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Q. Answer the following question using the Keynesian Model of a closed economy. Suppose the Federal government would like to increase output in the short-run and will engage in expansionary fiscal policy. The President contacts you, the Chair of the Federal Reserve, and asks you to take action to keep interest rates close to where they currently are.
a) What action do you take? Illustrate and explain the movements of the IS and LM curves.
b) Illustrate and explain the movement of the aggregate demand and aggregate supply curve both in the short and long run. What potential long term effect should you warn the President about?
What combination of T and M will you choose? Suppose that the price of day trip rises to $80. How will this change your decision making?
Mining is proposed for a wilderness area that provides two benefits: recreation due to backpacking opportunities and biodiversity there are endangered wildlife and plants.
A farmer has a production function f(L) where the input is capital (L). The cost of this loan is L(1+i). The farmer also has an outside option (loan from family member) which generates a profit of A.
What is the market solution (market price and quantity) and What is the total surplus of the society under the market solution
Do protectionist policies benefit producers, consumers, workers, or the government
Gains from trade will result if a country specializes.
The Australian government administers two programs that affect the market for cigarettes
Jane wants to buy a beautiful doll as a gift for her sister's birthday. What is the advantage to society to correct the externality?
Disposable personal income equals personal income and two factors are the keys to determining labour productivity
Analyze the USA financial meltdown that happened in 2008-2009. This crisis was partially caused by the reward systems that were in place for participants in the financial system. Identify the major participants in the financial system.
Assume that the industry wants to expand and has to make some long-term capital budgeting decisions. Now the industry is confronted with government regulations to oversee the merger.
Examine the key factors affecting the demand for and the supply of a good or service
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