A.EACH $ 5  BILLION INCREASE IN MONEY SUPPLY REDUCES THE RATE OF INTEREST BY 0.3 PERCENTAGE POINT

B.EACH 1 PERCENTAGE DECLINE IN INTEREST RATES STIMULATE 24 BILLION WORTH OF NEW INVESTMMENT.

C.MPC = 0.75 .

D.THE AGGREGATE SUPPLY CURVE IS SO FLAT PRICES DO NOT RISE NOTICABLY (NO INFLATION) WHEN DEMAND INCREASES. MAKE SURE DO ALL CALCULATION AS WELL PROPPER GRAPHS

3A) A junk bond promises to pay 16% interest, but it is expected to default (be worthless and thus, have a negative 100% rate of return) with a probability equal to 0.1. The expected rate of return is (in percent):

answer: ___________

3B) An investment costs $2.5 million today and is expected to be worth $3 million in one year. What is the maximum interest rate that the investor would be willing to pay for a loan to finance this investment? That is, what is its internal rate of return? (in percent)

answer:____________

3C) An investment pays $210,000 next year. The interest rate is 5%. The present value of this investment is (in dollars)

answer:_____________

3D) When the wage of a worker rises

a. works more due to the substitution effect. There is no income effect.

b. works more due to the income effect. There is no substitutiion effect.

c. works more due to the substitution effect but less due to the income effect.

d. works more due to the income effect but less due to the subsitution effect.

e. works more due to the substitution and the income effect.

3E) When non-wage income rises, the worker

a. works more due to the substitution effect. There is no income effect.

b. works more due to the income effect. There is no substitution effect.

c. works less due to the substitution effect. There is no income effect.

d. works less due to the income effect. There is no substitution effect.

e. works more due to both the substitution and income effects

Assume the wage in a cluster location is equal to w=$120. Labor demand curves are given by w_BOOM=180-L and w_BUST=100-2L, where L denotes the number of jobs.

1) Calculate the number of employed workers in both situations (Boom, Bust)

A) 120;0 B) 60;-10 C) 180;20 D) None of these

2) What is the expected CS if the likelihood of boom is 90%?

A)0 B)1800 C) 100 D) None of the above

One reason that a market fails is in the presence of externalities (Chapter 18) Discuss two cases of either a negative or positive externality that affects you directly.

• What are the economic outcomes associated with each externality (in terms of surplus/over production etc.)?
• What are some ways that you could intervene to correct these externalities? If your solution requires the government to be involved, discuss why. If not, also describe why! (For full credit please make a reference to Coase's theorem that could be relevant.)

describe at least two factors that indicate how the global economy can affect value chains and business processes. Use a real work example from your personal experience, or through Internet research

How can the use of economic data to provide deeper analysis of the effects of the federal budget on our economy?

Which school of economic thought originated in the 1930s and argued that the key to overcoming the Great Depression was to have the Federal Government borrow more money and spend it on various programs, such as public infrastructure projects, in order to increase the economy’s total monetary demand for commodities and labor?

Use the following data to answer the following questions; A. Calculate nominal GDP in 2012 and 2013 B. Calculate real GDP in 2012 and 2013 (make 2012 the base year) Quantities 2012 2013 Apples 70 160 Oranges 90 220 Prices 2012 2013 Apples $.50 $1 Oranges $.25 $2

The BLS reported the following CPI data.

What is the rate of deflation between June 2008 and 2009? (Even though the price level fell, you still work the problem the same)