculousness of counting its every increase as good and decrease as bad. Say that a couple gets divorced and pays a lawyer a hefty fee (GNP up, good). The kids now shuttle between his household and hers, requiring complete sets of bedroom furniture, toys, and clothes at both places (up, good). She finds cooking for herself too depressing and begins to live on junk food (GNP up, good). He starts spending his spare time fixing up the house instead of hiring someone else to do it (GNP down, bad). A new lightbulb comes on the market that uses only half as much electricity; everyone’s electric bill goes down (GNP down, bad). A town decreases its use of salt on the winter roads (down, bad), which causes cars to last two years longer before they rust out and have to be replaced (down, bad). However, more accidents cause an increase in repair bills for cars and people (up, good). A community’s floats a $30 million bond for a trash incinerator, which doubles the cost of garbage disposal. New air quality regulations then require more expenditures for scrubbers. The community becomes embroiled in litigation about the disposal of the toxic ash from the plant (up, up, up, good, good, good). The government decreases highway maintenance (down, bad). It builds more nuclear weapons (up, good). It gives a big raise to Congress (up, good). It eliminates half its paperwork (down, bad). 53  ECON2105 Principles of Macroeconomics The GNP is obviously not a measure of progress. It is a measure of monetary flow, effort, expense. Wendell Berry has called it the “fever chart of our consumption”. It is indiscriminate. It lumps together joys and sorrows, triumphs and disasters, profundities and trivialities, everything that costs money and nothing that doesn’t. The GNP measures environmental damage only if we pay to clean it up. It does not register the gardens we grow, the cooking, repairs and cleaning we do for ourselves. The GNP contains no information about justice. It does not tell us that the number of homeless families has increased and so has the number of families with second homes. An increase in GNP is good only in the sense that when money is spent, someone gets it, and that someone is usually happy about it. Whether it is good in the larger, societal sense depends on who spent it, who got it, what it bought, and what parts of the transaction were not accounted for. Economists are well aware of the inadequacy of GNP as a measure of welfare; they point it out in every macroeconomics course. But many economists, like many Presidents, forget the caveats and turn into cheerleaders, urging the GNP up, helping to reinforce the national illusion that a bigger economy is a better one. The problem with that illusion is that it has come to dominate economic policy. We assume no changes are needed when GNP growth is high; we call on extreme measures when it is low. With GNP as our only powerful indicator, we are in danger of producing GNP instead of what we really want –health, education, security, a clean environment, jobs with dignity. Surely those goals are more important than just to keep on swelling. When we hear that the GNP has grown, instead of cheering, we should ask exactly what has grown, for whom, at what cost, and at whose expense. Even better, we should work to develop indicators of national progress that reflect more accurately our real values and our real welfare. Copyright Sustainability Institute 1989 Merits and Problems involved with using GDP as a measure of well-being 1. List things that might be missing if we use GDP as a measure of well-being 2. List things that are included in GDP which do not add to our well-being 54  ECON2105 Principles of Macroeconomics Chapter 11 Measuring the Cost of Living 1. List the five steps for calculating the consumer price index and inflation rate. 2. The table below lists the per pound prices of meat and potatoes for the months of January, February, and March. Assume that the typical consumer buys 25 pounds of meat and 15 pounds of potatoes each month, and that January is the base period. Month Price of Meat Price of Potatoes January $3.50 $1.50 February $3.38 $0.60 March $4.00 $1.40 a. Calculate the cost of a basket of goods for each month. b. Calculate the consumer price index for February and March. c. Calculate the inflation rate for February. d. Calculate the inflation rate for March. 