To eliminate deficit spending and reduce public debt, some politicians and economists have proposed a Constitutional amendment requiring a balanced federal budget.

In your initial post to this discussion, respond to each of the following prompts based on what you’ve learned in this module about deficit and debt.

What present and future benefits might result from an amendment requiring that each year's budget be balanced?

What limitations or costs might result from such an amendment? Describe alternative legislation that might eliminate chronic deficits but have more desirable effects on the economy.

1. There are multiple derivations of the Rational Rule. Define the Rational Rule broadly.
   1. Define the Rational Rule for Buyers
   2. Define the Rational Rule for Sellers
   3. Define the Rational Rule for Workers
   4. Define the Rational Rule for Society
   5. Define the Rational Rule for Employers

Department of Homeland Security v. Regents of the University of California summarized in 2 paragraphs

Suppose the demand equation for bicycles is P = 1900 – 20QD. Calculate the elasticity of demand between the quantity demanded of 40 and 50

TotsPoses, Inc., a profit-maximizing business, is the only photography business in town that specializes in portraits of small children. George, who owns and runs TotsPoses, expects to encounter an average of eight customers per day, each with a reservation price shown in the following table. Assume George has no fixed costs, and his cost of producing each portrait is $25.

a. Suppose George is permitted to charge two prices. He knows that customers with a reservation price above $30 never bother with coupons, whereas those with a reservation price of $30 or less always use them. At what level should George set the list price of a portrait? At what level should he set the discount price? How many photo portraits will he sell at each price?

List price of a portrait: $__   

Number of portraits to be sold at the list price: __portraits

Discount price of a portrait: $__   

Number of portraits to be sold at the discounted price: __portraits

b. In this case, what is George’s economic profit and how much consumer surplus is generated each day?

Economic profit: $__   

Consumer surplus: $__

TotsPoses, Inc., a profit-maximizing business, is the only photography business in town that specializes in portraits of small children. George, who owns and runs TotsPoses, expects to encounter an average of eight customers per day, each with a reservation price shown in the following table. Assume George has no fixed costs, and his cost of producing each portrait is $35.

a. Complete the following table.

Instructions: If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Enter your responses as whole numbers.

How much should George charge if he must charge a single price to all customers? $__

At this price, how many portraits will George produce each day? __ portraits

What will be his economic profit? $__ per day

b. How much consumer surplus is generated each day at this price? $__

c. What is the socially efficient number of portraits? __ portraits

d. George is very experienced in the business and knows the reservation price of each of his customers. If he is allowed to charge any price he likes to any consumer, how many portraits will he produce each day? __ portraits.

What will his economic profit be? $__ per day

e. In this case, how much consumer surplus is generated each day? $__

Assume you have to find the optimal commodity tax rate for all the goods in an economy featuring only 17 goods. How many first order conditions would you have to find in your DWL minimisation problem?

Suppose you have experienced two types of banks one being Islamic and the other one as conventional. Based on this;
(a) What key differences and major issues of both types would share with your friend?
(b) What main reasons would you emphasize in order to help your friend to either choose Islamic or conventional bank?

Discuss the tradeoffs between stability & growth presented by the use of fiscal & monetary policies. Discuss arguments in favor of & opposed to the use of discretionary policy to manage the business cycle. Provide at least one example of each.

1. explain the rise of anti-trust laws in the late 19^th
2. How did anti-trust laws shift after WW1? (WW1 ended in 1918)
3. What does the documentary mean that anti-trust laws depend on politics more than any other area of law?

Explain income elasticity of demand? Discuss how can it be used to determine whether a good is a normal good or an inferior good?

PART B

The RBA intends to use open market operations in addition to reducing the cash rate.

Assume that a bond with no expiration date pays a fixed $300 annual interest and is selling for its face value of $10,000.

1. Calculate the interest yield on the bond.

2. Will the RBA buy or sell bonds if it uses open market operations? Briefly explain.

3. As a result of the RBA’s decision above which of these two outcomes is more likely or correct?

1. The market value of the bond will increase to $15,000 OR
2. The market value of the bond will decrease to $6,000.

Explain your answer by calculating the new interest yield after the RBA’s open market operations; show your workings.

QUESTION TWO

PART A

The following two economic events impact on the value of the Australian dollar in the foreign exchange rate market.

Speculators believe that the price of Australian exported commodities (iron ore, coal) will increase and at the same time Australian households and firms purchase less imports.

REQUIRED:

Explain the effect of the above economic conditions on the demand for and supply of Australian dollars and the change in the value of the Australian dollar (AUD) in the foreign exchange rate market (Note: a diagram is not required for this question).