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Solutions for Modern Principles of Macroeconomics, 6th Edition by Cowen (All Chapters included)

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Complete Solutions Manual for Modern Principles of Macroeconomics, 6th Edition by Tyler Cowen; Alex Tabarrok ; ISBN13: 9781319421250...(Full Chapters included and organized in reverse order from Chapter 21 to 1)...Chapter 1 The Big Ideas Chapter 2 The Power of Trade and Comparative Advantage Chap...

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Modern Principles of
Macroeconomics, 6th Edition
by Tyler Cowen



Complete Chapter Solutions Manual
are included (Ch 1 to 21)




** Immediate Download
** Swift Response
** All Chapters included

,Table of Contents are given below




Chapter 1 The Big Ideas
Chapter 2 The Power of Trade and Comparative Advantage
Chapter 3 Supply and Demand
Chapter 4 Equilibrium
Chapter 5 Price Ceilings and Floors
Chapter 6 GDP and the Measurement of Progress
Chapter 7 The Wealth of Nations and Economic Growth
Chapter 8 Growth, Capital Accumulation, and the Economics of
Ideas: Catching Up vs. the Cutting Edge
Chapter 9 Saving, Investment, and the Financial System
Chapter 10 Stock Markets and Personal Finance
Chapter 11 Unemployment and Labor Force Participation
Chapter 12 Inflation and the Quantity Theory of Money
Chapter 13 Business Fluctuations: Aggregate Demand and Supply
Chapter 14 Transmission and Amplification Mechanisms
Chapter 15 The Federal Reserve System and Open Market Operations
Chapter 16 Monetary Policy
Chapter 17 The Federal Budget: Taxes and Spending
Chapter 18 Fiscal Policy
Chapter 19 International Trade
Chapter 20 International Finance
Chapter 21 Political Economy and Public Choice

,Solutions Manual organized in reverse order, with the last chapter displayed first, to ensure that all
chapters are included in this document. (Complete Chapters included Ch21-1)


CHAPTER 21
Modern Principles of Economics:
Political Economy and Public Choice

Facts and Tools
1. Which of the following is the smallest fraction of the U.S. federal budget? Which are the two largest
categories of federal spending?

Welfare

Interest on the federal debt

Defense

Foreign aid

Social Security

Health care

Solution

1. Foreign aid is the smallest, while Social Security and health care are the two biggest. It’s also worth
noting that “welfare” is not a well-defined category, which highlights the difficulties in being an
informed citizen.

2. Do you believe that public school teachers in the United States should be paid higher salaries?
Without searching online, what do you believe is the average annual salary of public school teachers
in the United States?

Solution

2. Obviously, student responses will vary on these two questions. However, as of 2021, the average
public school teacher salary in the United States was $65,090, which is likely higher than most student
guesses.

Interestingly, in a national study, 61% of survey respondents answered yes when they were asked if
public school teachers should be paid more. However, if the respondents were first told how much
teachers earned in their home state, the percentage dropped to 36%. Survey respondents estimated
that the national average teacher salary was $40,587, which is roughly 30% lower than the actual value
(at that time) of $58,064.

For more information on this study, check out http://time.com/money/4900091/teachers-average-
salary-underpaid-poll and https://www.educationnext.org/edstat-informed-teachers-current-salaries-
36-public-favors-pay-raise-teachers. And average teacher pay by state (and compared to the average

, 2

statewide salary in other occupations) can be found here: https://www.business.org/hr/workforce-
management/best-us-states-for-teachers.

3. a. How many famines have occurred in functioning democracies?

b. What percentage of famines occurred in countries without functioning democracies?

Solution

3. a. Zero.

b. 100%. The answers are according to Nobel Prize̵ winner Amartya Sen. The precise numbers are a bit
debatable, but in the social sciences, it’s rare to find relationships that are this strong: a point worth
emphasizing.

4. Around 155 million voters participated in the 2020 U.S. presidential election. Imagine that you are
deciding whether to vote in the next presidential election. What do you think is the probability that
your vote will determine the outcome of the election? Is it greater than 1%, between 0.1% and 1%,
between 0.01% and 1%, or less than 0.01% (i.e., less than 1 in 10,000)?

Solution

4. The right answer is much less than 1 in 10,000. Andrew Gelman, Nate Silver, and Aaron Edlin
calculated that in 2008, the probability of an average voter affecting the outcome of the presidential
election was 1 in 60 million. For a voter in a key state, it was 1 in 10 million. (Gelman, A., Silver, N. and
Edlin, A. (2012). “What Is the Probability Your Vote Will Make a Difference?” Economic Inquiry, 50(2),
321–326.) In 2000, the election in Florida was decided by around only 200 votes, a very rare event, and
that was only true in Florida, one state out of 50. Further, on those rare occasions when elections are
close, a single vote still generally doesn’t make a difference (one vote is still far less than 200 votes).

5. If a particular government policy—like a decision to go to war or to raise taxes—works only when
citizens are informed, is that an argument for that policy or against that policy?

Solution

5. That’s an argument against the policy. If a policy really needs careful citizen monitoring to work and if
there is little citizen monitoring, then the policy probably won’t work. Individual voters should recognize
that most of their neighbors just won’t try very hard to keep informed and take that into account when
choosing which policies to support.

6. True or false?
a. During Bangladesh’s worst famine, average food availability per person was much lower than
usual.
b. Democracies are less likely to kill their own citizens than other kinds of governments.
c. Surprisingly, newspapers aren’t that important for informing voters about hungry citizens.
d. Compared with a dictatorship or oligarchy, democracies have a stronger incentive to make the
economic pie bigger.
e. Compared with most other countries, full democracies tend to put a lot of restrictions on
markets and property rights.

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