55  ECON2105 Principles of Macroeconomics Chapter 11 Measuring the Cost of Living 1. List the five steps for calculating the consumer price index and inflation rate. 2. The table below lists the per pound prices of meat and potatoes for the months of January, February, and March. Assume that the typical consumer buys 25 pounds of meat and 15 pounds of potatoes each month, and that January is the base period. Month Price of Meat Price of Potatoes January $3.50 $1.50 February $3.38 $0.60 March $4.00 $1.40 a) Calculate the cost of a basket of goods for each month. b) Calculate the consumer price index for February and March. c) Calculate the inflation rate for February. d) Calculate the inflation rate for March. 56  ECON2105 Principles of Macroeconomics 3. The table below lists annual consumer price index and inflation rates for a country over the period 2010 – 2013. Assume the year 2010 is used as the base year. Year CPI Inflation Rate 2010 100 2011 120 B 2012 A 15% 2013 134 C a. Calculate the missing value that belongs in space B. b. Calculate the missing value that belongs in space A. c. Calculate the missing value that belongs in space C. 4. Consumer spending in what category is the largest component of the CPI? 5. List the three major problems in using the CPI as a measure of the cost of living 57  ECON2105 Principles of Macroeconomics 6. PROBLEMS WITH CPI a. If the price of beef rises and consumers buy more chicken and less beef, what kind of bias does the consumer price index exhibit? b. Suppose the typical basket for the calculation of the CPI includes one computer. Since computers have gotten better over time as a result of technological change, what problem does this create for calculating the CPI? c. The CPI assumes a fixed basket of goods over time. In fact, consumers are likely to change purchasing behavior over time by purchasing less of the goods whose prices have risen by relatively large amounts and by buying more of the goods whose prices have risen less or maybe even fallen. What problem does this cause for measuring the cost of living? 7. CORRECTING FOR INFLATION a. Suppose that the price of one gallon of milk was $0.25 in 1950, that the CPI in 1950 was 25, and that in 2000 the CPI was 200.What is the price of a 1950 gallon of milk in 2000 dollars? b. Suppose that the price of one ear of corn was $0.05 in 1920, that the CPI in 1920 was 10, and that in 1990 the CPI was 180. What is the price of a 1920 ear of corn in 1990 dollars? c. Michael Jordan’s rookie salary in 1984 was $550,000. The CPI in 1984 was 103.9, while the CPI in 2010 was 218.1. What is Michael Jordan’s rookie salary in 2010 dollars? d. Suppose the Tooth Fairy paid 50 cents for a tooth in 1970. The CPI in 1970 was 38.8, while the CPI in 2010 was 218.1. What is the value of the Tooth Fairy’s payment in 2010 dollars? 58  ECON2105 Principles of Macroeconomics 8. Compute how much each of the following items is worth in terms of today's dollars using 177 as the price index for today. a) In 1926, the CPI was 17.7 and the price of a movie ticket was $0.25. b) In 1932, the CPI was 13.1 and a cook earned $15.00 a week. c) In 1943, the CPI was 17.4 and a gallon of gas cost $0.19. 9. REAL vs. NOMINAL Interest Rate a. If the real interest rate is 10.3% and the nominal interest rate is 12.6%, what is the inflation rate? b. If the real interest rate is 6.8% and the inflation rate is 3.9%, what is the nominal interest rate? c. If the nominal interest rate is 8.3% and the inflation rate is 4.4%, what is the real interest rate? 10. Why does the GDP deflator give a different rate of inflation than the CPI? 59  ECON2105 Principles of Macroeconomics Chapter 15: Unemployment IDENTIFYING UNEMPLOYMENT Classify each of the following individuals in one of the following categories: employed, unemployed, or not in the labor force. 1. Steve worked 40 hours last week in an office supply store. 2. Last week, Elizabeth worked 10 hours as a computer programmer for the National Video Company and attended night classes at the local college. She would prefer a full-time job. 3. Roger lost his job at the R-gone Manufacturing Company. Since then he has been trying to find a job at other local factories. 4. Linda is a homemaker. Last week she was occupied with her normal household chores. She neither held a job nor looked for a job. 5. Linda’s father is unable to work. 6. Scott has a Ph.D. He worked full-time but does not like his job as a dishwasher. He has applied for jobs with 3 companies and 5 universities. As soon as he gets an offer, he will quit his current job. 7. Mary-Helen has been out of work for a full year. She would take a job if it was offered, but no local companies are hiring. She is not actively searching for work. 60  ECON2105 Principles of Macroeconomics Calculating Unemployment 1. Write the formula for calculating Labor Force. 