if this analysis is correct,namely that a reduction in wages will reduce the aggregate demand for goods, what assumption must we make about the relative proportions of wages and profits that are spent( given that a reduction in real wage rates will lead to a corresponding increase in rates of profit)? Is this a realistic assumption?

Q2. The new global economy has its supporters, but also its detractors.

a. Explain the most important benefits and pitfalls.

b. Analyze the government regulations for trade liberalization of international trade.

Q1. Some analysts believe globalization will put an end to longstanding national economic, political and cultural differences. Others disagree. Which side, if any.

Discuss if do you think is right, and why?

Assume the market for cigarettes is perfectly competitive. The demand and supply for cigarettes in Oakland is given by the following equations:

Where P represents the price of a carton of cigarettes and Q denotes the quantity of cartons of cigarettes. Use the above information to answer the following questions. Show your work for full credit.

a. Draw a graph of the market in equilibrium and solve for the equilibrium quantity and price. Identify on your graph and calculate the values of consumer, producer, and total surplus. Be sure to label your graph.

P* = _________ Q* = _________ CS = ___________ PS = ___________ TS = ___________

b. Suppose a panel of public health scientists from the Food and Drug Administration (FDA) determine that half a unit of air pollution is emitted for every carton of cigarettes that is smoked and that the external cost (that is the cost that people outside of the market bear) of one unit of pollution is $100. What is total external cost of the air pollution given the market equilibrium quantity of cigarettes exchanged in the unregulated market from part (a)? How does this alter your calculation of total surplus once the external cost is taken into account?

Total External Cost = ___________ TS given External Cost = ___________

c. Now consider a potential FDA regulation to address this air pollution that bans the production and sale of cigarettes. What is total surplus if this policy is imposed? Are the consumers or producers of cigarettes hurt the most by the ban? Support your answer with at most two sentences.

Total Surplus with the ban = ___________ Who is hurt most from the ban? ___________

d. Another potential FDA policy would be to place a lump sum tax the sale of cartons of cigarettes rather than ban cigarette sales as in part (c). The following equation gives the demand curve including the impact of the tax:

Draw a new graph that illustrates the impact of the tax and find the after-tax quantity and the prices paid by buyers and sellers. What is consumer surplus, producer surplus, tax revenue, DWL, and the external cost after the tax is imposed. From your analysis, can you determine who pays the tax directly to the government?

Pbuyer = _________ Pseller = _________ Qtax = _________ CS = _________ PS = _________ Tax Revenue = _________ DWL = _________ External Cost = _________ Who pays the tax to the government? _____________________________

e. Imagine you were the head of the FDA and you must decide whether the FDA should intervene in this market and, if so, in which way to intervene. Would you intervene and, if so, which of the above policies would you choose (the ban or the tax)? Support your answer with no more than two sentences.

8. Chapter 8) Suppose country A pegs its currency to country B (i.e., country B is the center country). Suppose country A is in recession. To help country A, what does the country B’s Central Bank can do? As a result, what happens to IS and LM curves in both countries? (Use graphs to explain)

(a) Consider a one input production technology utilizing labor that is represented by the function, x = Aln(L) with A>0. Is

the producer’s choice set convex? Show your working.

(b) Find the total cost function associated with this production technology.

Note: Show all necessary working and steps so that understanding the solution is easy.

A firm has two variable factors and a production function f(x1; x2) = (2x1 + 4x2)^1/2. On a graph, plot three input combinations and draw production isoquants corresponding to an output of 3 and to an output of 4. Also, mention the technical rate of substitution(s) for the isoquants. Show all working.

You consume two goods, X and Y . On Tuesday, the price of Y (not X!!) rises. On Wednesday,
there are no new price changes, but your income rises until you are just as happy as you were
on Monday.
a) Draw your budget lines and optimum points on all three days. Label the optima M, T and
W.
b) In terms of the locations of the optimum points, what would it mean for Y to be a Giffen
good?
c) In terms of the locations of the optimum points, what would it mean for X to be a normal
good?
d) Suppose that X is a normal good, and suppose also that you consume more X on
Tuesday than on Monday. When the price of Y changes, which effect on your
X-consumption is larger: the income effect or the substitution effect? Justify your answer
in terms of the locations of the points on your graph.

Which market structure is more common in the U.S. economy, oligopoly markets or monopolistically competitive markets? Please find a source or sources to support your answer.

QUESTION 131

1. An increase in the interest rate should ________ the demand for dollars and the value of the dollar, and net exports should ________.

   		increase; increase
   		decrease; decrease
   		increase; decrease
   		decrease; increase
   		increase; not change

1 points   

QUESTION 132

1. If the Federal Reserve targets the interest rate and the money demand curve shifts to the left, then the Fed

   		cannot maintain the interest rate target.
   		can maintain the interest rate target with no change in the money supply.
   		can maintain the interest rate target, but at a higher quantity of the money supply.
   		can maintain the interest rate target, but at a lower quantity of the money supply.

1 points   

QUESTION 133

1. An increase in the price level causes

   		a movement up along the money demand curve.
   		a movement down along the money demand curve.
   		the money demand curve to shift to the left.
   		the money demand curve to shift to the right.

1 points   

QUESTION 134

1. Falling interest rates can

   		lower the cost of buying new homes and fewer new homes will be purchased.
   		raise the cost of buying new homes and fewer new homes will be purchased.
   		raise the cost of borrowing for firms and decrease investment.
   		increase a firm's stock price, which causes firms to issue more stock shares, and thus increases funds for investment.

