Suppose that the demand and supply function for ice cream are QdI = 85−4PI +6PP and QsI = 5PI − 5, respectively. Suppose the demand and supply function for pie are QdP = 110 − 5PP + 2PI and QsP = 3PP − 10, respectively. (a) Are pie and ice cream substitutes or complements? (b) Solve for and graph the market-clearing curves for pie and ice cream. (c) Find the general equilibrium prices and levels of consumption of both goods.
In: Economics
1. Why does the short run aggregate supply (SRAS) curve slope upward to the right? What does the upward slope indicate?
2. If the prices of both (a) resources and (b) goods and services increase proportionally will business firms have a greater incentive to expand output? Why or why not?
3. If the price level in the current period is higher than what buyers and sellers anticipated, what will tend to happen to real wages and the level of employment? How will the profit margins of business firms be affected? How will the actual rate of unemployment compare with the natural rate of unemployment? Will the current rate of output be sustainable in the future?
4. Why is an unanticipated increase in the price level likely to expand output in the short run, but not in the long run?
5. if the inflation rate increases and the higher rate is sustained over an extended period of time, what will happen to the nominal interest rate? What will happen to the real interest rate?
6. “When the U.S. dollar appreciates against the Euro, fewer dollars will be required to purchase a Euro.” Is this true? If the dollar appreciates, how will this affect net exports?
7. Can output rates beyond the economy’s long run potential be achieved? Can they be sustained? Why or why not?
8. When the economy is in long-run equilibrium, which of the following will be true?
a. The actual price level will be equal to the price level anticipated by decision makers.
b. The actual unemployment rate will be equal to the natural rate of unemployment.
9. (a) What is the difference between the real interest rate and the money interest rate?
(b) Suppose that you purchased a $5,000 bond that pays 7% interest annually and matures in five years. If the inflation rate in recent years has been steady at 3% annually, what is the estimated real rate of interest? If the inflation rate during the next five years rises to 8%, what real rate of return will you earn?
10. How is a nation’s trade balance related to its net inflow of foreign capital? If the inflow of foreign capital is used to finance the federal deficit, how will the well-being of future generations be affected?
In: Economics
2. Draw a graph on the utility maximization framework for a consumer who faces a decrease in the price of good x if x is inferior.
In: Economics
a. (4 points) Discuss two ways in which the Central Bank can try to increase the money supply. Be explicit.
b. (6 points) What are the effects of the expansionary policy in the short run? Show in the appropriate graph(s).
c. (5 points) Which two factors determine the magnitude of the effects in the short-run?
d. (6 points) What are the effects in the long-run, assuming no further shocks to the economy? Show in the appropriate graphs.
e. (4 points) How does this example illustrate monetary neutrality? Explain your answer.
In: Economics
Suppose that the demand for real money balances depends on disposable income. That is, the money demand function is M/P = (Y-T) - k(r+Eπ). Using the IS-LM model, discuss whether this change in the money demand function alters the following:
a. The analysis of changes in government purchases.
b. The analysis of changes in taxes.
In: Economics
2. (1 point) (Mankiw) Explain why each of the following statements is true. Discuss the impact of monetary and fiscal policy in each of these special cases.
a. If investment does not depend on the interest rate, the IS curve is vertical.
b. If money demand does not depend on the interest rate, the LM curve is vertical.
c. If money demand is extremely sensitive to the interest rate, the LM curve is horizontal.
In: Economics
Consider a competitive industry that the government taxes in order to raise revenue (e.g., the sale of alcoholic beverages). Show graphically that the amount of revenue generated by a per-unit tax on the industry can in principle be duplicated by reorganizing it as a state-run monopoly and using the profits as government revenue.
In: Economics
explain the accelerator model of inventories
In: Economics
Explain the roles and importance of data collection and forecasting in monetary policy.
Why is accuracy in forecasting so important?
Evaluate the appropriateness of the current monetary policy and explain how policy has impacted economic conditions.
In: Economics
In: Economics
The average wage depends on ability and years of education (S)
as follows:
W = $50,000 + $5,000S for more able individuals W = $30,000 +
$5,000S for less able individuals
In addition, S=10 for more able individuals and S=5 for less able
individuals.
a) Do employers discriminate based on the years of education? b)
Based on the observed difference in the average wage between more
and less able individuals, what is the implied return per year of
education? How is this different from the actual return per year of
education? c) What is an instrumental variable? Explain how using
an instrumental variable can help you identify the actual return
per year of education even if you can’t observe the ability of
individuals.
