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You are an aide working for a policy maker (like a Senator Marilyn Pugh in the U.S.) in your country. You have been asked to analyze the economy, determine if there are any problems, and to make policy recommendations. You are to report to the policy maker in a policy paper. Your group leader will be responsible for entering the group paper in the document area. (You may select your own group leader.) You have gathered information statistics about the economy and this is what you have found.
Population= 300 million Labour Force= 160 million Unemployed= 12 million Structural Unemployment rate= 2% Frictional Unemployment rate= 3% GDP Deflator 2007= 170 GDP Deflator 2008= 176.8 (The GDP deflator is the price index for the entire economy.) Full Employment Real GDP= $6,000 billion Equilibrium Real GDP= $5,880 billion MPC= .75 1. What is the problem with the economy? Back your answer up with statistics. (You will not get very many points for merely identifying the problem. The real points come from substantiating your answer).
2. What are two possible fiscal policy solutions for the problem? Using a Keynesian approach, you should be able to get numerical solutions. More points are given for numerical solutions.
3. What cautions should you give the policy maker about these potential solutions? (In other words are there some undesirable side-effects?)
Consumption accounts for about 60% of GDP, while investments accounts for about 20% for GDP. But many economists think that, to understand economic recession, it is more significant to look at investment than consumption. Why?
Assume that a price support system for cotton requires the federal government to pay farmers $3,000 for each acre to not plant cotton. How would you shift either the supply or demand curve for cotton to describe the effect of this action? In your a..
Is this a good model for unemployment? What would you add to study the problem more completely? What assumption does this model make regarding unemployment
The annual demand for coffee by the U.S consumers is Q = 250 - 10P. Compute the lost consumer surplus?
How will a fall in domestic investment affect the trade surplus and net capital outflows in the domestic economy, the trade deficit and capital inflows in the rest of the world.
A pure monopolist determines that at the current level of output the marginal cost of production is $2.00, average variable costs are $2.75, and average total costs are $2.95.
Your company is considering an investment project that will generate after-tax cash flows of $1,000 per year for the next three years (and then be scrapped, with no salvage value).
Problem on standard deviation
How do you think each of the following affected the world price of oil? (Use demand and supply analysis.)
Find the velocity given that the market is in equilibrium. MD1 is the relevant curve and it is given that the real GDP is 30,000.
hat is your expected utility without insurance? Suppose you can buy insurance that will cover the medical expenses but not the foregone part of your salary. How much is an actuarially fair policy, and what is your expected utility if you buy it?
What is the opportunity cost of going to a doctor to be examined for skin cancer? Would eliminating research reduce or increase the cost of U.S. health care?
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