a)How do we compare the price and quantity of a monopoly and perfectly competitive market?

b)Why will the perfectly competitive solution be the only efficient allocation?

Suppose interest parity does not hold exactly, but the true relationship is R = R∗ + (Ee − E)/E + ρ(B), where ρ(B) is a risk premium on domestic government bonds that positively depends on B. Suppose a temporary rise in domestic government spending is financed by issuing additional government debt (an increase in B) and makes do- mestic public bonds risk premium higher. Evaluate the policy’s output effects in this situation.

CH8

Suppose an economy produces three final products. Use the following table to calculate GDP and economic growth rate.

Fill in the blanks of the next table. Numbers only without thousand separator.

An economy has four final products, A, B, C, and D. Please use the output and price information to complete the following table and answer questions. Do NOT use thousand separators and ignore decimals (e.g., two thousand as 2000).

The real GDP growth rate in 2017 =   % (e.g., 7%)

Michigan based GM's production of Buicks in China is part of ________ GDP and part of _______ GNP; Japan's Honda's production of Accords in Kentucky is part of ______ GDP and part of _________ GNP, respectively.

• A. China's; the U.S.; the U.S.; Japan's.

• B. China's; the U.S.; the U.S.; the U.S..

• C. U.S.; the U.S.; the U.S.; Japan's.

• D. China's; the U.S.; Japan's; the U.S..

quiz 7

What are the differences between autoregressive and moving average models? Consider the following: model specifications, stationarity, the shapes of their autocorrelation and partial autocorrelation functions.

Success of a company investing and operating in a foreign country depends on the competitive advantage of the company. The entry strategy of a company in a foreign country could be technology based, quality based, or cost based. Explain what each strategy means in your own words.

2. In a knowledge economy, knowledge is the intensive factor of production. Comparing China and America, which country do you think has competitive advantage in a knowledge economy, China or America? Explain and justify your answer.

nour likes green pens. Yesterday, she opened his desk drawer and found no green pens. So, bought three green pens without worrying too much about their price. Assume that nour’s budget is M, denote X for green pens, and denote Y for all other goods.

a) Apply the Slutsky equation to nour’s demand for green pens as a Giffen good.

b) Graphically show nour’s demand for green pens using Marshallian and Hicksian demand curves from nour’s indifference curves.

c) On your graph, show the following very clearly: the Hicksian monetary compensation, the Hicksian substitution effect, the Marshallian income effect, and the total Marshallian demand effect

1. You are asked to analyze each of the following events using the Solow growth model (the events all happen at time 0): a) The investment rate rises in Tanzania. b) Immigration increases the population of France by 10%. c) An earthquake destroys 10% of the capital stock of Chile. (Hint: does steady state GDP per capita change in Chile?) d) Malaysia realizes a 10% rise in TFP due to technology transfer.

For each of these: Draw a Solow diagram to show what happens when the economy is initially in steady state. Explain how steady-state GDP per capita changes. Use algebra to help in your explanation. Does steady-state capital per capita change? Explain how the growth rate of GDP per capita changes at time 0. Explain how the economy adjusts from the short run to the long run after the change

Economics history question a). What does the arbitrage inequality tell us about trade costs if we know prices in both markets and markets are fully competitive? b). How can trade can rise even if trade costs do not change? c). Explain why the division of labor is determined by the “extent of the market”.

1. In August 2014, the US banks excess reserves (NBR) were equal to $2.699 trillion while they reached $2.087 trillion in January 2018 due to the historic ending of the Fed’s QE programs.

2. Since January 2009, the monthly average interest rate paid by the Federal Reserve Bank on both required reserve and excess reserve balances has been 25 basis points (0.25%).

3. The federal funds rate (overnight rate) in 2014 was 0.25%, while it was equal to 1.75% in 2018.

4. The Discount Rate in 2014 was 0.75%, while it was 2.25% in 2018.

Question1:

Explain in detail the different arguments for and against the Federal Reserve Bank independence?

According to the theory of liquidity preference, the opportunity cost of holding money rises when the interest rate rises, so people desire to hold more of it.

Select one:

True

False

In the long run, changes in government spending can affect prices, output, and unemployment rates if the spending programs alter the availability of natural resources, capital equipment or technology

Select one:

True

False

According to liquidity preference theory, the money supply curve is vertical because the Fed can dictate the quantity of money supplied by engaging in the purchase and sale of government bonds.

Select one:

True

False

An increase in the interest rate induces firms to borrow less, which will result in less investment spending and a decrease in the aggregate demand for goods and services.

Select one:

True

False

A lower price level leads to lower money demand, lower money demand leads to lower interest rates, and a lower interest rate increases the quantity of goods and services demanded

Select one:

True

False

Does Attractiveness Lead to Higher Marginal Revenue Product?

Economist David Hamermesh of the University of Texas, Austin, and Jeff Biddle of Michigan State University discovered that “plain-looking” people earn 5 to 10 percent less than people of “average” looks, who in turn earn 5 percent less than those who are considered “good looking.” Surprisingly, their research showed that the “looks effect” on wages was greater for men than for women. This wage differential related to appearance is not, contrary to popular belief, evident only in modeling, acting, or working directly with the public. Looks seem to account for higher earnings in jobs such as bricklaying, factory work, and telemarketing.

According to Hamermesh and Biddle, part of the wage differential may be created by the fact that attractiveness leads to higher marginal revenue product. More attractive persons may have higher

self-esteem, which in turn causes them to be more productive.

QUESTION: What are some other possible reasons that more attractive people tend to earn more?

Automatic stabilizers are changes in taxes or government spending that decrease aggregate demand without requiring policymakers to act when the economy is in an expansionary boom that is causing inflation.

Select one:

True

False

If there is no change in the unemployment compensation program, then the total amount of benefits paid to participants in the program will fall during economic expansions and rise during recessions.

Select one:

True

False

Critics of stabilization policy argue that the policy can be a source of, instead of a cure for, economic fluctuations because the lags associated with a discretionary policy create the possibility that an expansionary fiscal policy is implemented when the economy has already adjusted on its own to the natural rate of output.

Select one:

True

False

According to liquidity preference theory, a decrease in money demand for some reason other than a change in the price level causes the interest rate to rise, so aggregate demand shifts right.

Select one:

True

False

Automatic stabilizers tend to make the government’s budget move toward a deficit during recessions and toward a surplus during an economic expansion.

Select one:

True

False

Labour costs have a bearing on the demand and supply of so many goods in the economy. Illustrate with well labelled graphs, how the minimum wage affects demand, supply and equilibrium

Brandon raises apples. Where L is the number of units of labor he uses and T is the number of units of land he uses, his output is ?(?, ?) = 2√?? bushels of apples

a) Write an equation for the isoquant that gives him an output of 100 bushels?

From now on, assume that the number of units of land is fixed at T= 8 in the short run. Per-unit prices of apple,

labor and land are p = 3, wL = 2 and wT = 1

b) Write a short run production function reflecting a short run restriction on the units of land

c) Write a short run profit function that states Brandon’s profit as a function of the amount of labor

d) Find out profit maximizing unit of labor. How much bushels of apples will he produce? What is his

maximized profit?