2. Write the formula for calculating the Unemployment Rate. 3. Write the formula for calculating the Labor Force Participation rate. 4. The table below lists the number of people by labor force classification for the country of Shelbyville. Employed 80 million Unemployed 20 million Not in the Labor Force 60 million a. What is the size of the labor force, and the size of the adult population? b. What is the unemployment rate? c. What is the labor force participation rate? 61  ECON2105 Principles of Macroeconomics 5. a. The adult population in the town of Bedrock is 75,000. Within Bedrock, 5000 are unemployed, and 40,000 are employed. Calculate the number of people not in the labor force. b. In the town of Gotham the adult population is 560,000, the number unemployed is 25,000, and 185,000 are not in the labor force. Calculate the unemployment rate. 6. JOB SEARCH a. The Internet may reduce frictional unemployment because it b. Briefly summarize the advantages and disadvantages of unemployment insurance. 7. MINIMUM-WAGE LAWS a. List a few of the characteristics of workers who typically earn at or below the minimum wage. 62  ECON2105 Principles of Macroeconomics b. If the minimum wage is set at $100, how many will be unemployed? c. If the minimum wage increases from $100 to $125, how many additional workers will be unemployed? d. If the minimum wage is equal to $125, what is the quantity of labor supplied, the quantity of labor demanded, and number unemployed? e. Without a minimum wage, what is the equilibrium level of employment? Explain what happens to the level of employment if the minimum wage is equal to $125. 8. LABOR UNIONS a. List the main employment characteristics over which a labor union negotiates for its workers. b. Do economists believe that labor unions are good or bad for the U.S. economy? c. Explain how the actions of labor unions generate greater unemployment. 63  ECON2105 Principles of Macroeconomics 9. EFFICIENCY WAGES a. Define efficiency wages. b. List the four types of efficiency-wage theory. 64  ECON2105 Principles of Macroeconomics Chapter 16 Monetary System 1. What is money? List and define its functions. 2. What is barter? What is a double coincidence of wants? How does the existence of money affect barter? 3. What is the difference between commodity money and fiat money? Why do people accept fiat money in trade for goods and services? 4. In prisons, cigarettes are used as money. Do cigarettes in prisons have the ability to satisfy all functions of money? Explain. https://www.cengage.com/economics/tomlinson/transcripts/8520.pdf 5. Are Credit Cards money? Are credit cards a medium of exchange? 65  ECON2105 Principles of Macroeconomics 6. Is each of the following statements consistent with our definition of money? Explain your answer each time. a. She had a lot of money in her purse. b. She made a lot of money last year c. I use my MasterCard when I am low on money d. He has most of his money in the bank. 7. The amount of currency per adult in the US is about $6000. Most people carry far less than this. How much currency do you currently have? The question is, "where is the rest of the currency?" Fractional Reserve Banking 8. Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent. 66  ECON2105 Principles of Macroeconomics 9. Draw a simple T-account for First National Bank which has $5,000 of deposits, a required reserve ratio of 10 percent, and excess reserves of $300. Make sure your balance sheet balances. 10. Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control. 11. Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum? 12. First National Bank Assets Liabilities Reserves $1,200 Deposits $10,000 Loans 8,800 The reserve ratio for this bank is. If the required reserve ratio is 10 percent, then this bank has excess reserves of _____ 67  ECON2105 Principles of Macroeconomics The Federal Reserve System 13. What makes the New York Federal Reserve regional bank so important? 14. List the two main functions performed by the Fed? 15. Briefly describe the structure of the Federal Reserve System, how it is governed, and its roles in the economy. 16. List the Fed's main policy tools and briefly explain each one. 17. Trace the effects on the money supply when the Fed decreases the discount rate. 68  ECON2105 Principles of Macroeconomics 18. What is the Term Auction Facility? 19. Name three actions the Fed can take to increase the money supply. 20. Describe the role of the Federal Deposit Insurance Corporation (FDIC). 69  ECON2105 Principles of Macroeconomics Chapter 20 Aggregate Demand and Supply 1. Explain how a recession differs from a depression. 2. Identify the direction of the change during a recession in each of the following: consumption expenditures, investment expenditures, and unemployment. 