1. When does a fixed exchange rate regime become suspect of collapsing?

2.Bank runs are still a common problem in the United States

True

False

3.

Contagion of crises can stem from both trade and financial linkages

True

False

4. In lecture we likened speculative attack on central bank reserves to which of the following?

: Assume the market for Pepsi, the soft drink, is in equilibrium. For each of the following, (1) indicate whether the demand for Pepsi or the supply of Pepsi or both the supply and demand for Pepsi changes; (2) explain why the curve is shifting; (3) draw a graph illustrating the effect of the change on the equilibrium price and quantity of Pepsi; and (4) verbally explain what happens to the equilibrium price and quantity of Pepsi. Analyze each event independently.

1. PepsiCo, the producer of Pepsi, invents a more efficient process to bottle Pepsi.

2. The supply of Coca Cola decreases.

3. The price of sugar and high-fructose corn syrup, ingredients in Pepsi, increase.

4. The Surgeon General of the United States announces that drinking soft drinks increases the risk of dying by 10 percent.

5. Both of the events described in parts (a) and (d) above, occur simultaneously.

Question 2. Short answers. Use graphs where appropriate.

1. Explain why is the short run labor demand curve less elastic relative to the long run labor demand curve. (7.5 points)

2. How would imposing a minimum wage above the market-clearing wage affect employment in a competitive labor market? Use a graph to illustrate this. (7.5 points)

3. Many immigrants and many American high school dropouts possess very few skills. What impact will these low-skill immigrants likely have on the labor market opportunities of American high school dropouts? (7.5 points)

4. Comment on this statement: “If we deported all undocumented persons who are now in the United States, our total national unemployment would decline by the same number of people.” (7.5 points)

1. Define the Marshall-Lerner condition. What are the likely effects of devaluation during a recession when supply elasticities are high?

2. Explain the J-curve phenomenon. Consider an economy with a fixed exchange rate with a fixed price level. What is the effect of depreciation on equilibrium income and trade balance in the first six months after depreciation?

3. Define uncovered interest parity. What is the relationship among the forward exchange rate, the spot exchange rate, and the interest rate? Suppose the (1-year) interest rate on bank deposits is 2% in Canada and 1.75% in United States. If the (1-year) forward US$–C$ exchange rate is C$1.25 per US$ and the spot rate is C$1.2 per US$, will the C$ depreciation or appreciation against the US$ over one year, and by how much?

1. If a country faces a trade deficit,
   1. What fiscal policy would you propose to reduce the trade deficit?
   2. What monetary policy would you propose?

2. What fiscal, monetary, and exchange rate policies would you propose if a country wanted to eliminate a trade surplus so that its citizens would have access to more consumer goods?

3. Explain what is lilkely to value of the dollar if the following economic conditions change. (You can use a supply-demand drawing or reason with words.)

1. The Federal Reserve decides to lower interest rates.
2. A crisis causes foreign holders of finance to buy safe assets.
3. A big economic expansion in Europe leads to a surge of demand for American exports.
4. The United States experiences a big economic expansion and this leads to an increase in the demand for imports from China.

In recent decades, economic inequality (both income inequality and wealth inequality) has become a prominent topic in American politics. How would you define income inequality? How is income inequality measured? What has happened to income inequality in the United States since the end of the Second World War in 1945? What evidence can you provide to support your answer? What are the reasons for the changes in income inequality since 1945.

What is wealth inequality and how does it differ from income inequality? Is wealth more or less equally distributed than income? Why do you suppose that is? What has happened to wealth inequality in the U.S. in recent years? What accounts for those changes?

Do you think the trend in economic inequality is a problem? Why or why not?

Why do people get married? Quite contrary to what books, films, songs, and TV dramas tell us, anthropologists recognize that love and sexual attraction are not the key reasons most people get married, either in the United States or in other countries.

What other factors are considered important when individuals decide to get married and which of these, or combination of these, are crucial in determining the long term success of marriage? Which qualities would you personally look for in a marriage partner (or if you are married, what did you look for)? Would you be comfortable with someone else selecting your marriage partner for you rather than doing so yourself? What factors might contribute to deciding to never marry and would there be any negative consequences to remaining permanently unmarried in your culture/society?

1. Present and former law review editors who were researching disciplinary systems and procedures at the military service academies for an article were denied access to case summaries of honor and ethics hearings, with personal references or other identifying information deleted, maintained in the United States Air Force Academy’s Honor and Ethics Code reading files. It was the Academy’s practice to post copies of such summaries on forty squadron bulletin boards throughout the Academy and to distribute copies to Academy faculty and administration officials. The editors brought an action under the Freedom of Information Act (FOIA) against the Department of the Air Force to compel disclosure of the case summaries. Which exemptions to FOIA are most applicable? Explain whether any of these exemptions would enable the Academy to withhold the requested case summaries.

According to Nielsen Media Research, the average number of hours of TV viewing by adults (18 and over) per week in the United States is 36.07 hours. Suppose the standard deviation is 9.7 hours and a random sample of 52 adults is taken.

a. What is the probability that the sample average is more than 35 hours?

b. What is the probability that the sample average is less than 38.8 hours?

c. What is the probability that the sample average is less than 29 hours? If the sample average actually is less than 40 hours, what would it mean in terms of the Nielsen Media Research figures?

d. Suppose the population standard deviation is unknown. If 75% of all sample means are greater than 48 hours and the population mean is still 36.07 hours, what is the value of the population standard deviation?

Some characteristics of the determinants of nominal interest rates are listed as follows. Identify the components (determinants) and the symbols associated with each characteristic: