What is reciprocal arbitrage?

1. Discuss the differences calculating GDP using the expenditure approach and income approach. Be specific, do not just write the formula.

Q.2 AD-AS model analysis for an increase in oil price

• Start with an initial AD-AS model with full employment equilibrium. Please label all the axes and the curves. Label the equilibrium as “1”.

• Let’s say that there is an oil shock (the price of oil has increased). What happens to which curve? Make sure to show the changes in the above AD-AS model. Therefore, what happens to the equilibrium and the economic condition? Explain all the changes in writing as well.

• What do we call this economic status? Explain how this economic situation is not the same as the recession in general.

Suppose the country is currently experiencing a recession. What type of fiscal policy can the government use to fight off recession?

1. Explain with (2-3 sentences) whether each of the following would cause the value of the multiplier to be larger or smaller.

   1. An increase in real GDP increases imports

   2. An increase in real GDP increases interest rates

   3. An increase in real GDP increases MPC

   4. An increase in real GDP causes the average tax rate paid by households to decrease

   5. An increase in real GDP increases the price level

Suppose the economy is initially in long-run equilibrium and there is a positive demand shock. Using the AD-AS diagram clearly describe the effects of the demand shock in the short run and how the economy will adjust through the self-correcting mechanism in the long run

Katanya Lyon operates the “Lyon King” hamburger stand at her local weekend market. She sells only two types of burgers: the MegaMeat burger with the works, and the PowerVeg burgers. Katanya employs the following family members:

• Sister Tankaya prepares bread rolls (including toasting and buttering). She gets cranky a lot because the toaster often overheats and the rolls get burnt and have to be thrown away;

• Brother Donnie, who is in charge of grilling (either meat patties or veggie patties; as well as grilling onion and frying eggs). Donnie only grills meat patties and veggie patties in different batches; he will never allow both meat patties and veggie patties to sit on the grill at the same time. Donnie believes that “mixed-grilling” is disrespectful to all the vegetarians out there. In contrast with Tankaya, Donnie is very relaxed, even when the grill breaks down (which happens twice a month on average).

• Mother Bonnie, who performs cutting and assembling activities (cutting lettuce and tomatoes, putting together the patties, eggs and the salad ingredients);

• Katanya looks after cash receipts herself.

  Katanya has a simple operation with only three major pieces of equipment: two toasters and one (very expensive) BeefEater Barbeque SL4000 Unit. Three suppliers provide all the main ingredients: the local butcher “Butch-a-Way” provides the meat patties and eggs, a vegetable supplier “All-Vegged-Out” supplies the salad ingredients; and “We-Bake” bakery supplies the bread rolls.

  Further, Katanya believes in specialisation; each employee focuses only on his/her own process. In particular, Katanya does not trust Donnie with the money, and she would never contemplate getting involved in the grilling process herself. In addition to cutting and assembling, Bonnie (who is good at haggling) is also in charge of negotiating deals with the suppliers. By purchasing in bulk she often manages to get large discounts.

  Required: **Make sure that your answers are specific to the case!**

  (a) Identify examples of the following potential constraints in Katanya’s operation:

  • Demand/market constraint

  • Supply constraint

  • Material constraint

  • Capacity constraint

  • Logistical constraint

  • Managerial constraint

  • Behavioural constraint

    (b) Briefly explain how the concepts behind TOC can help Katanya to better manage time, cost and quality in her hamburger business.

When considering the merits of employment resulting from a project, which of the following questions is most important?

a. Could more jobs have been created if another project had been undertaken?

b. Will the persons employed by this project create more wealth than they would if employed in other areas?

c. Does the project increase total employment?

d. How many people does the project employ?

Government spending programs that create jobs are often popular because

a. when spending programs are funded by the government there are no secondary effects.

b. the benefits of job creation are always greater than the costs. Jobs are the key to economic progress.

c. the created jobs are highly visible, while the secondary effects of lost jobs in other areas, higher interest rates, and higher future taxes are less visible.

d. if a spending program is approved by Congress, it means that the value of what is produced is greater than the value of the resources used to produce it.

When the government funds a project that will create jobs, the funds for the project

a. will leave private sector output and employment unchanged.

b. are essentially free, because the project originated in the government sector.

c. will have to be either taxed or borrowed from the private sector.

d. will generate additional tax revenues that will pay for the project.

Imagine that you are the Surgeon General of the United States, who formulates national health policy. (A former Surgeon General, C. Everett Koop, formulated the crusade against tobacco smoking a generation ago). Describe what you believe is the primary health problem in the United States today. Justify your choice with as many facts (minimum 3) as you can find. Describe the steps you believe should be taken by a) government,b) private companies, c) organizations, and d) individuals to eradicate this health problem.

Beer Drinkers’ Tastes Change with the Season

What a time to be alive—at least according to beer drinkers. Nearly nine in 10 (88 percent) beer drinkers agree that it’s a great time to be a beer lover. When looking more closely at what it is about beer they love so much, 70 percent say they enjoy trying new types of beer and nearly two in three (64 percent) are fans of local brews. The latter is especially true of craft beer drinkers, 86 percent of whom are fans of local beer, compared to 77 percent of those who prefer import beers and 60 percent of domestic non-craft beer drinkers. Those in their 30s stand out from the crowd in their passion for beer. Among beer drinkers in this age group, 95 percent say it’s a great time to be a beer lover and 85 percent enjoy trying new types of beer. They’re also more passionate fans of local brews than the average beer drinker (76 percent). These are some of the results of The Harris Poll of 2,115 U.S. adults (ages 21 and older, including 913 who drink beer at least several times per year, surveyed online. As the weather changes, so do the taps, with spring seasonal brews replacing the winter drafts. When it comes to beer style, lagers are tops, with 30 percent of beer drinkers saying a lager is their preferred choice. However, 40 percent of beer drinkers say their

favorite beers change with the season. Millennials may welcome the change most as they’re more likely than any other generation to modify their tastes with the seasons (56 percent vs. 42 percent Gen Xers, 26 percent Baby Boomers, 21 percent Matures).

