Explain that metaphor:

A Surplus is like Profit.

Topic 8 Spending and Output in the Short Run

8.1 Explain the errors of the following arguments made by an economicsstudent:

a) “The textbook said that a higher interest rate lowers investment, but that doesn’t make sense. I know that if I can get a higher interest rate, I am certainly going to invest more in my savings account.”

b) “The newspaper said that the recent recession was caused by a decline in investment. This can’t be true. If there had just been a decline in investment, the only firms hurt would have been construction firms and other firms selling investment goods. In fact, many firms experienced falling sales during that recession, including department stores and firms selling consumer electronic products.”

8.2 Company A in country X is considering the investment in a project with the following (estimated) cost and benefit. The project has a life of 3 years and has zero value after the third year.

a) Suppose in year 0 Company A could borrow or lend at an annual interest rate of 4%. Explain clearly with calculation whether Company A will invest in this project.

b) Based on your answer in part (a) explain how an increase in interest rate to 5% will affect Company A’s investment decision.

c) There is a concern about the unemployment problem in country X and the lack of investment demand is regarded as one of the major reasons of unemployment. Suppose other firms in country X will be affected in the same way as Company A as described in part (a) and (b) above. Use the Keynesian model to explain the process of how a change in interest rate may help to solve the unemployment problem.

8.3 Consider the following Keynesian model: Consumption:

C = 200 + 0.7Yd

Lump-sum tax: T0 = 50

Proportional Tax Rate: t = 0.2

Government Expenditure: G = 435

Planned Investment: I = 300

Exports: X = 100

Imports: M = 0.06Y

Yd: Disposable Income

Numbers are in billion dollars.

a) Each row corresponds to one possible output level. Fill in the remaining columns of the table given the equations given above.

b) What is the equilibrium output level of this economy?

c) What is the level of unplanned investment at the output level of 1500 and at the level of 15 2500? If it is not in equilibrium, describe how the economy would adjust to the equilibrium in each case.

d) What is the change of equilibrium output when government expenditure increases to 560? Explain your steps. What kind of policy is it?

e) If investment decreased to 175 billion dollars under policy uncertainty, how does it change the equilibrium output level? Is the change in equilibrium output larger than the change in investment? Why?

f) What factors would affect the size of expenditure multiplier? Briefly explain

explain how the banking system 'creates' money independent from the amount of currency in the economy. In your own words indicate whether this is a major or minor source of money in the economy and whether you think it compares today vs 20 years ago vs how important it might be 20 years in the future. (Is the role of the banking system consistent over time or evolving? If evolving where is it heading, if its not evolving, why has it remained stable over time?)

1. Consider Consumers A, B, and C with the following preferences over two goods.

U_A (x₁,x₂) = x₁²x₂³

U_B (x₁,x₂) = 2x₁+3x₂

U_C (x₁,x₂) = min{2x₁,3x₂)

The prices given are p1, p2 and income for each consumer is m.

Solve for the Engel curves for each consumer.

please be very detailed, thank you!

How did the 2008 financial crisis affect the united states employment rate ( 500 Words )

Ture or False.
1. Rwanda is an example of how colonialism can be good sometimes. The social structure supported by colonial powers was important in maintaining peace after Rawanda’s independence.

2. The reason some countries are developed, while others are not, is straightforward.

3. Imagine that I am looking-up values in the A column using values on a table E3:F10. VLOOKUP(A1, $E$3:$F$10,2,TRUE) MAY NOT work in practice.

4. Under the False-Paradigm model, development can be achieved by having students from poor countries earn their education in the developed world.

Most government interventions are designed to modify market outcomes, and the aim is usually to improve economic welfare. However, some interventions are specifically motivated purely by political considerations. For this task, we will consider political intervention in the labour market in Venezuela. This case study comes from the article by: Chang-Tai Hsieh, Edward Miguel, Daniel Ortega, and Francisco Rodriguez. 2011. The Price of Political Opposition: Evidence from Venezuela’s Maisanta, American Economic Journal: Applied Economics 3: 196–214.

http://ezproxy.deakin.edu.au/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=eds jsr&AN=edsjsr.41288634&authtype=sso&custid=deakin&site=eds-live&scope=site.

Note that the analysis in this reference is advanced and you do NOT have to read the entire study to complete the assignment. You should, however, read pages 196-198.

1. Figure 1 on page 197 of the Hsieh et al. (2011) article shows that over one million voters who signed a petition to remove President Hugo Chávez from office were discriminated against and experienced a drop in their wages and employment. Use demand and supply analysis to illustrate this situation.

2. With the aid of a diagram, discuss the impact this political event is likely to have had on Venezuela’s production possibilities and economic welfare.

