Which of the following statements about the effects of the tariff compared to free trade are correct? Check all that apply.

The tariff benefits producers in Alagir.

In Alagir, some workers at retail and shipping companies that import iGadgets lose their jobs.

The tariff will not reduce the price differential between Alagir and Ertil.

The extra cost of iGadgets gets passed on to products and services using iGadgets in the production process.

As a result of the tariff, the price of the imported iGadget always rises above its domestic price.

Suppose country A has a central bank with full credibility, and country B has a central bank with no credibility. How does the credibility of each country’s central bank affect the speed of adjustment of the aggregate supply curve to policy announcements? How does this result affect output stability? Use an aggregate supply and demand diagram to demonstrate.

Suppose the central bank is following a constant-money-growth-rate rule and the economy is hit with a severe economic downturn. Use an aggregate supply and demand graph to show the possible effects on the economy. How does this situation reflect on the credibility of the central bank if it maintains the money growth rule? How does it reflect on the central bank’s credibility if it abandons the money growth rule to respond to the downturn?

Consider a general model of intertemporal consumption. Paul lives for two periods, working in the first and retiring in the second. Paul’s income is 1000 in the first period and is 0 in the second period. He must decide how much to consume in the first period and how much to save for consumption in the second period. Any money that Paul saves in the first period will earn a 5% interest. For the questions below, you only need to write the budget constraints and don’t need to solve the maximization problem.

(a) (5 points) Write Paul’s consumption in the second period (c2) as a function of his consumption in the first period (c1). Note that any of Paul’s income in the first period that is not consumed will be saved.

(b) (5 points) If Paul must pay a 25% tax on his income in the first period, how would your answers to question (a) change?

(c) (5 points) Now assume that Paul must pay a 25% tax on his income in the first period and a 20% tax on his interest income in the second period, how do your answers to question (b) change?

The market for a particular good is described by the following demand and supply equations respectively: QD = 448 – 3.5P and QS = 2.5P – 80. Consider that after much discussion among policymakers and following a final vote, the government implements a 20% ad valorem tax on sellers of the good. The market adjusts and is currently in equilibrium.

1. After the tax is implemented, what quantity of the good is traded?

2. What price do buyers pay?

3. What price do sellers receive?

4. After the tax is implemented, do consumers or producers face any tax burden? If so, then state who faces a higher burden, and what this implies about the group’s price elasticity relative to the other group’s price elasticity.

Using the principles of supply and demand as applied to labor markets, what are the effects of placing a universal binding minimum wage on a labor market that is otherwise perfectly competitive? What are the effects if the minimum wage is not universal (i.e., if there is a sector of the labor market not covered by the minimum wage – such as waiters and waitresses)? In both cases briefly discuss potential efficiency effects.

Suppose that the market for rutabagas (in case you don’t know, it is a root vegetable that’s also known as Swedish Turnip) is competitive. The demand for rutabagas is Q = 2, 000 − 100P and the supply of rutabagas is Q = −100 + 200P.

(a) (10 points) Suppose that Governor Sloop imposes a $2 per unit tax to be paid by consumers. Who bears the statutory incidence of the $2 per unit tax? Who bears the economic incidence of this tax? [A graph can be helpful but not required.]

(b) (5 points) What is the deadweight loss of the tax?

(c) (10 points) Suppose now that Governor instead imposes that the $2 unit tax is to be paid by the stores directly. What will happen to the “sticker price” (i.e. price paid by consumers) on rutabagas? Verify that the consumers’ tax burden would stay the unchanged.

WHAT ARE 3 ECONOMIC INDICATORS OF A COUNTRY? EXPLAIN EACH IN DETAIL.

how would you define Fascism, and what were some of the key reasons that so many people living in Europe (particularly in Italy and Germany) in the 1930's and 40's chose to embrace it?

1. You should create your total product or service concept early on.

Select one:

True

False

2. There is no single, perfect method of establishing a promotional budget because it is both an art and science.

Select one:

True

False

3. The essence of selling is teaching.

Select one:

True

False

4. Asking the right questions is optional during a sales call or presentation.

Select one:

True

False

5. A successful business is built upon repeat customers.

Select one:

True

False

6. It is wise to keep a reserve equal to one-fourth of the start-up investment.

Select one:

True

False

7. Inflation is not a problem for most businesses because you can simply raise your prices to compensate.

Select one:

True

False

8. Keeping good records will show how to make a business more profitable, will document business profitability/cash position, and prove that payments have been made.

Select one:

True

False

9. The power of the income statement is that it will tell you whether you are fulfilling the formula of buying low, selling high, and meeting customer needs.

Select one:

True

False

10. Debt ratios show the relationship between debts and equity.

Select one:

True

False

11. Operating-efficiency ratios are important to a business. They include collection- period, debt period, and inventory turnover.

Select one:

True

False

12. Cash flow is the lifeblood of a business.

Select one:

True

False

13. The cash flow statement is: cash flow = cash on hand + credit and cash sales – cash disbursements.

Select one:

True

False

14. Both cash inflows and outflows can be managed to control overall cash flow.

Select one:

True

False

15. Factoring is the selling of a business’ accounts receivables at a discount to a finance company called a factor in exchange for immediate cash.

Select one:

True

false

Suppose the chief engineer asks you to do a replacement analysis on an existing piece of equipment. (The defender) Because technology changes so rapidly, she does not want you to evaluate the equipment beyond 4 years since the equipment will be obsolete. The company uses a MARR of 8 percent.

The existing equipment was purchased 5-years ago for $175,000 but can be sold today (t = 0) for $30,000. The future salvage values of the equipment are expected to decrease by 20% per year. For the first year, (t=1) the firm will have to spend money on upgrading the equipment ($32,000) in addition to its operating costs ($8,000) The upgrading cost, the annual operating costs and salvage values are shown in the table below.

*$32,000 + $8,000 = $40,000

1. Calculate the economic service life of the equipment.
2. Suppose the firm keeps the defender for 3 years. Calculate the cost of keeping the equipment for one more year. (From year 3 to year 4)

Provide detailed and comprehensive information to support your answer. Where applicable, use examples to support your answers.

1. Why have so many successful entrepreneurs started out in sales?

2. Define debt and equity and explain the difference between them. Where does each appear on financial statements? 3. What is the purpose of financial ratio analysis?

4. How could the income statement potentially confuse a business owner?

5. Why would collecting all money owed within 30 days and paying bills in 90 days help protect a business? Is there a potential downside to this behavior? What is it and why?

1. Recall that in chapter 25 we learned about the aggregate production function, in which the factors of production were labour L, capital K, and technology T. Answer the following questions according to the Neoclassical growth model.
   1. Imagine that the amount of capital K increases by 10% (from 50 to 55 units) while labour and technology stay the same. How much does total GDP and GDP per worker change by? (A specific percentage is not needed, just ‘more than’ / ‘less than’ 10%.)

.

2. Imagine that capital increases by 5 units again, from 55 to 60. How big is the resulting change in GDP and GDP per worker compared to the change that occurred in part a?

3. What is the term (hint: law) used to describe the relationship between K and GDP in parts a and b?

4. Based on your answers to parts a through c, is it possible to have sustained economic growth due to capital increases alone?

5. Now imagine that the amount of labour L and capital K both increase by 10%. By how much do total GDP and GDP per worker change by?

6. What is the term used to describe this relationship?

7. What is required to have sustained increases in per-worker GDP (which, in turn, results in improving living standards)?