4 a. Explain the two ways that an economy could close an inflationary gap. Explain what happened to price and GDP in each solution. Which “solution” created lower prices? List a pro and con of each “solution”.

b. What policy would you put into effect to help reduce the inflationary gap in an economy like Canada? How would businesses and/or Canadians be effected?

Without using any examples from the textbook, give an example of a brand that is positioned in each of the following methods. Explain your answer.

1. Postioned by Salient Attributes

2. Positioned by Symbols

3. Positioned by Competion

INFLATION AND THE PHILLIPS CURVE

explain with your own words

1 What is the Phillips curve?

2 What is the relationship between inflation and growth?

An industry consists of three firms with sales of $205,000, $745,000, and $305,000. a. Calculate the Herfindahl-Hirschman index (HHI). Instruction: Enter your response rounded to the nearest integer. b. Calculate the four-firm concentration ratio (C4). c. Based on the FTC and DOJ Horizontal Merger Guidelines described in the text, is the Department of Justice likely to attempt to block a horizontal merger between two firms with sales of $205,000 and $305,000? Yes No

Suppose Fiat recently entered into an Agreement and Plan of Merger with Case for $4.3 billion. Prior to the merger, the market for four-wheel-drive tractors consisted of five firms. The market was highly concentrated, with a Herfindahl-Hirschman index of 2,685. Case’s share of that market was 9 percent, while Fiat comprised just 5 percent of the market. If approved, by how much would the postmerger Herfindahl-Hirschman index increase? Based only on this information, is the Justice Department likely to challenge the merger according to the Horizontal Merger Guidelines? No. Yes. Possibly - but other factors will be considered

One important task for the government is to redistribute income. Explain, why (some) redistribution could be a good idea, and why (too much) redistribution could be a bad idea. Remember to contextualize, define, exemplify, and illustrate relevant concepts – if you wish, you can include data for any country to support your analyses.

2. COVID-19 shock

a. Discuss the impact of COVID-19 shock on each component of output (recall the income-expenditure identity Y = C + I + G + NX).

b. Discuss the impact on the Canadian labour market, specifically employment number and unemployment rate.

c. There are many examples of asymmetric impacts of the virus. Discuss the impact of the quarantine on different types of consumption: durables, semi-durables, and non-durables. Discuss the impact on the services sector versus manufacturing sector.

d. Explain how the upcoming recession due to COVID-19 is different than the Great recession of 2008-2009.

The existence of externalities can lead to inoptimal equilibrium if the markets are left to themselves. Based on your understanding of externalities, first, explain negative and positive externalities. How can the government intervene in order to assure a socially optimal equilibrium? Remember to contextualize, define, exemplify, and illustrate relevant concepts.

Exercise 2:

i. Why is the Value-Added Method used as an alternative method to calculate GDP?

ii. What is the difference in computing the value of public service and private good?

Today and due to the spread of Covid-19, we can observe that some sectors in an economy are expanding and others contracting, while the government very actively is intervening in the economy. Using the public economics framework, list and discuss at least three examples of government initiatives for the USA Remember to contextualize, define, exemplify, and illustrate relevant concepts, as well as including data to support your descriptions and analyses.

b. In the country of Hypothetica, we have the following information for the year 2015:

*Consumption totalled $2 billion, but 25% of this total consisted of goods which were initially sold in 2014.

*A total of $250 million worth of new housing stock was sold.

*Labour wage income was $150 million. *Businesses invested $100 million dollars in new capital (i.e. machinery) stock.

*Businesses also bought $200 million dollars worth of company shares on the stock exchange.

*Foreigners with working visas living in foreign-only households bought $100 million worth of locally made goods and services.

*The government spent $500 million building roads.

*Hypothetica is a closed economy, thus they are no exports and imports.

(i) Calculate and explain how you obtained the figure (i.e. what did you count, and what did you exclude) for Hypothetica’s consumption in 2015

(ii) Calculate and explain how you obtained the figure (i.e. what did you count, and what did you exclude) for Hypothetica’s investment in 2015

(iii) What was Hypothetica’s GDP in 2015 using the expenditure method? Explain your answer

Two firms choose the prices of their products on the first day of the month. The following payoff table shows their monthly payoffs resulting from the pricing decisions they can make

1. Is the Pricing decision facing the 2 firms a prisoner’s dilemma situation? Why or why not?
2. What is the outcome of the game if the firms do not cooperate in making the decision to choose their prices? Why?
3. What is the outcome of the game if the firms do cooperate in making the decision to choose their prices? Why?