a) Suppose the money supply increases. If the demand for money curve remains the same, show what will happen to prices of goods and the PPM and explain. Use a graph to illustrate. Clearly label your graph.

b) Suppose that at the same time the supply of goods increases, and overall, prices have risen. What has happened? Draw a new PPM graph illustrating your point and explain. Clearly label your graph.

With the aid of a diagram, explain why according to economic theory, in the short run rational firms should only be operating at Stage two of production.

b. Why is it not rational for firms to operate at Stage one or Stage three of production?

c. The impact of COVID-19 has the CEO of a small manufacturing firm worried because of the reduced demand for its product has resulted in reduced production. She has asked you to explain how this will affect the firms fixed, variable, average and marginal costs ( 5 marks) .

Using a graph and in your own words, explain how a change in open market purchases affects money supply and the nominal interest rate.

This is an exercise on moral hazard in credit markets. Assume that a borrower must borrow 100 for an investment. The borrower can choose between a safe project yielding a return of R_s with 100% probability and a risky project yielding a return of R_r with probability p_r and a return of 0 with probability (1-p_r). Assume that the lender cannot observe or control the type of project chosen by the borrower. What are the conditions for the borrower to choose the risky over the safe project under limited liability? What is the minimal level of collateral that will lead the borrower to choose the safe project instead? Alternatively, assume that the borrower has some money of his or her own to invest in the project that costs 100. Assuming that the bank cannot collateralize the loan, what is the maximum amount of the loan such that the borrower will prefer the safe project over the risky project?

A real estate investor has the opportunity to purchase land currently zoned as residential. If the county board approves a request to rezone the property as commercial within the next year, the investor will be able to lease the land to a large discount firm that wants to open a new store on the property. However, if the zoning change is not approved, the investor will have to sell the property at a loss. Profits (in thousands of dollars) are shown in the following payoff table:

Assume that an economy’s long-run equilibrium is described as follows: economic growth at 2.5% pa, the natural rate of unemployment at 6% and expected inflation at 2%.

Using large AD/AS and Phillips curve diagrams, illustrate the short-run effects of the policy or event on the economy. Assume the price level is not sticky.

Starting position : Long-Run equilibrium

Policy/event : increasing interest rates

How does an increase in inflation affect the nominal exchange rate

How consistent is the Keynesian consumption function with the random walk hypothesis

Use Tobin's q theory and the neoclassical theory of investment to explain why investment rises so rapidly once the economy has passed the trough of a business cycle

Why is the long-run Aggregate Supply (LRAS) Curve a vertical line? What causes it to shift?

Describe what the Phillips curves relationship looked like when it was first "discovered" by Philips (U.K.) and Samuelson & Solow (U.S.). What did this relationship imply for the government policy regarding the economy?

Explain what an economist might oppose fiscal consolidation in the short run. Why might fiscal consolidation look more attractive in the medium-run?

1. Draw three different supply curves on a graph:

1. Make S1 highly elastic
2. Make S2 highly inelastic
3. Make S3 perfectly inelastic
4. Which supply curve is the supply curve for Vincent van Gogh’s masterpiece, “A Starry Night”?
5. Which supply curve is for an ice cream manufacturer?
6. Which supply Curve if for an airplane manufacturer?

How has the business environment & climate changed for Gazprom since 2009?

To avoid harm to society, the government often becomes the supplier of a good or service when the respective market

a, would be a natural monopoly, and the good or service is considered essential

b, would be competitive enough to cause surpluses to develop

c, has been engaging in illegal activities that the government seek to eliminate

d, has a high profit, and the government can use those to replace tax revenue

Suppose at 11am this morning, the following rates are obtained from the FX markets:

In New York €1 =$1.09251

In Frankfurt £1 = €1.1234

In London $1 = £0.85

1. Determine if there is a currency arbitrage opportunity in this 3-currency situation.
2. If there is an arbitrage opportunity to be exploited, show how you may be able to capture this profit. YOU NEED TO ILLUSTRATE YOUR PROFITABLE ROAD MAP WITH A NUMERICAL EXAMPLE.