10. The free-rider dilemma refers to a situation in which an individual can consume a good or service without having to pay for it. True/False?

15. The Great Depression

Multiple Choice

• was the most severe recession since the Civil War, even though it lasted only 18 months.

• was a severe and prolonged reduction in output and employment for the United States during the 1930s.

• was a severe and prolonged reduction in output and employment for the United States during the 1980s just prior to the long economic expansion of the 1990s.

• is another name for the economic downturn that followed World War II.

22. Public goods

Multiple Choice

• include most goods and services that the market produces.

• lead to the pay-as-you-go problem.

• by definition, must be produced by the government.

• can be consumed by more than one person at the same time.

24. Which of the following individuals is frictionally unemployed?

Multiple Choice

• Jennifer has not been able to find a job because she lacks computer skills.

• Jose has decided to stop looking for work in order to return to school.

• James quit his teaching job in Virginia in order to relocate to Hawaii.

• Jai Lynn lost her job because her employer had to reduce staff during the recession.

1. Assume the rate of interest on USD deposits is 5% and the rate of interest on French deposits is 3% which of the following is likely to occur?

2. The equilibrium real exchange rate is the rate at which   ?

3. The price of a T-shirt made in China is 40RMB. The price of a T-shirt made in America is $75.00 Assuming an USD:RMB echange rate of 1.5, what does this imply Americas real exchange rate?

4.

If you had $100 invested in a German bank earing 3% interest and the USD was expected to depreciate by 5% what would be your overall expected rate of return on this investment?

Scenario #2 (Questions 6-10) - John badly scrapes his leg after falling off of his bike. Two days after his fall he thinks his leg may be infected.

Question 6 - What are some signs and symptoms of infection?

John sees the doctor and is given a broad spectrum antibiotic.

Question 7 - What does "broad spectrum" mean?

Question 8 - What is the term for an antibiotic that limits or slows growth of susceptible bacteria?

John's infection suddenly becomes more serious. The broad spectrum antibiotic is not effective. The doctor prescribes an aminoglycoside antibiotic.

Question 9 - What two areas of the body can suffer serious adverse effects from aminoglycosides?

After John begins receiving the aminoglycoside, his doctor wants John to have peak and trough levels drawn at the hospital lab.

Question 10 - What does a peak and trough measure?

QUESTION ONE

1. We add the demands of private goods horizontally but add the demands of public goods vertically when determining the associated marginal benefit to society. Why do we do this, and why are the procedures different for public and private goods?                              [6 Marks]
2. Individual A’s demand for Bread (a private good) is
   1. Q = 21 - 6P
   2. and Individual B’s demand is
   3. Q = 6 - 3P.
3. Write down an equation for the social marginal benefit of the of Bread consumption.
   1. [4 Marks]
4. Now suppose that Bread is a public good. Write down an equation for the social
   marginal benefit of Bread consumption.                                                              [4 Marks]
5. People in your neighbourhood pay annual dues to a neighbourhood association. This association refunds neighbourhood dues to selected home owners who do a particularly nice job of beautifying their yards. At the most recent home owners’ association meeting, home owners voted to end this practice because they felt that it was unfair that some people would not have to pay their share of the costs of maintaining the neighbourhood. What is likely to happen to the overall level of neighbourhood beautification? Explain.                    
   1. [6 Marks]
6. Consider the rival and excludable properties of public goods. To what degree is radio broadcasting a public good? To what degree is a highway a public good?              [5 Marks]

Direct Materials, Direct Labor, and Overhead Variances, Journal Entries

Algers Company produces dry fertilizer. At the beginning of the year, Algers had the following standard cost sheet:

Algers computes its overhead rates using practical volume, which is 54,000 units. The actual results for the year are as follows:

Units produced: 53,000

Direct materials purchased: 274,000 pounds at $2.50 per pound

Direct materials used: 270,400 pounds

Direct labor: 40,100 hours at $17.95 per hour

Fixed overhead: $161,800

Variable overhead: $122,000

Required:

1. Compute price and usage variances for direct materials.

2. Compute the direct labor rate and labor efficiency variances.

3. Compute the fixed overhead spending and volume variances.

4. Compute the variable overhead spending and efficiency variances.

Q1. Solow Growth Model. Consider the production function for a closed economy ? =2 ∙ K^1/2(AN)^1/2
Assume that the savings rate s equals 20% and the depreciation rate ? equals 5%. Further, assume the growth rate of the labor force g_N is 3% and the growth rate of technological progress gA is 2% per year.

a. Find the steady-state values of (i) capital per effective worker, (ii) output per effective worker, (iii) the growth rate of output per effective worker, (iv) the growth rate of output per worker, and (v) the growth rate of output. (2.5 marks)

Now we modify the basic Solow growth model described above, by including government spending as follows. The government collects taxes T to finance its government spending G in every period. Government spending per worker is given by a constant g, where g= G/N. Workers consume a fraction of disposable income C= (1-s)(Y-T). Suppose that the government has a balanced budget. Also assume that A= 1 and the growth rates of technological progress and the labor force are zero, gA=0, gN= 0.

b. Write down the capital accumulation equation. With the help of a diagram, illustrate that there can be two steady-state values of capital per worker (k*=K*/N). Carefully label your diagram. (3.5 marks)

c. We can focus on the high k* and ignore the low k* because the low k* is an unstable steady state. What is the effect of an increase in g on k*? What are the effects of an increase in g on aggregate consumption C? Explain.

d. Now we modify the way we define government spending. Suppose that government spending G is proportional to aggregate output Y, where G= zY. That is, government spending is a fraction z of aggregate output Y. Are there two steady-state values of capital per worker? What are the effects of an increase in z on capital per worker k* and aggregate consumption C? Explain.