1 points   

QUESTION 135

1. If the amount you owe on your house is greater than the price of the house, you have

   		a mortgage rate that is too high.
   		a reverse mortgage on your house.
   		no value to your house.
   		negative equity in your house.

1 points   

QUESTION 136

1. Fiat money is generally issued by

   		private banks.
   		brokerage firms.
   		central banks.
   		major multinational corporations.

1 points   

QUESTION 137

1. According to the quantity theory of money, if the money supply grows at 6%, real GDP grows at 2%, and the velocity of money is constant, then the inflation rate will be

   		8%.
   		6%.
   		4%.
   		2%.

1 points   

QUESTION 138

1. An economy without money would have no exchanges of goods and services.

   True

   False

1 points   

QUESTION 139

1. From an initial long-run macroeconomic equilibrium, if the Federal Reserve anticipated that next year aggregate demand would grow significantly slower than long-run aggregate supply, then the Federal Reserve would most likely

   		decrease interest rates.
   		increase income tax rates.
   		increase interest rates.
   		decrease income tax rates.

1 points   

QUESTION 140

1. Article Summary

   With global borrowing costs so low, economic analysts are warning that central banks need to be prepared to set negative interest rates during the next economic downturn. Several central banks in Europe set negative interest rates in 2014, as did the Japanese central bank in 2016, in an attempt to spur lending. The global market value of negative-yielding bonds rose to $8.6 trillion in mid-2017 due to low inflation and increased perceptions of geopolitical risk. The current U.S. economic expansion is the third longest since the 19th century, and credit markets are showing signs of reaching a cyclical peak. According to Harvard professor Kenneth Rogoff, low interest rates this late in an economic cycle are unprecedented, noting that the Fed cut interest rates by an average of 5.5 percentage points in the nine recessions since the 1950s, and this would be impossible today without negative interest rates.
   Source: Sid Verma and Cecile Gutscher, "With Next Recession Looming, Central Banks Better Make Peace With Negative Rates," bloomberg.com, August 14, 2017.
   
   
   Refer to the Article Summary. Implementing a negative interest rate policy, as is discussed in the article summary, would be designed to ________ the price level and ________ real GDP.

   		decrease; decrease
   		increase; decrease
   		decrease; increase
   		increase; increase

QUESTION 145

1. If bankers become more uncertain regarding future deposits and withdrawals and choose to hold more excess reserves against deposits, the money multiplier will increase.

   True

   False

1 points   

QUESTION 146

1. A central bank can help stop a bank panic by

   		calling in consumer loans.
   		raising the required reserve ratio.
   		acting as a lender of last resort.
   		decreasing income taxes.

1 points   

QUESTION 147

1. If gold is used as money in an economy, the money supply is easy to control.

   True

   False

1 points   

QUESTION 148

1. During the German hyperinflation of the 1920s, the large increases in the money supply were generated by the German government

   		selling large quantities of government bonds to the central bank, the Reichsbank.
   		printing large quantities of German marks.
   		significantly lowering the required reserve ratio to enable German businesses to obtain loans.
   		significantly raising the required reserve ratio to reduce business loans.

1 points   

QUESTION 149

1. A decrease in the reserve requirement ________ bank reserves and ________ the money supply.

   		decreases; increases
   		increases; decreases
   		decreases; decreases
   		increases; increases

1 points   

QUESTION 150

1. Expansionary monetary policy refers to the Fed's increasing the money supply and increasing interest rates to increase real GDP.

   True

   False

1 points   

QUESTION 151

1. If people speculate that a run on one bank will cause a run on all banks in the financial system, and this speculation proves accurate, then the financial system would experience what is known as a

   		institutional death spiral.
   		bank panic.
   		commodity crisis.
   		securitization meltdown.

1 points   

QUESTION 152

1. Contractionary monetary policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.

   		higher; higher
   		lower; lower
   		lower; higher
   		higher; lower

1 points   

QUESTION 153

1. A decrease in interest rates can ________ the demand for stocks as stocks become relatively ________ attractive investments as compared to bonds.

   		increase; more
   		increase; similar
   		decrease; less
   		decrease; more
   		increase; less

2. suppose there are three firms: Oil Pro, Grease Tech, and Luber. Each firm moves sequentially (i.e. Stackelberg Competition). Oil Pro is the first mover. Grease Tech is the second mover. Luber is the third and final mover. If the demand equation is P = 18 - Q (where Q is the sum of all the quantities), and the marginal cost of each firm MC=2, what quantity will Oil Pro release to market?

Suppose one market has a demand curve ?(?) = 100 − ??

（1）If this market has many firms supplying the identical products to the consumers, and the industry has a cost function ?(?) = 2? ^2. What are the market equilibrium price and quantity?

（2）What is the price elasticity of demand at the market equilibrium in (1)?

（3）If this market has only one firm supplying the products, with cost function ?(?) = 2?^2. What are the market equilibrium price and quantity now

（4）What is the price elasticity of demand at the market equilibrium in (3)? What can we conclude about the monopoly's profit-maximizing behavior regarding the price elasticity of demand?

（5）Illustrate consumer surplus, producer surplus and the total social welfare (total surplus) for the two cases. Based on your comparison, discuss the arguments for and/or against the monopoly.

Is it okay to cite or use (and not cite) information from Wikipedia?