Consider the effects of the Corona pandemic (both on the AD and AS). Starting with an initial long-term equilbrium, show these effects by drawing the GRAPHS for: a) Goods Market; and b) Short and Long Run Phillips Curves under the two different scenarios: i. No action is taken ii. Suppose that a monetary policy action is taken to overcome the resulting problem.

Question Three A certain brand of vacuum cleaners can be purchased from several local stores as well as from several catalogues or websites. If all sellers charge the same price for the vacuum cleaner, will they all earn zero economic profit in the long run? Explain and include a diagram.

Question One Explain the difference between a positive and a negative network externality and give an example of each, with a completely labelled diagram, respectively.

Answer the next 3 questions based on the following information:  Starting from a recession (Y₂ < Y_f), what would happen to the real interest rate (r) from there if the return to potential output (Y_f) was accomplished by each of the following? For each, you should write one of the following responses:  Up, Down, or Same

41. If no policy were enacted.
42. If, instead, the Fed accomplished the return to Y_f through its use of monetary policy.
43. If, instead, Congress and the President accomplished the return to Y_f through its use of fiscal policy.

assume that an economy's long run equilibrium is described as follows: economic growth at 2.5% per annum, natural rate of unemployment at 6% and expected inflation at 2%
Using AD/AS and Phillip's curve diagrams illustrate the short run effects of an increase in interest rates with a starting position during a boom, above the natural rate.

Answer the next 7 questions.

44. In an open economy, what would be the long-run effect on a country’s exchange rate (e), i.e., the strength of its currency, of a simultaneous reduction in personal taxes (T↓) and reduction in the money supply (M↓) designed to leave real GDP the same (Y = Y_f)? Up, Down, or Same?
45. In an open economy, what would be the long-run effect on net exports (NX) of a simultaneous reduction in personal taxes (T↓) and reduction in the money supply (M↓) designed to leave real GDP the same (Y = Y_f)? Up, Down, or Same?
46. Stabilization policy, also known as demand management, is designed to shift the aggregate demand curve (AD) back toward potential GDP (Y_f) when actual GDP (Y) deviates significantly from Y_f in either direction. True or False?
47. Following a temporary adverse supply shock, demand management (stabilization policy) can be employed to sustainably restore the original (pre-shock) level of GDP. True or False?
48. Starting from full-employment (Y = Y_f), capital formation is promoted by policies that reduce either consumption or government purchases. True or false?
49. If the government budget is in deficit, but the economy is in recession (Y < Y_f), then it is possible that there is a structural budget surplus. True or False?
50. A tax system for which taxes (T) are related to income (Y) by the formula T = -1000 + .25Y would be considered a proportional tax system due to the constant nature of the marginal tax rate. True or False?

True/False

A way to cool off an inflationary economy is to lower interest rates.

According to the concept of purchasing power parity, exchange rates adjust to different rates of inflation in different countries.

The intentional raising of the value of a currency by a nation's government is called devaluation.

If the money supply increases, its price—in the form of interest rates—also increases.

A common market requires that member nations harmonize their tax, monetary, and fiscal policies, and that they create a common currency.

You feel sick and you decide to take some days off work during which, you follow the advice of your grandma who recommended you to drink warm beverages and chicken soup. A week later, you still do not feel better and you finally decide to visit a doctor.

A. In this scenario, who is the principal? Who is the agent? Explain in details your answer.

B. Could there be a Principal-Agent problem between a doctor and her/his patient? Explain in details your answer.

Explain the concept of value-based insurance designs. What might be some of the difficulties in implementing such designs?

2. The production function is given as Q=LK1/2 with K fixed at 4 units. Note K1/2 is same as the square root of K.

a. Draw the total, average and marginal product associated with this function.

b. Write down the equations for total cost, total fixed and total variable cost when w=2 and r=3, and draw the respective diagrams.

c. Write down the equations for AFC, AVC, MC and ATC corresponding to the values of w and r as in part b, and draw the respective diagrams.

d. Using duality, answer to part a, and words, explain the shapes of AVC and MC drawn in part c.

e. If r = 4, which of the cost curves (TC, TFC, TVC, AFC, AVC, AC and MC) will change and why? (4 points)

For the case study above, create a PERT schedule with the key activities for the $20 million contract negotiation project. There should be between to activities identified from the case study. Additional relevant activities may be included. Create an AON network diagram and find the critical path using slack once estimated activity time is established.

The rule of 70 (which provides an estimate of the amount of time it will take for some variable, like money holdings to double) can show us how during a drastic inflation

a. money’s usefulness as a store of value is destroyed.

b. the relative value of products falls as inflation continues.

c. the relative value of products change.

d. the amount of money in everyone's bank accounts will double.

Assume that an economy experiences an adverse supply shock that causes stagflation (simultaneous decrease in output (increase in unemployment) and increase in prices). In your opinion, should the government use expansionary or contractionary fiscal policy to address the situation? Explain your answer, mentioning the tradeoffs that each of the policies involves?

List some factors that might be responsible for the rising health care costs in the US. You must use evidence to support your case and make sure to cite properly?