“It’s certainly a good time to be a beer lover,” says Danelle Kosmal, VP of Nielsen’s Beverage Alcohol Practice. “As Americans continue to enjoy some of their favorite traditional lagers, they also have a seemingly unlimited set of options when it comes to styles and new flavors. Whether it’s with a new session IPA, a farmhouse sale or a refreshing summer flavor, there are plenty of reasons for beer lovers and brewers alike to be excited about their opportunities in beer.” Perhaps just as critical as the contents of your pint glass is what’s on the plate next to it. Pizza tops the list of foods beer drinkers say is the best to eat while sipping a cold one (28 percent), which comes as no surprise since a separate Harris Poll found that pizza also ranked as the No. 1 comfort food and beer beats out all other alcoholic beverages the top alcoholic beverage to wash down a slice. Burgers (10 percent) and wings (7 percent) round out the top three favorite foods to pair with a beer.5

Questions

1. What is the construct or constructs in the research? Give a constitutive definition.

2. What levels of measurement could the researchers have used? Give examples

3. What could have been used to measure reliability?

4. How might the researchers approach the measurement of validity?

5. What could be done to measure construct validity?

In a remote valley, two businesses share a waterway. Tom's Tomato Farm pumps water from a river and uses it to irrigate its fields. The used water eventually flows back into the river, carrying some of the fertilizer that Tom applies to his crops. Up to a point, more fertilizer helps increase Tom's harvest. Downstream, Jay's Riverview Campground offers campsites to interested vacationers. Fertilizer contamination of the river creates algae blooms that adversely affect Jay's business. The functions describing the profits of each establishment are:

πT(F) = 32 +12F - 0.25F2

πJ (F) = 220 - 8F

where the subscripts "T" and "J" refer to Tom's and Jay's places of business, respectively. "F" represents the amount of fertilizer in the river generated by Tom.

(a) Derive the functions representing (i) the marginal benefit of fertilizer to Tom and (ii) the marginal cost of fertilizer to Jay.

(b) Suppose that the existing law defines property rights that favor recreational users of waterways (e.g., campsites) at the expense of farmers. A campsite can sue a polluting farmer for prohibitive damages if any pollution takes place, unless the affected parties consent to an alternative agreement. Indicate (i) the amount of pollution that takes place in this scenario, and (ii) the profits of Tom and Jay. Assume that Jay has all the bargaining power (i.e., he captures the entire Coasian bargaining surplus, note it is different from the classroom example where both parties have some bargaining surplus).

(c) There exists a containment process for recapturing irrigation water in underground troughs and cleansing it of any leached fertilizer contaminants. This technology, which can be purchased for a cost of $X, would prevent Tom's operations from polluting the river at all (regardless of his choice of F). Suppose property rights and bargaining power are defined as in (b). What is the most Tom would be willing to pay to obtain this new process?

1. In a typical boom, consumption _____. Investment moves in the same direction but proportionately _____.

Question 1 options:

rise, more

rises, less

falls, more

falls, less

Question 2 (1 point)

2. Which of the following changed would contribute to a rise in the index of leading indicators, suggesting that a boom is more likely?

Question 2 options:

a decline in stock prices

a decline in building permits

a decline in the initial claims for unemployment insurance

a decline in the slope of the yield curve

Question 3 (1 point)

3. If a technological advance at credit card companies makes stores start accepting more credit payments, the demand for money will _____. If the money supply is held constant, the aggregate demand curve will shift to the _____.

Question 3 options:

increase, right

increase, left

decrease, right

decrease, left

Question 4 (1 point)

4. An expansion in aggregate demand increases _____ in the short run. In the long run, however, it increases only the ____.

Question 4 options:

real GDP, price level

real GDP, velocity of money

unemployment rate, price level

unemployment rate, velocity of money

Question 5 (1 point)

6. If the Fed responds to a positive supply shock by reducing the money supply, it will

Question 5 options:

stabilize aggregate demand at its previous level

make the resulting recession deeper than it otherwise would have been

keep the economy closer to its natural levels of output and employment

allow the price level to return to the level that prevailed before the shock

Consider a working mother with one child in New Zealand. Her wage rate is $30 per hour, and the maximum hours she can work is 80 hours per week.

a) Draw her budget line. What is the slope of the budget line?

b) In New Zealand, the Family Tax credit (FTC) gives a working mother with one child $113 if her weekly earnings are between $0 to $820. For each additional dollar earned above $820, the tax credit decreases by 25 cents. Draw the budget line under the FTC. What are the slopes of the new budget line?

c) Where does the new budget line intersects with the initial budget line in (a)? What are her income and hours of work at the intersection?

d) Suppose the working mother works 25 hours per week under the original budget constraint in (a). What is the income effect from the FTC? What is the substitution effect from the FTC? Will she work more, less, or ambiguous after the introduction of the FTC?

List explain and show how to calculate two specific ratio measures that could be used to measure a banks credit risk. In each case explain whether an analyst would want a higher or low ratio than the ratios of the banks peer group and why

that have you learned about yourself as a learner and student in transitioning to this environment? Comment on your most significant accomplishments (academic and personal); some of the difficult challenges (academic and personal) you have faced and how you dealt with them? What advice would you offer to an incoming first year student ?