Reference no: EM131081707

Question 1: Consider the following game from the political world involving two potential leaders, Malcolm and Tony. The game is as follows. First, Tony can choose to Spoil or Not Spoil. If Tony chooses Not Spoil the game is over and Malcolm gets a payoff of 50 and Tony gets 20. IF, on the other hand, Tony opted for Spoil, this becomes publicly known so that it is observable to Malcolm. Malcom then gets to choose whether to Fight or Negotiate. If Malcolm Fights, both politicians gets a payoff of 30. If Malcolm opts to Negotiate, the payoffs are 15 to Malcolm and 15 to Tony. What are the Nash equilibria of the game?

• (Spoil, Fight) and (Not Spoil, Negotiate)
• (Not Spoil)
• (Spoil, Fight)
• (Spoil, Fight) and (Not Spoil, Fight)
• None of the above.

Question 2: Consider the following game from the political world involving two potential leaders, Malcolm and Tony. The game is as follows. First, Tony can choose to Spoil or Not Spoil. If Tony chooses Not Spoil the game is over and Malcolm gets a payoff of 50 and Tony gets 20. IF, on the other hand, Tony opted for Spoil, this becomes publicly known so that it is observable to Malcolm. Malcom then gets to choose whether to Fight or Negotiate. If Malcolm Fights, both politicians gets a payoff of 30. If Malcolm opts to Negotiate, the payoffs are 20 to Malcolm and 20 to Tony. What are the subgame perfect (credible) equilibria of the game?

• (Spoil, Fight) and (Not Spoil, Negotiate)
• (Not Spoil)
• (Spoil, Fight)
• (Spoil, Fight) and (Not Spoil, Fight)
• None of the above.

Question 3: The UK is considering leaving the European Union (EU), at which point it would get less favourable access to European markets, and Europeans would get less access to the UK market. The UK has to decide whether to leave. If they leave, the remainder of the EU has to decide whether to negotiate a new comprehensive trade agreement with the UK. There are two 'stages' in this game. First, the UK can choose to be IN the EU, or to be OUT. If UK chooses IN the payoffs are (0, 0), where the first payoff is for the UK and the second is for the EU. If the UK's chooses OUT, the EU can choose to either AGREE to a new trade agreement or to NOT agree. The payoffs are as follows. If the UK opts for OUT and the EU opts for AGREE, the payoffs are (10, -10). Finally, if the UK chooses OUT and the EU chooses NOT to agree the payoffs are (-15, -15). What are actions observed in the subgame perfect (or credible) equilibrium outcome(s) in this game?

• UK chooses IN; and UK chooses OUT and EU chooses NOT
• UK chooses IN
• UK chooses OUT, and EU AGREE
• UK chooses OUT and EU NOT
• None of the above.

Question 4: Coke and Pepsi are in a market together in which they can each make the following sequence of moves. First, Coke decides whether to launch a SPORTS drink or an ENERGY drink. Second, Pepsi observes Coke's choice then chooses SPORTS or ENERGY. If ENERGY is chosen by both firms, Coke gets 30 and Pepsi 40. If Coke chooses ENERGY and Pepsi SPORTS the payoffs are 35 to Coke and 35 to Pepsi. If Coke opts for SPORTS and Pepsi opts for ENERGY the payoffs are 25 and 50 to Coke and Pepsi. Finally, if both choose SPORTS the payoffs are 60 to Coke and 45 to Pepsi. In the subgame perfect (or credible) equilibrium, what do we observe each firm do?

• Coke opts for ENERGY and Pepsi SPORTS.
• Coke opts for SPORTS and Pepsi ENERGY
• Coke opts for SPORTS and Pepsi SPORTS
• Coke opts for ENERGY and Pepsi ENERGY
• None of above.

Question 5: The economy in 2010 (the base year) produces 5 tonnes of iron ore at a price of 200 dollars a tonne and 10 t-shirts at a price of 20 dollars each. In 2015, the same economy produces 10 tonnes of iron ore at a price of 50 dollars a tonne and five t-shirts for $20 each). What was the Nominal GDP growth rate between 2010 and 2015?

• -75%
• -50%
• 0%
• 50%
• 75%

Question 6: The economy in 2010 (the base year) produces 5 tonnes of iron ore at a price of 200 dollars a tonne and 10 t-shirts at a price of 20 dollars each. In 2015, the same economy produces 10 tonnes of iron ore at a price of 50 dollars a tonne and five t-shirts for $20 each). If real GDP is measured using 2010 prices, what was the Real GDP growth rate between 2004 and 2014?

• -75%
• 50%
• 0%
• 50%
• 75%

Question 7: If planned Aggregate Expenditure in an economy is given by the equation AE = 10 + 0.2Y, then the expenditure multiplier is equal to:

• 10
• 2
• 1.25
• 0.25
• 0.2

Question 8: In an economy the population is 1.35 billion, the working-age population is 900 million, the labour force is 800 million, and employment is 760 million. What is the labour-force participation rate and what is the unemployment rate (correct to 1 decimal place)?

• The labour-force participation rate is 88.9% and the unemployment rate is 15.6%
• The labour-force participation rate is 88.9% and the unemployment rate is 5.0%
• The labour-force participation rate is 59.3% and the unemployment rate is 15.6%
• The labour-force participation rate is 55.6% and the unemployment rate is 5.3%
• The labour-force participation rate is 84.4% and the unemployment rate is 5.3%

Question 9: When an economy has a positive output gap, which of the following statements is true:

• Real GDP is less than Potential GDP; the unemployment rate exceeds the natural rate of unemployment; and the inflation rate tends to fall.
• Real GDP is greater than Potential GDP; the unemployment rate is less than the natural rate of unemployment; and the inflation rate tends to fall.
• Real GDP is greater than Potential GDP; the unemployment rate is less than the natural rate of unemployment; and the inflation rate tends to rise.
• Real GDP is less than Potential GDP; the unemployment rate is less than the natural rate of unemployment; and the inflation rate tends to rise.
• Supply is greater than demand.

Question 10: The basket of goods used to construct the Consumer Price Index (CPI) includes 10 cups of coffee, 5 sandwiches and 1 month of mobile phone access with data. In 2010 (the base year for calculating the CPI), the price of these items was $3 per cup of coffee; $5 per sandwich and $85 for 1-month of mobile phone access with data. In 2015 the price of these items was $5 per cup of coffee; $9 per sandwich and $52 for 1-month of mobile phone access with data. What is the CPI 2015?

• 147
• 140
• 107
• 105
• 100