6) Each year since winning control of the House of Representatives in the 2010 election, Conservative wing of Republicans have argued that we need to immediately initiate sharp reductions in government spending and entitlement programs and rapidly move towards a balanced budget, (although they have never actually produced a budget proposal in which tax revenues would match government spending plus entitlement transfers). Many Democrats, while arguing that tax rate increases on high income earners need to be part of the any deficit reduction program, have agreed that we need to initiate budget deficit reduction now. However, under the current Trump Administration, the tax reform implemented in 2018 was just the reverse of what democratic party views on taxes. Citizens for Tax Justice (CTJ) have made an estimate of how much these tax reform approved by by the GOP led Congress would impact the existing budget deficit crisis already. According to their estimate, this reform would yield tax revenues of only $1.1 trillion. The Office of Management and Budget (OMB) estimated that the federal government would raise an estimated $2.5 trillion and spend $5 trillion in 2018. Another estimate by independent research organizations and government agencies predict that the federal budget deficit might increase by $1 trillion in 2018-2019 budget year. Given this reality, would result which of the following outcomes?

A) What is the argument against attempting to balance the Federal Government budget rapidly at the present time via either deep cuts in Federal Government spending or sharp increases in federal income tax rates? 4pts

B) Does this argument imply that budget deficits don’t matter in the long run? If not, why might the impact of large deficits predicted in the long run under current tax and spending programs be different than the impact today? Explain. 4pts

1. A widely popular brand of car tyres have consistently given more mileage to the consumers over time which have led to an increase in their prices. However, the inflation rate computed using CPI jumps up considerably because of this. What kind of drawback does the CPI have in this case?

a. New Product Bias

b. Outlet Bias

c. Substitution Bias

d. Quality Bias

2. Which one of the following is a major cost of inflation?

a. Shoeleather Costs.

b. Tax distortions.

c. Menu Costs.

d. All of the other options.

3. Unexpected inflation leads to:

a. Transfer of wealth from creditors to debtors.

b. Transfer of wealth from creditors to creditors.

c. None of the other options are true.

d. Transfer of wealth from debtors to creditors.

4. Which of the following sequences explains the Wealth Effect the best?

a. Price level rises, consumers feel wealthier, consumption spending falls, output demand falls.

b. Price level rises, consumers feel poorer, consumption spending rises, output demanded rises.

c. Price level falls, consumers feel poorer, consumption spending falls, output demanded falls.

d. Price level rises, consumers feel poorer, consumption spending falls, output demanded falls.

5. The Quantity Theory of Money is given by the equation:

a. MV = PY

b. MY=VP

c. MP=VY

d. M/V = P/Y

6. The fundamental equation of the national income accounting identity is given by:

a. Y = C + I + G + X – M

b. Y = C +I + NX

c. Y = C + I + G + M – X

d. Y = C + G + X – M

7. Which of the following can cause a shift of the AD curve?

a. Change in consumption

b. All of them.

c. Change in output.

d. Change in Price

Calgary Paper Company produces paper for photocopiers. The company has developed standard overhead rates based on a monthly capacity of 80,000 direct-labor hours as follows:

During April, 26,000 units were scheduled for production: however, only 20,000 units were actually produced. The following data relate to April.

1. Actual direct-labor cost incurred was $1,425,000 for 75,000 actual hours of work.

2. Actual overhead incurred totaled $1,372,500, of which $472,500 was variable and $900,000 was fixed.

Required:

Prepare two exhibits similar to Exhibit 11-6 and Exhibit 11-8, which show the following variances. State whether each variance is favorable or unfavorable, where appropriate.

1. Variable-overhead spending variance.

2. Variable-overhead efficiency variance.

3. Fixed-overhead budget variance.

4. Fixed-overhead volume variance.

Variable-Overhead Spending and Efficiency Variances. (Select "None" and enter "0" for no effect (i.e., zero variance). Round "Actual Rate" and "Standard Rate" to 2 decimal places.)

In 1780, in what is now referred to as "Brady's Leap," Captain Sam Brady of the U.S. Continental Army escaped certain death from his enemies by running over the edge of the cliff above Ohio's Cuyahoga River in (Figure 1), which is confined at that spot to a gorge. He landed safely on the far side of the river. It was reported that he leapt 22 ft (≈ 6.7 m) across while falling 20 ft (≈ 6.1 m).

What is the minimum speed with which he’d need to run off the edge of the cliff to make it safely to the far side of the river?  