3. Name two macroeconomic variables that decline when an economy goes into recession, and name one macroeconomic variable that rises. 4. Briefly state the three key facts about economic fluctuations. 5. Identify periods 1 and 2. 6. Explain how the aggregate demand and aggregate supply model changed during periods 1 and 2. 70  ECON2105 Principles of Macroeconomics 7. What curve shows the quantity of goods and services that households, firms, the government, and customers abroad want to buy at each price level? 8. What curve shows the quantity of goods and services that firms choose to produce and sell at each price level? 9. What are three reasons the aggregate demand curve slopes downward? Name at least three factors that shift the aggregate demand curve? 10. a. Suppose a boom in stock market prices helps make people feel wealthier. Using the model of aggregate demand and aggregate supply, identify the curves that are affected, and which way these curves would shift. b. Suppose the government raises taxes. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift? c. Suppose a recession overseas reduces a country’s exports. Which curve(s) in the aggregate demand and aggregate supply model would be affected, and which way would it (they) shift? 71  ECON2105 Principles of Macroeconomics d. Suppose a country offers a new investment tax credit. Which curve(s) in the aggregate demand and aggregate supply model would be affected, and which way would it (they) shift? e. Suppose a nation experiences increased immigration from abroad. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift? f. Suppose technology advances within a nation. Which curves in the aggregate demand and aggregate supply model would be affected, and which way would they shift? g. Suppose a country experiences an increase in its capital stock. Which curve(s) in the aggregate demand and aggregate supply model would be affected, and which way would it (they) shift? h. Suppose people anticipate an increase in the expected price level. Which curve(s) in the aggregate demand and aggregate supply model would be affected, and which way would it (they) shift? 11. What are three reasons the short run aggregate supply curve slopes upward? 12. Name at least three factors that shift the SRAS curve. 72  ECON2105 Principles of Macroeconomics 13. How are the factors that shift the LRAS curve different from those that shift the SRAS curve? 14. Why is the LRAS curve vertical? 15. How does strong economic growth in China affect AD in the US? 16. Other things the same, what happens in the short run to the price level and quantity of output when the aggregate demand curve shifts to the left? 17. Other things the same, what happens in the long run to the price level and quantity of output after a contraction in aggregate demand? 18. Other things the same, what happens to the price level and quantity of output when an adverse shift in the short run aggregate supply curve occurs? 73  ECON2105 Principles of Macroeconomics 19. Describe whether the following changes cause aggregate demand to increase, decrease or neither. a. The price level increases b. Investment decreases c. Imports decrease and exports increase d. The price level decreases e. Consumption increases f. Government purchases decrease 20. Suppose that a sudden increase in aggregate demand moves the economy from its long run equilibrium. a. Illustrate this change using the aggregate demand-aggregate supply model b. What are the effects of this change in the short run and long run? 74  ECON2105 Principles of Macroeconomics Chapter 21 Monetary and Fiscal Policy Watch these videos and answer the following questions (approx. 26 mins total) 1. Introduction to Fiscal Policy (3:27) Introduction to Fiscal Policy | Macroeconomics Videos (mru.org) a. What are the tools of fiscal policy? b. What is expansionary fiscal policy and contractionary fiscal policy? c. What is fiscal multiplier? 2. Fiscal Policy: the best-case scenario (3:38) Fiscal Policy: The Best Case Scenario | Macroeconomics Videos (mru.org) 3. Limits of Fiscal Policy (7:06) The Limits of Fiscal Policy | Macroeconomics Videos (mru.org) a. Explain the 3 features of ideal fiscal policy? b. What are the limits of fiscal policy? c. What are automatic stabilizers? Give one example. 75  ECON2105 Principles of Macroeconomics 4. The Dangers of Fiscal Policy (6:03) The Dangers of Fiscal Policy | Macroeconomics Videos (mru.org) a. What are some dangers of Fiscal Policy? 5. Fiscal Policy and Crowding Out (5:26) Fiscal Policy and Crowding Out | Macroeconomics Videos (mru.org) a. What is a monetary offset? b. What is crowding out? c. What is Ricardian Equivalence? 76