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Assume that the following information about the economy is correct. The potential GDP is 3 percent. Real GDP has fallen at a minus two percent rate in the last 12 months (2007) but was growing at a 2.0 percent rate through most of 2006. The unemployed rate in 2007 is 7.7 percent up from 6.8 percent and has been in the neighbourhood of one percent for the post 12 months. Median short term inflationary expectations are averaging percent over the past year and long term inflationary expectations are average 1.5 percent in 2007. The leading indicators have been negative for the past six months. Payroll jobs are averaging -40,000 a month in 2007. Productivity growth has averaged 1.3% over the past 12 months, but was 0.5% in the last quarter. Capacity utilization was at 77% for most of 2006 and was 75 percent in the first six months of 2007. The dollar has strengthened by 10% on a trade- weighted basis over the past year; consumption spending has increased at a one percent level the past three quarters. The Employment Cost Index and hourly wages have increased at a 1.5% rate over the past quarters. Residential investments have decreased by 16% over the past year, but non residential business investment has increased by 6% in the last year. Federal Government ha increased by 5% over the 1st 12 months but state and local government spending has decreased by 10 Percent during that same time period. Based on the information given below, Please answer the following five questions.
1. Using business cycle terminology where is this economy in the business cycle?
2. Where is the economy on the aggregate demand and aggregate supply?
3. What are the strengths and weaknesses of this economy?
4. What changes would you recommended for aggregate demand or aggregate supply?
5. How would your firm be impacted by your suggested changes in aggregate demand and aggregate supply?
Comment on the effect of a recession on the investment curve (only) and on the level of savings, investment, and the equilibrium real interest rate in the financial crisis that hits United States first starting in fall 2007.
Throughout this course we have discussed the 'agency problem' - i.e., when the interests of owners and managers are not properly aligned.
What takes place to the equilibrium price and quantity of ice cream in response to each of the following? Describe your answers.
Draw a diagram describing autarky and a pattern of comparative advantage for your example.
In 1991, Brazil and Columbia united to form a coffee cartel and reduce coffee output. Suppose total costs for the cartel are:
What is national saving? What is private saving? What is public saving? How are these three variables related?
Global Widgets Corp is a manufacturing company that builds standardized galvanized metal benches for sports arenas and stadiums-Do you think one of these firms would be more likely to benefit from a de-centralized decision making organizational arc..
For each of the following events, state whether the aggregate demand curve would increase, decrease, or stay the same.
A Monopolist is deciding how to allocate output between two markets. The two markets are separated geographically. Demand and marginal revenue for the two markets are given by:
Explain why competitive markets normally lead profit maximizing firms to make choices about resource use that lead to an "efficient" allocation of resources to the market?
All semester we have been tracking the economy to discern where it currently resides along the business cycle and where it seems to be headed over the next 6-9 months.
Give the before-tax charcoal price and quantity exchanged. Give the after-tax charcoal price to buyers, the quantity exchanged, and total tax revenues.
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