15.3

a. Nina starts with wealth of $120,000, earns no additional income, and faces a zero interest rate. How much does she consume in each of three periods if she has the following utility function: U = ln(C₁) + ln(C₂) + ln(C₃)

b. David starts with wealth of $120,000, earns no additional income, and faces a zero interest rate. How much does she consume in each of three periods if he has the following utility function: U = 2 ln(C₁) + ln(C₂) + ln(C₃)

Hint: For both a. and b. Equate the slope of the budget constraint, 1+r, to the slope of the utility function, the marginal rate of substitution between consumption in any two periods i.e. the ratio of marginal utilities. Note marginal utility is the first derivative of total utility.

1. Conduct a Benefits-Cost Analysis on the following Highway Project using:

Initial Costs of Tunnel. = $5,000,000
Annual costs for operating/maintenance = 150,000

Annual savings and benefits to travelers = 250,000

Residual value of benefits after horizon = 350,000

Useful life of investment = 30 years
Interest Rate = 6%

a. Find B-C Ratio of Annual Worth

b.Find B-C Ratio of Future Worth

c.Find B-C Ratio of Present Worth

42. Assume the required reserve ratio is 20 percent and the FOMC orders an open-market purchase of $100 million in government securities from member banks. If the oversimplified money multiplier is assumed, then the money supply will

43. In the mid-1990s, real interest rates fell in the United States. This was the result of budget deficit

48. An expansionary monetary policy will

49. The Fed has which of the following as its strongest control over the money supply?

It is said of Gary Cohn, former chair of Goldman Sachs and advisor to the Trump presidency, that while “[p]inning blame for the world’s financial crisis of 2008 on one man or one bank would not be fair, . . . Gary Cohn and his entourage at Goldman Sachs is a good place to start.” At Goldman Sachs, Cohn aggressively promoted subprime mortgages and other dubious financial instruments. Knowing that these financial instruments were likely to fail, he and his cronies walked away with hundreds of millions of dollars in bonus money and stock options. His behavior cost his company billions and the world economy trillions of dollars in value, and earned him a place in Donald Trump's inner circle.

Of course, Cohn was only one of many crooks to walk away rich from the financial crisis of 2008.

1. Why was Cohn able to operate his fraud for so long? Why did people continue to trust him with their money right up until his frauds were exposed?

2. What happens to financial markets where insiders get a reputation for corruption? Will people continue to invest?

Question One The economic advisors to an economy estimate the supply and demand curves for cigarettes as the following:

Qd=140,000-25,000P

Qs=20,000+75,000P

, where Q is the daily sales in packs of cigarettes, and P is the price per pack.

1. Calculate the consumer surplus and producer surplus of this economy at the market clearing condition;

b. Calculate the price elasticities of demand and supply in this economy. Interpret your findings.

Discuss how the economy can have inflation from the demand side and from the supply side. Discuss the purpose of the Phillips curve and the shape of the Phillips curve in the long-run.

1. The following macroeconomic projected return models

π = inflation and GDP = GDP growth

RBAH=9.2+0.2Fπ+ 0.8FGDP+ϵ

RFIVN=11.6-0.6Fπ+ 1.8 FGDP+ϵ

RSP500=8.8-1.2 Fπ+ 1.6 FGDP+ϵ

1. Expected inflation is 2.3% and actual inflation may be greater by 0.4%, calculate the impact on the S&P500 projected return ( How would the projected return change)
2. Create a portfolio invested in Boaz Allan (BAH) and Five9 (FIVN) with the same exposure to GDP as the S&P500.
3. Create a portfolio invested in Boaz Allan (BAH) and Five9 (FIVN) to diversify away exposure to inflation.

2. Given the following information

             Corr (Bah,FIVN) = 0.4

Does an arbitrage opportunity exist?

Please include work

This is all the information provided for the question.

Delinquency prevention programs face a number of obstacles. Identify and explain these obstacles. Which of the obstacles do you believe to be the most problematic and what can be done to combat this particular issues.

A firm offers a pick and drop facility for its workers.

Why would a profit-maximizing firm opt for such a policy? Explain in words.

Would the workers respond to this announcement? Show in a standard diagram with wage on the x-axis and effort on the y-axis. With the aid of the diagram you have drawn. Show what would happen to the equilibrium wage and effort?

A firm offers a pick and drop facility for its workers.

Discuss what works, what doesn’t work, and what is promising in regard to school-based delinquency prevention programs. Which program type do you feel may continue to show the most promise for the future youth of our country.

U.S. productivity growth accelerated in the second half of the 1990s. How do you account for this speedup? Why is it still impossible to know if this speedup is the start of a long-term trend or simply a transitory change?

2. How did the Federal Reserve’s actions during the Great Recession in 2007–2009 in response to the financial crisis affect its balance sheet? \