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

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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.

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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.

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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

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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.

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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.

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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.

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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?

1.Jones works for a consulting firm and gets remunerated a
monthly wage of $500.00. He always spends all the $500.00 on buying
5kg of potatoes  only which he buys at $100/kg. One day, amidst of
Covid 19 pandemic, the price of potatoes increased to $120/kg. Due
to the snap change in the price, Jones supervisor approached him
and gave him two options to choose from:
i). Reduce Jones wage to $400.00 and supplying him with 30kg of
potatoes at $80/kg monthly.

ii). Increase his wage to $600.00
As a smart student of Principles of Economics and within a page, kindly
advise Jones to make a justified rational choice.

please help with this Economics

Kelly sells orange juice in a competitive market on a busy street corner in New York. Her production function is ?(?1, ?2) = ?1 1/3 ?2 1/3, where output is measured in gallons, ?1 is number of pounds of oranges she uses, and ?2 is the number of labor-hours spent squeezing them. ?1 = $16 is the cost of a pound of oranges and ?2 = $2 is the wage rate for orange-squeezers.

At the cost minimizing input bundle, how much labor-hours are spent per pound of oranges? That is,

compute the ratio of x2/x1 at the cost minimizing input bundle

b) What is the optimal inputs bundle to produce 8 units of output in the cheapest way?

c) What is the minimized cost of producing 8 units of output?

d) Calculate the average cost when total cost of production is minimized and output is 8 units

e) If market price of orange juice is $20 per unit (p=$20), conditional on Kelly is now producing 8 units of

output in the cheapest way, what is Kelly’s total profit? Determine Kelly’s supply decision in long run

How does an increase or decrease in money supply (specifically as a result of overnight rate fluctuation) effect income, price level, and interest rate?

Over the past few decades, Disney has gone through both horizontal and vertical integration through a number of horizontal and vertical mergers. What are these mergers? What does Disney’s business include? What are the pros and cons being so integrated?

The Cold War that divided world between the United States and the Soviet Union broke out after the end of the Second World War. Discuss how the Cold War was based on ideas and concerns.

What affect, if any, do you think the precautionary principle will have on technological innovation and economic growth? Why? (500 words)

Suppose Nadine owns an apartment in San Francisco worth $108 and does not have earthquake insurance. Nadine’s wealth is $144, including the value of the apartment. Nadine’s utility of wealth function is U (W ) = 10W 0.5 . If an earthquake hits, Nadine’s apartment will be destroyed. The probability that an earthquake will hit is 0.5.

(a) Is Nadine risk averse?

(b) What is Nadine’s expected wealth?

(c) What is the largest amount that Nadine is willing to pay for comprehensive earthquake insurance?

(d) Suppose her neighbor Patricia also owns an apartment in the same building that is also worth $108. Patricia has the same utility of wealth function as Nadine but has total 1 wealth of $169, including the value of her apartment. Is Patricia wiling to pay the same premium that you solved for in part (c)? Without any calculations, how do you know?

(e) Draw Nadine’s utility of wealth function. Indicate her expected utility if she does not purchase earthquake insurance. Also indicate her wealth and certain utility if she pur- chases earthquake insurance at the premium you solved for in part (c).

How much do you think Schumpeterian creative destruction explains the American economic experience and why? How do biotech and digital technological innovations fit this answer?

Arguably the natural disaster will also affect the risk premium x: Briefly discuss how the risk premium might be affected and describe the implications for the short run equilibrium value of output.

Suppose that Canada is now in a recession triggered by the COVID-19 pandemic, with unemploy- ment and an output gap. We now analyze this situation using a New Keynesian sticky price model that we learned in Chapter 14. In particular, the labor market and the goods market do not have to clear in the New Keynesian model. Note: In this question, you do not need to show how the COVID-19 pandemic affects the economy, i.e., you do not need to compare the economy before and after the COVID-19 shock. Instead, you directly start from the fact that the economy is currently in a recession with unemployment.

1. (10 Points) Draw four separate figures illustrating the labor market, the goods market, the money market, and the production function. Make sure you illustrate clearly that there is unemployment in the economy, and label clearly the output gap in the figure of the goods market.

2. (10 Points) To help the economy recover from the recession, the Bank of Canada has cut the policy interest rate to 0.25%. At the same time, the government expenditure increases: The Government of Canada announced the COVID-19 Economic Response Plan will provide up to $27 billion in direct support to Canadian workers and businesses. Use the four figures to analyze how this combination of expansionary fiscal policy and expansionary monetary policy together helps the economy recover from the current recession by showing its impacts on output, employment, interest rate, wage, and money demand. (Hint: In our lecture notes we analyze the effects of fiscal policy or monetary policy separately, while in this question you are asked to illustrate the effects of these two policies that are implemented simultaneously.)