In: Economics
Complete the table and answer the following questions. The price of this perfectly competitive firm is $300.
|
QTY |
FC |
VC |
TC |
AFC |
AVC |
ATC |
MC |
MR |
|
0 |
700 |
|||||||
|
1 |
650 |
|||||||
|
2 |
700 |
|||||||
|
3 |
760 |
|||||||
|
4 |
840 |
|||||||
|
5 |
950 |
|||||||
|
6 |
1090 |
|||||||
|
7 |
1270 |
|||||||
|
8 |
1500 |
|||||||
|
9 |
1790 |
|||||||
|
10 |
2150 |
In: Economics
Background
In this hypothetical scenario, you are the Chief Executive Officer (CEO), of a company, Island Ports Limited. Your business, is a global business, with shipping ports in all of the major English speaking Caribbean countries. On January 7, 2020, you signed a Heads of Agreement with the Government of The Bahamas to invest $120 million during Phase I to develop a cruise port on the island of New Providence. As you can appreciate, the signing and the commitment of your shareholders to this project, preceded any information available to your company and its shareholders with respect to the potential impact of the coronavirus, i.e. COVID-19.
Concessions granted to Island Ports (hypothetical scenario)
The following were the concessions granted to Island Ports during the signing of the Heads of Agreement:
Commitments from Island Ports to the Government and People of The Bahamas
In light of the concessions granted to Island Ports as listed above, the company has committed the following to the Government and people of The Bahamas:
The following is the outlook for The Bahamas, based on baseline data (as at 2019) taken from the Central Bank Quarterly Digest at www.centralbankbahamas.com and projections for 2020 based on these baseline numbers:
Table I: Key Metrics for The Bahamas
|
Key Metrics |
As at 2019 (Pre COVID-19) |
Impact – Projected 2020 |
|
National Debt as at December, 2019 ($mils.) |
$8,749 |
$10,413 |
|
Debt in Foreign Currency ($mils.) |
$2,618 |
$4,282 |
|
Foreign Reserves as at Feb., 2020 ($mils.) |
$2,001 |
$900 |
|
Gross Domestic Product (2019) ($mils.) |
$12,900 |
$10,900 |
|
National Debt as % of GDP |
67.8% |
95.5% |
|
Tourism Expenditure as at 2019 ($mils.)* |
$2,817 |
$1,665 |
|
Unemployment as at November, 2019 |
11.0% |
24.8% |
|
Government GFS Deficit ($mils.) |
($377.6) |
($1,664) |
You have just been appointed the Chief Operating Officer (COO) of Island Ports. You have over twenty years experienceadvising CEO’s on strategic decisions. In addition to your experience as an advisor on strategy, you are accomplished academically. You were a graduate of the University of TheBahamas and later pursued your Masters at Yale in Analytics and Strategy. Needless to say, there is high expectations from your office, in helping the company, Island Ports on the way forward.
Decision
Island Ports has to decide as to whether it wishes to move forward in September, 2020, with the start of construction of Phase I of the construction of the cruise port in New Providence. Island Ports investors are also reluctant to move forward in the current environment. The Government of The Bahamas is also applying pressure to Island Ports to get started with its construction, as this project will provide much needed jobs for the economy, at a time when jobs and incomes are really needed. The government has also reminded Island Ports of the generous concessions that were granted on the condition that the project gets started on time. While the Government of The Bahamas is applying pressure to Island Ports, the company has reminded the government that its project will provide tremendous benefits to the country, through its efforts and ingenuity.
As the COO, you are asked to advise the company on the way forward by way of answering the following questions:
APPENDIX
Key Metrics – The Bahamas
Assumptions and other notes:
Table I: Key Metrics
|
Key Metrics |
As at 2019 (Pre COVID-19) |
Impact – Projected 2020 |
|
National Debt as at December, 2019 ($mils.) |
$8,749 |
$10,413 |
|
Debt in Foreign Currency ($mils.) |
$2,618 |
$4,282 |
|
Foreign Reserves as at Feb., 2020 ($mils.) |
$2,001 |
$900 |
|
Gross Domestic Product (2019) ($mils.) |
$12,900 |
$10,900 |
|
National Debt as % of GDP |
67.8% |
95.5% |
|
Tourism Expenditure as at 2019 ($mils.)* |
$2,817 |
$1,665 |
|
Unemployment as at November, 2019 |
11.0% |
24.8% |
|
Government GFS Deficit ($mils.) |
($377.6) |
($1,664) |
The tourism expenditure of $1.665 billion does not take into account seasonal adjustments/variations, which may result in even a lower level of receipts from tourism.
In: Economics
I need some assistance with my 2000 word essay I am writing about COVID-19 and how it is affecting and affected the business industry around the world. Thank you.
In: Economics
A real estate investor buys two properties. Monthly net income from the first property (an apartment building) is $1,000 times the number of apartments that are rented out, minus $1,800 in property taxes and maintenance expenses. The number of apartments that are rented out is a random variable, X, with mean 20 and standard deviation 3. Monthly net income from the second property (a parking lot) is ninety percent of revenue (the management company takes the other ten percent), minus $1,200 in property taxes and maintenance. Revenue is a random variable, Y, with mean $20,000 and standard deviation $200. The correlation between the number of apartments rented out (X) and revenue from the parking lot (Y) is 0.4.
a. Calculate the real estate investor’s expected monthly net income from these two properties:
b. Compute the covariance from the correlation:
c. Calculate the variance of monthly net income from these two properties
In: Economics