1. Suppose that there are drastic technological improvements in shoe production in Home such that shoe factories can operate almost completely with computer-aided machines. Consider the following data for the Home country:

Computers:       Sales revenue = ?_c?_? = 100

Payments to labor = ??_? = 50

Payments to capital = ??_? = 50

Percentage decrease in the price = ∆?_?⁄?_? = -10%

Shoes:                 Sales revenue = ?_??_? = 100

Payments to labor = ??_? = 20

Payments to capital = ??_? = 80

Percentage increase in the price = ∆?_?⁄?_? = 30%

1. Which industry is capital-intensive? Is this a reasonable question, given that some industries are capital-intensive in some countries and labor-intensive in others?
2. Given the percentage changes in output prices in the data provided, calculate the percentage change in the rental on capital.
3. How does the magnitude of this change compare with that of labor?
4. Which factor gains in real terms, and which factor loses? Are these results consistent with the Stolper–Samuelson theorem?

You have entered a short position in an oil futures contract. The contract size is 1,000 barrels for each contract. The initial margin required is $20,000 per contract. The maintenance margin is $16,000. The contract is entered at market close on January 7 at a price of $100/barrel. Fill in the table below. If a margin call occurs, indicate in the margin call column the amount that has been added to the margin account as a result of the margin call and adjust the margin account balance accordingly in the next period. Please round to the nearest dollar.

What is the margin account balance on January 11?

Assume this economy only produces Pens, Limes, and Computers.

1. What is the Nominal GDP growth rate (per cent) for 2015?  

2. What is the Real GDP growth rate (per cent) for 2015?  

Assume the standard basket of goods is 2 pens, 10 limes, and one computer.

3. What is the inflation rate (per cent) for 2015?  

Suppose the money supply was $4.70 Trillion and Velocity 0.6

4. What is the value of Nominal GDP in Trillions?  

5. Assuming the growth rate in velocity is 2% and the growth rate in the real GDP is 3%,
what is the target growth rate (in percentage) in the money supply for the FED if they wanted to keep prices stable?  

Macro Economics

Table contains some data about the economy of Potsteel. Assume that this is a complete record of the economy. Some parts of this question ask for numerical solutions. You must include both the final answer, and how you found that answer

The data suggests that Potsteel suffered a small recession in 2018. Using the Solow-Swan model, explain why we might expect an economy just coming out of a recession to grow more swiftly than usual

1. Vwalika plc was created on 1 January 2010 with a share capital of K150,000, fully paid in cash on that date. The price level index at that date was 100. The following transactions were recorded:

Purchased equipment for K90,000, K40,000 paid when the index was 100, and payment of the balance being deferred for 18 months.

Purchased goods for K88,000 when the index was 100.

Purchased goods for K90,000 when the index was 110.

Sold goods for K200,000 when the index was 120, the cost of sales amounting to K120,000. Cash expenses amounted to K32,000, and a depreciation provision of 10 per cent on historic cost of equipment was made at year end.

Additional information as at 31 December 2010 was as follows:

Trade debtors                                                                                       K36,000

Bank balance                                                                                         K81,000

Creditors                                                                                                K67,000

Closing inventory was valued at K58,000 on a FIFO basis.

The index at year end was 120.

Required:

1. Calculate the purchasing power gain or loss on the monetary items.
2. Prepare an inflation-adjusted income statement for the year ended 31 December 2010.
3. Prepare an inflation- adjusted balance sheet as at 31 December 2010 when the price level index was 130.

Your Investment advisor suggests a protective put position: go long the STI index fund and long put options on this fund. The option has an exercise price of $80 and 1 month until expiration. Assume STI index is currently trading at $100. Your best friend Joe recommends you to buy a 1-month call option on the STI index fund with exercise price $90 and buy 1-month risk-free asset with face value of $90.

a) Draw the payoffs to both strategies as a function of the STI index fund value in 1 month' time. Label your graph clearly.

b) Which of these strategies require a greater initial cash flow?

c) Suppose the market prices of the securities are as follows: STI index fund: $100 Riskfree asset: 85 Call: 20 Put: 2 Construct a table of realised profits for each portfolio for the following values of the STI index fund in 1 month: $0, $80, $90, $100, and $120. Plot the profits to each portfolio as a function of STI index fund value on one graph.

d) Which strategy is riskier? Briefly explain.

An investor purchased the following 5 bonds. Each bond had a par value of $1,000 and a 10% yield to maturity on the purchase day. Immediately after the investor purchased them, interest rates fell, and each then had a new YTM of 5%. What is the percentage change in price for each bond after the decline in interest rates? (Round all the answers below to two decimal places)

​(Repurchase of stock​) The Dunn Corporation is planning to pay dividends of ​$560 comma 000 . There are 280 comma 000 shares​ outstanding, and earnings per share are ​$4 . The stock should sell for ​$49 after the​ ex-dividend date.​ If, instead of paying a​ dividend, the firm decides to repurchase​ stock, a. What should be the repurchase​ price? b. How many shares should be​ repurchased? c. What if the repurchase price is set below or above your suggested price in part ​(a​)? d. If you own 100​ shares, would you prefer that the company pay the dividend or repurchase​ stock?

Faisal states that he does not care whether he drinks Coke or Pepsi “as long as it is soda.” Assume that Faisal can spend $100 per month on soft drinks.

1. Does Faisal’s statement violate any of the properties we require for preferences? (4.1)
2. How many cans of Coke and Pepsi does Faisal consume, respectively, if the price of Coke is $4 per can and the price of Pepsi is $2.50 per can?
3. How does your answer change, if the price of Pepsi increases to $3? What if it increases to $5?
4. Illustrate your answers A) through C) graphically.