The world-record time for the 100 m dash is approximately 10 s. Given this, is it reasonable to expect Brady to be able to run fast enough to achieve Brady's leap?

Identify two mistakes in the following quote from the Starbucks case:

“Starbucks grew from 17 coffee shops in Seattle 15 years ago to over 19,000 outlets in 58 countries. Sales have climbed an average of 20 percent annually since the company went public, peaking at $10.4 billion in 2008 before falling to $9.8 billion in 2009. Profits bounded ahead an average of 30 percent per year through 2007 peaking at $673, then dropping to $582 billion and $494 billion in 2008 and 2009, respectively. The firm closed 475 stores in the U.S. in 2009 to reduce costs. But more recently, sales revenues rebounded to $11.2 billion in 2011, and profits reached a record $1.2 billion.”

Consider an economy that initially stays at its long-run equilibrium. Policy affects the economy with a one-period lag. Answer the following questions:

1. Use the 3-equations model and diagrams to provide a period by period explanation of how a negative aggregate demand shock lead to a deflation trap, where output and inflation are falling without limit. How can the government use fiscal policy to escape the deflation trap? Illustrate with diagrams.
2. Suppose that the current public debt is already quite large, explain the policy trade-off that the government faces. To implement its policy, the government can choose to finance through either borrowing or taxing. In the light of this trade-off, which one would you recommend between these two options. Why?

Suppose you are a stock market analyst specialising in the stocks of theme parks, and you are examining Disneyland’s stocks. The Wall Street Journal reports that tourism has slowed down in the United States. At Six Flags Magic Mountain in Valencia, California, a new Viper roller coaster is now operating and another new ride, Psyclone, will be opening this year. Using demand and supply analysis, predict the impact of these events on ticket prices and attendance at Disneyland. As reported in The Wall Street Journal, Disneyland slashed ticket prices and admitted that attendance was somewhat lower. Is this consistent with your prediction using demand and supply analysis? In light of the fact that both price and output were falling at Disneyland, is the law of demand being violated in the world of fantasy? [15 marks]

A meteoroid of mass = 555 kg has a speed of 90.0 m/s when 700 km above the Earth. It is falling vertically (ignore air resistance) and strikes a bed of sand in which it is brought to rest in 3.49 m. (a) How much work does the force of gravity do on the meteoroid on the way to the surface? GJ (b) What is the speed of the meteoroid just before striking the sand? m/s (c) How much work does the force of gravity do on the meteoroid after it hits the surface? GJ (d) How much work does the sand do to stop the meteoroid? GJ (e) What is the average force exerted by the sand on the meteor? GN (f) How much thermal energy is produced? GJ

Consider what happens when two people with different (or identical) love styles develop or  attempt to develop a love relationship 
(there is potential humor and tragedy here!). Your task:  Create two (2) profiles or scenarios of two couples using any combination of
love styles outlined in chapter 7 (and handouts if necessary). What would this relationship look like? Could it work? 

Why or why not?  For example, what would a relationship between the ludic lover and the storgic  lover look like, or the manic lover 
and the pragmatic lover? Have fun and feel free to be creative. Also see attached for an opportunity to assess your own love styles!

How do the love styles impact the experience of falling in love and loving?

1. Job-specific human capital. In this problem, based on a simplified version of the model in Bhattacharya and Sood (2006), we will explore how linking employment and health insurance provision can (partially) solve the adverse selection problem if the labor market is competitive. Suppose that there are two types of workers – sickly workers with probability p_s of falling ill over the course of the next year, and robust workers with probability p_r < p_s of falling ill. Employers cannot observe whether a worker is sickly or robust, and because of U.S. law they can only decide to offer health insurance to allof their workers, or none at all. We will assume that a just-hired employee is less productive than an employee who has more experience; let MP_n be the marginal value product of new employees, and MP_e > MP_n be the marginal value product of experienced employees. In this simple model, marginal value product depends only on experience, not on whether a worker is sickly or robust.

1. Consider an employer deciding whether to hire a new employee who will produce a marginal value product of MP. If the employer offers income and no health insurance, what wage, w, will the employer have to pay the employee in a competitive labor market? What would happen if the employer offered the employee less? What would happen if the employer offered the employee more?

ANS.

2. D is a measure of job-specific human capital; as workers learn the job, they become more productive so D > 0. However, not every job or industry has the same value for D. In some lines of work D is low, while in others D is high, simply because of the nature of the work. Given the results you have seen in this problem, in which types of industries – high-D or low-D – would you expect there to be a larger fraction of employers offering pooled health insurance to workers?

ANS.