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?

Article 8 of the US Consitution empowers Congress, in part, "To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries."

In several paragraphs, discuss whether in your view the patent & copyright system in the United States is perfect as it is, or if it should be modified, and in what way. Please justify your response with evidence from an academic-level outside source.

Effect on demand and supply due to the onset of a pandemic

Tom, the only steel drum manufacturer in Narnia, can sell a single drum for $30. However, for every extra drum he wants to sell, he is forced to reduce the price (for all his customers) by $2. The total fixed costs in his workshop are $15, and the variable cost of the first drum produced is $25. For each extra drum thereafter, the cost drops by $5 up to, and including, the fifth drum. After that, the cost of each extra drum increases by $5.

What is Tom’s profit-maximizing output, price, and total profit or loss?

Output:

Price: $   

Profit/loss: $

Use and aggregate supply (upsloping range) and aggregate demand diagram to demonstrate the following. For each problem state the determinant and what happens to the price level and RGDP.

1. Consumer confidence grows for third straight month.

2. A technological breakthrough lowers the cost of energy.

3. the government engages in a new highway building program.

4. A series of natural disasters disrupt production and delivery of goods.

5. Laws are tightened to make immigration more difficult and this leads to labor shortages.

6. interest falls.

7. Productivity rises

8. Labor strikes cause an interruption in shipment of parts

9. Increased graduation rates for schools lead to more-skilled workforce.

10. Stock and bonds markets soar

Suppose that the MD = 5E and with its current technology, the firm’s MAC is given by MAC1 = 200 – 5E.

a) Determine the socially optimal level of emissions E.

b) Determine the emissions tax that would achieve the socially optimal level of emissions.

Now suppose the firm can adopt a new technology that changes is MAC to New MAC2 = 160 – 4E Calculate change in costs for the firm from adopting the new technology when:

c) The government uses an emissions standard equal to your answer in (a) above

d) The government uses an emissions tax equal to your answer in (b) (Assume no change to standard or tax rate after the change in technology)

Now suppose the government adjusts the standard and/or the tax such that MD = New MAC. Calculate the change in total costs for the firm from adopting the new technology when:

e) The government adjusts the standard, and

f) The government adjusts the tax rate