The problem of mutual confidence of needs can be eliminated if :
A) trade is organized in a common market
B) Money is used to facilitate the exchange
C) Exchange of goods with goods ( exchange) is encouraged.
D) A and B are true


The sale of one-year discounted bond with a nominal value of $ 20,000 to selling for $15,000 ------------- means that it generates returns.
A) 3 percent
B) 20 percent
C) 25 Percent
D) 33.3 Percent

Lesson Six Discussion Question:

Please respond to the following discussion,

Very few would argue with the claim that the President’s role as Commander-in-Chief is the greatest formal power that a president possesses. Yet, in the Constitution, only Congress has the authority to formally “declare war.” Presidents for the last 60-70 years have openly stated that they do not need Congressional authorization to use the military to pursue America’s interests on the global stage. As proof, America has not formally declared war since WWII. So, Korea, Vietnam, Gulf War, Iraq War, Afghanistan, and now Syria have all been military exercises, but not wars in the Constitutional sense.

Has the power of the President of the United States as Commander-in-Chief exceeded constitutional boundaries and should those powers be curtailed, given the constant state of war we find ourselves in? Or should the President’s military powers continue to expand to address the growing chaos in our world, despite the Constitution or in congruence with the Constitution? Explain your answer.

Your initial discussion postings (250-300 words) should demonstrate an understanding and analysis of the assigned readings and video. While you are welcome to incorporate additional scholarly external sources you find in your initial post, you are expected to cite mainly from the assigned material in your response demonstrating connections between your thoughts and the course resources. Please remember you are expected to cite your sources in APA format, you can review the Citation/Reference portion of the syllabus to refer to examples of APA format. In addition, you will also need to post two substantial responses (about 150-200 words) to at least two of your classmates' posts.

The wage for workers in a competitive market is initially $10 and rent, the cost of capital (also rented in a competitive market), is initially $5. Now suppose that wages decrease to $8 and rent decreases to $2.

a) Describe how the scale effect changes a firm's use of labor and capital.

b) Describe how the substitution effect changes a firm's use of labor and capital.

c) Overall will a firm hire more or fewer workers? Will a firm rent more or less capital?

d) Will a firm change its production technology given the changes in w and r?

Moral Agency is the self-awareness, freedom, and ability to make choices based on everyone’s differing opinions and perceptions of right and wrong.

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Question 3 (1 point)

Consumerism is:

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Question 4 (1 point)

_______________ relies on the theory that global wealth is static and, therefore, prosperity depends on accumulating it from others.

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Question 5 (1 point)

Businesses that wish to achieve the dual goal of human flourishing and responsible profits should model which ethical behavior?

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Question 6 (1 point)

The cultural transmission and socialization process that stems from cultural exchange is called

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Question 7 (1 point)

As a function of culture, ethics is not static but changes with each new era.

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Question 8 (1 point)

Which intellectual, emotional, and social human trait affects all decision-making, including ethical decisions?

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Question 9 (1 point)

Unfortunately, the emphasis on consumerism leads to the problem of:

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Question 10 (1 point)

Ethical principles that apply everywhere despite differences in time, geography, and culture are referred to as

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5.If the price elasticity of demand is 2.5, then a 40 percent decrease in the price of the good will lead to a _______ percent increase in the quantity demanded

A. 100.00 B. 22.5 C. 66.7 D. 150.00

6.Government intervention to reduce the level of pollution is prompted by the existence of

A. An inequitable distribution of income B. A monopoly C. Government failure D. Externalities

7.GDP is an incomplete measure of social welfare because

A. GDP includes the services of prison guards, so an increase in GDP could mean an increase in crime B. GDP does not include the value of volunteer activities, which may improve social welfare C. All of the above D. An increase in output may increase pollution and traffic congestion

8.In a competitive labor market, at wages above equilibrium, the

A. Labor-supply curve will shift to the left B. Quantity supplied of labor is greater than the quantity demanded C. Quantity demanded of labor is greater than the quantity supplied D. MRP of labor curve shifts to the right

9.A stock person who is laid off by a department store because retail sales across the country have decreased is _______ unemployed

A. Structurally B. Chronically C. Frictionally D. Cyclically

Part I.

If a central bank is selling its own currency in the foreign exchange market

a. It must have a fixed exchange rate

b. It has a BOP surplus

c. It has a BOP deficit

d. It has a CA deficit

e. It has a CA surplus

Part II.

If a central bank sells foreign currency (buys its own currency) in the foreign exchange market and simultaneously sells government bonds in the domestic market (an open market operation) then:

a. The money supply will expand and the currency will fall in value.

b. The foreign exchange intervention has been effectively sterilized.

c. The money supply will contract and the currency will rise in value.

d. The money supply will expand and the currency will rise in value.

e. The money supply will contract and the currency will fall in value.

Part III.

If a central bank simultaneously sells its own currency in the foreign exchange market AND purchases bonds in domestic open market operations then

a. The currency will depreciate as both of these actions cause the money supply to increase

b. The currency will appreciate as both of these actions cause the money supply to increase

c. The currency will appreciate as both of these actions cause the money supply to decrease

d. The second action sterilizes the first action

Briefly summarize Hamilton's economic policies. What were the goals of these policies, and why were they controversial (who opposed them and why?)?