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Many people believe that Congress will eventually have to reduce Social Security benefits in order to reduce the budget deficit. Although most of the changes would not take place until later, assume f
In this economy, compute private saving, public saving, and national saving
Suppose the price elasticity of demand for vanity plates in your state is 0.60. The initial price is $20 and the initial quantity is 1,000 plates per week. Suppose the state increases the prices by 10
Assume Px = 5, Py = 2 and Income =540. If a consumer has a MVx = 2x/y, is it possible for her to achieve an interior solution? If so, what is the solution? If not, why not?
Suppose that the unemployment rate is 6.5% and current-dollar GDP is $1,45 billion. Using Okun’s Law, what would be the potential GDP number corresponding to a natural unemployment rate of 5.5%?
Suppose that in 1984 the total output in a single-good economy was 10,000 buckets of chicken and the price of each bucket of chicken was $10. In 2005 the price per bucket of chicken was $20 and 22,000
How does the amount of unemployment created by an increase in the minimum wage depend on the elasticity of labor demand? Do you think an increase in the minimum wage will have a greater unemployment e
Discuss the rationale for government regulation of firms with market power. Is regulation in the consumer’s interest or in the producer’s interest and how might this control special intere
Some workers in the economy are paid a flat salary and some are paid by commission. Which of compensation scheme would require more monitoring by supervisors? In which case do firms have an incentive
Suppose government spending increases. Would the effect on aggregate demand be larger if the Federal Reserve held the money supply constant in response or if the Fed were committed to maintaining a fi
Consider a two good exchange economy with two individuals, A and B. A’s preference is represented by UA = 0.3 lnxa1 + 0.7 lnxa2 and B’s is represented by UB = .8lnxB1 + .2lnxb2. A’s
Consider two countries, Canada and China. Canada has comparative advantage in oil production, and China in shoes production. Suppose China grows biased to oil production.
If imports of Brazilian ethanol begin to rise sharply in the future, what do you predict will happen to the size of the import tariff levied on this good?
Suppose a freeze in Florida wipes out 20% of the apple crop. How will this affect the equilibrium price and quantity of pear? Assume that the apple and pear are substitute to each other.
When the United States placed a tariff on steel imports in 2002, foreign producers naturally complained, but there were also complaints from U.S. firms operating in other industries. Why would other t
Find the maximum of (X1,X2) of F subject to the constraint: P1X1+P2X2 =I (Income), the answer should be a function of (P1,P2,I)
Supposed a firm faces an inverse demand function of p(y)=20-y and a total cost function of c(y) = a + y^2
Why is universal acceptability such an important characteristic of money? What other characteristics can you think of that might be important to market participants?
You can either take a bus or drive your car to work. A bus pass costs $5 per week, whereas driving your car to work costs $60 weekly. You spend half an hour less on a one-way trip in your car than on
The U.S. has long been suffered from trade deficits (especially with China). Explain the effect of trade deficits on economic growth in the U.S. What are the options to deal with China on trade defici
Suppose the demand curve is given by QD = 400 – 50 P, where P is price. The supply curve if given by QS = 50P
Why should countries engage in international trade rather than remaining self-sufficient and avoiding the unfair competition of low-paid foreign workers?
If our country (US) can make everything better and cheaper than foreigners, why would we have any reason to be involved in international trade?
If we do engage in foreign trade, should we limit foreign trade to nations that engage in "fair trade" by giving us access to their domestic markets and reciprocal import tariff reductions that mirror
What are the seven objectives normally listed in respect of a government’s economic policy? What are the effects of these on the economic development of small open economies?