1. You win $10,000 in a lucky draw. You have a choice between spending the money now or putting it away for a year in a bank account that pays 5% interest. What is the opportunity cost of spending the $10,000 now?

Two drivers – Joan and Rob – each drive up to a gas station. Before looking at the price, each places order. Joan says, “ I’d like 40 litres of gas.” Rob says, “I’d like $40 worth of gas.” What is each driver’s price elasticity of demand?

In response to the decline in aggregate income due to the COVID-19 pandemic, Indian central bank has expanded money supply significantly, but the government of India has left its fiscal expenditure unchanged. In the context of IS-LM model, the pandemic had shifted the IS curve to the left, and the central bank’s response has rotated the LM curve downward. This is in contrast with the situation in other countries that launched expansionary fiscal as well as monetary policies. In other words, after experiencing a leftward shift in the IS curve due to the pandemic, other countries employed fiscal policies to shift IS curve to the right at the same time that their monetary policies flattened their LM curve. Assume that the pandemic effects and the policy responses are all temporary. In the following questions, please compare the macroeconomic outcomes of India’s current policies with the hypothetical situation where, like other countries, India had used an expansionary fiscal policy in addition to the monetary policy that it adopted.

(a) How would the interest rate and aggregate income in India have been different from the current outcome if India had added expansionary fiscal policy to its pandemic response?:

(b) How would the rupee exchange rate and net exports in India have been different from the current outcome if India had added expansionary fiscal policy to its pandemic response?

(c) How would investment and household consumption in India have been different from the current outcome if India had added expansionary fiscal policy to its pandemic response?

On the graph below, draw the demand curves for widgets, both before and after the government announces that anyone buying a widget will be subject to a new stiff tax.

On the graph below, draw the demand curves for apples, both before and after a sharp increase in the price of apples.

On the graph below, draw the demand curves for bananas, both before and after a new law requires banana peels to be recycled. Assume that the recycling center is quite inconvenient.

The questions are all related to tool and die manufacturers. The market for the products of tool and die manufacturers is relatively easy to enter and includes a large number of firms that produce a variety of fixtures, dies, molds, machine tools, cutting tools, gauges, and other tools used in other manufacturing processes.

A.

The above information about tool and die manufacturers implies the industry is a:

perfectly competitive industry

monopolistically competitive industry

oligopoly

monopoly

b.

How would a decrease in economic activity leading to a decrease in the demand for a wide range of manufactured products affect the market price of tool and die products?

increase price

decrease price

no impact on price

c.

How would a decrease in economic activity leading to a decrease in the demand for a wide range of manufactured products affect the profit maximizing level of output for individual tool and die manufacturers?

increase output

decrease output

no impact on output

d.

How would a decrease in economic activity leading to a decrease in the demand for a wide range of manufactured products affect firm profit in the short run?

increase profit

decrease profit

no impact on profit in the short run

e.

How would a decrease in economic activity leading to a decrease in the demand for a wide range of manufactured products affect the market in the long run, assuming lower demand persists?

there would be entry

there would be exit

there would be neither entry nor exit

a.

If in this industry, expansion results in increasing demand for the many workers with specialized skills, including cross-company recruitment and bidding up of workers’ wages, this must be:

A decreasing cost industry

a constant cost industry

an increasing cost industry

b.
If firms had been able to hire new workers without increasing wages industry-wide during expansion, the market could have expanded _________ than if wages increased.

More

Less

c.

If firms had been able to hire new workers without increasing wages industry-wide during expansion, the price of tool and die products would have been ________________ than if wages increased.

higher

lower

d.

What would the long run supply curve look like if expansion did not increase wages (or any other input prices)?

upwardly sloping

flat (horizontal)

downward sloping

e.

What would the long run supply curve look like if expansion did not increase wages (or any other input prices)?

upwardly sloping

flat (horizontal)

downward sloping

explain • Employees can't practice as they don't have the tools and equipments • Technical problem may happen. • Sometimes it is not possible to match all the employee's time for the online classes. • Sharing of ideas and creativity get limited.

Using the AD-AS graph and the IS-LM graph, illustrate and explain the short-run and medium-run effects of a reduction in the price of oil. Explain what happens to the price level, output, real wage, investment, and unemployment.

Use the WS and PS relations to show the effects of the following events on the natural rate of unemployment and on the real wage. Be sure to explain the effects of the event and to illustrate your answer graphically.

a. increased anti-trust legislation leads to increased competition.

b. a reduction in unemployment insurance.

2. Some have argued that the 1980s was a decade in which the international economy grew in importance, with special relevance for the formerly planned socialist economic systems. How have the contours of the international economy changed, and how will the formerly planned socialist systems be integrated into the new world order? write 1/2 page.

What types of action have been taken by employers to combat employee theft?

1) If the economy is in a recession and the president invites three economists—A Keynesian, a monetarist, and a new classical—to offer explanation and policy options, what would each say in two sentences or less?

-Keynesian:

-Monetarist:

-NeoClassical:

2) Between the crises of 1930s and 2008, what are (mention two for each):

a)       the similarities?

b)       the differences?

3) If you were an influential economist, to prevent deep recessions in the future, what policies/thoughts would you offer?  

What role might military groups play in the reform of socialist economic systems? Why might a role for the military be different from roles to be played by other important interest groups?

Starting with the long-run equilibrium in the aggregate demand and supply (AD-AS) model. Consider the macroeconomic effects of the lockdown measures due to COVID-19. In each part of your answer, please be brief and concise in less than 100 words. You need to make assumption clear, reasonable and explicit if making any. The quality and logic of arguments determine your marks.

a)Explain this development in the AD-AS framework in words (Diagrammatic representation not required)

c)Fiscal and monetary policy measures can be taken as the response to the development in part a). Explain the policy measures in writing. Diagrammatic representation of the effects of these policies not required. d)What are the possible long run impacts of the recommended policy measures in part (c). Explain the impact in writing. Diagrammatic representation not required.

E)Continue on the long-run, the government starts to register the budget surplus after having paid off the large budget deficits incurred as the policy measured in part c). What happens to the quantities of saving and investment and (real) interest rates with this development? Explain in writing. Diagrammatic representation not required (Hint: try to explain the step by step).