I only need 4 and 5

1) Define Aggregate Demand.

Aggregate demand is a schedule or curve that shows the various amounts of real domestic output that domestic and foreign buyers will desire to purchase at each possible price level.

2) Give three reasons why the Aggregate Demand curve slopes downward.

Real balances effect: When the price level falls, the purchasing power of existing financial balances rises, which can increase spending.

Interest‑rate effect: A decline in the price level means lower interest rates that can increase levels of certain types of spending.

Foreign purchases effect: When the price level falls, other things being equal, U.S. prices will fall relative to foreign prices, which will tend to increase spending on U.S. exports and also decrease import spending in favor of the U.S. products that compete with imports.

3) Using the Expenditure Model (GDP = C + G + I + NX), draw a graph that depicts Demand-Pull inflation.

For the GDP be , we have the representative AD and AS curve, and the initial equilibrium at X. Now, in case of demand-pull inflation, the AD increases to AD' due to an increase in consumption and/or government spending and/or NX, ie for , the representative AD is AD'. The new equilibrium would be at Y, where the price has increased.

Hence, inflation in case of demand-pull inflation would happen in the framework of expenditure model when

• C: consumer expenditure increases for some reason, such as an increase in the price of a group of products (which may happen as a significant factor like oil prices spikes up).

• G: government spending increases as a part of the expansionary fiscal policy.

• NX: domestic currency depreciates and that change in exchange rate causes export to increase, ie net export increases.

4) What factors cause Demand-Pull inflation?

5) Using the Expenditure Model (GDP = C + G + I + NX), what needs to be done to get back to equilibrium when an economy experiences Demand-Pull inflation?

Alden Company uses a three-variance analysis for factory overhead variances. Practical capacity is defined as 32 setups and 32,000 machine hours to manufacture 6,400 units for the year. Selected data for 2019 follow:

1. Compute: (a) the total overhead spending variance, (b) the overhead efficiency variance, and (c) the total overhead flexible-budget variance for 2019. Label each variance as favorable (F) or unfavorable (U).

A) Spending variance _____?_____ Unfavorable

B) Efficiency variance _____?_____ Unfavorable

C) Flexible-budget Variance ____?_____ Unfavorable

2. Assume that the company includes all setup costs as variable factory overhead. The budgeted total fixed overhead, therefore, is $176,000, and the standard variable overhead rate per setup is $2,550. What is: (a) the total overhead spending variance, (b) the overhead efficiency variance, and (c) the total overhead flexible-budget variance for the year? Label each variance as favorable (F) or unfavorable (U).

A) Spending __?___ unfavorable

B) Efficiency variance __?__ unfavorable

C) Flexible-budget variance __?__ unfavorable

3. Assume that the company uses only machine hours as the activity measure to apply both variable and fixed overhead, and that it includes all setup costs as variable factory overhead. What is (a) the Total Overhead Spending Variance, (b) the Overhead Efficiency Variance, and (c) total Overhead Flexible-Budget Variance for the year? Indicate whether each variance is favorable (F) or unfavorable (U).

A) spending __?__ unfavorable

B) efficiency __?__ unfavorable

C) flexible-budget __?__ unfavorable

Organizations use budgets to reach their financial goals. A planning budget is a detailed financial plan that shows future income and expenses. For example, all of us sometimes create household budgets that plan projected income and expenses for food, clothing, housing, etc. At the end of the budgeting period, we compare what we earned and our expenses to the planning budget to make sure we followed the plan. For example, if we buy a boat and didn’t budget for that boat, what might happen? Organizations use budgets in a similar way.

We also create flexible budgets to help guide actual operations. For example, an organization’s actual expenses will rarely equal its budgeted expenses as estimated. Activities, such as sales, are rarely the same as budgeted. Many actual expenses and revenues will naturally differ from what was budgeted. A flexible budget is an estimate of what revenues and costs should have been, given the actual level of activity for the period. A flexible budget might help us to justify buying that boat!

Variance analysis evaluates and improves performance. A varianceis the difference between the actual amount and the amount budgeted in a certain time period. In other words, the amounts are different. Revenue variance is the difference between actual revenue and budgeted revenue. If the actual revenue is higher than budgeted revenue, the variance is labeled favorable. If actual revenue is less than budgeted, the variance is labeled unfavorable. Spending variances also occur. If the actual spending exceeds budgeted spending, the variance is unfavorable. If the actual spending is less than budgeted spending, the variance is favorable. As you can see, earning more than budgeted is good, but we should try to avoid spending more than what we budget. Think about the boat!

• Describe the budgeting process at your place of work. If you do not work or if this information is not available, you may describe the budgeting process you use in your personal life.
• Explain how using a flexible budget and variance analysis can help make the process you described above more effective.