The mean cost of domestic airfares in the United States rose to an all-time high of $385 per ticket.† Airfares were based on the total ticket value, which consisted of the price charged by the airlines plus any additional taxes and fees. Assume domestic airfares are normally distributed with a standard deviation of $110.

(a)

What is the probability that a domestic airfare is $561 or more? (Round your answer to four decimal places.)

(b)

What is the probability that a domestic airfare is $230 or less? (Round your answer to four decimal places.)

(c)

What is the probability that a domestic airfare is between $300 and $480? (Round your answer to four decimal places.)

(d)

What is the minimum cost in dollars for a fair to be included in the highest 3% of domestic airfares? (Round your answer to the nearest integer.)

The mean cost of domestic airfares in the United States rose to an all-time high of $370 per ticket. Airfares were based on the total ticket value, which consisted of the price charged by the airlines plus any additional taxes and fees. Assume domestic airfares are normally distributed with a standard deviation of $100. Use Table 1 in Appendix B.

a. What is the probability that a domestic airfare is $530 or more (to 4 decimals)?

b. What is the probability that a domestic airfare is $240 or less (to 4 decimals)?

c. What if the probability that a domestic airfare is between $320 and $480 (to 4 decimals)?

d. What is the cost for the 4% highest domestic airfares? (rounded to nearest dollar)

1. policymakers, and politicians often argue that rising healthcare costs in the United States are bad, and use this to argue for policies to try to reduce prices. Using economics and the supply and demand framework:

   • Explain why you should not reason or make policy based on the fact that prices are rising/falling. (2 points)

   • Give two demand side and two supply side factors that might explain rising prices in the US (4 points)

Returns on common stocks in the United States and overseas appear to be growing more closely correlated as economies become more interdependent. Suppose that the following population regression line connects the total annual returns (in percent) on two indexes of stock prices:

MEAN OVERSEAS RETURN = ?0.07 + 0.20 ? U.S. RETURN

1. What does this number say about overseas returns when the U.S. market is flat (0% return)? (Fill in blanks)

This says that the mean overseas return is ______ % when the U.S. return is 0%.

2.What does this number say about the relationship between U.S. and overseas returns? (Fill in blanks)

This says that when the U.S. return changes by 1%, the mean overseas return changes by ______ %.

3.We know that overseas returns will vary in years when U.S. returns do not vary. Write the regression model based on the population regression line given above. (Fill in blanks)

y_i = _____+ ______ x_i + ?_i, where y_i and x_i are observed overseas and U.S. returns in a given year, and ?_i are independent N(0, ?) variables.

The travel-to-work time for residents of the 15 largest cities in the United States is reported in the 1998 Information Please Almanac. Suppose that a preliminary simple random sample of residents of San Francisco is used to develop a planning value of 6.25 minutes for the population standard deviation. If we want to estimate the population men travel-to-work time for San Francisco residents with a margin of error of 2 minutes, what sample size should be used? Assume a 95% confidence interval

Assume the GDP in the United States is at $20.5 billion dollars and has been growing at about 3% for the last 6 years. The unemployment rate is 4.0% and has been stable at that level for 7 months. The inflation rate is at 4.8% which is up from 2.5% two years ago. Economists at the Council of Economic Advisors estimate the NRU to be 4% and the target inflation to be 2.0%.

1. What problem(s) is the economy facing? Explain in detail using the data to support your explanation.

2. What would be an appropriate fiscal policy to deal with the problem you identified in Question 1? Explain the policy in detail and include an explanation of the tool(s) that should be used to address the problem.

3. What would be an appropriate monetary policy to deal with the problem you identified in Question 1? Explain the policy in detail and include an explanation of the tool that should be used to address the problem.

4. Which of the two policy options you identified in Questions 2 and 3 would be the more effective in dealing with the problem you identified in Question 1? Explain in detail.

1. A beer in the United States sells for $4. The same beer can sell for €3 in France. The current nominal exchange rate is $1.08/€. Calculate the real exchange rate of the French beer per US beer (use two decimal points). Based on your response, is beer relatively more expensive in the US or in France? Show your work and explain.

b. Use the market for foreign exchange to analyze the effect of the following events. In your graph, make sure to identify the effect of each of these events on the US dollar (i.e. does the dollar get weaker/stronger?) Explain in 1-2 sentences what each of your graphs is showing. Important: Treat each event separately (i.e. draw a separate graph for each event). i. American companies discover a new technology that allows them to become much more productive. ii. The Central Bank of Canada decides to raise their interest rates.

Indicate whether each of the following was counted in the United States gross domestic product for the year 1998. Explain each of your answers.

a) The commission earned by a Realtor who sold a house in 1998. The house was originally built in 1955.

b) The value of an automobile produced in 1998, but sold on January 1st, 1999.

c) The $1000 that Kevin earned from a stock that he bought and sold in 1998.

d) The value of blenders produced in 1998 entirely in Germany by a company that is owned by American citizens.