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Problem
1) As of the Spring of 2011 interest rates are near 0% and have been for sometime.
a) According to theory, if you lower interest rates, business investments and consumer purchases of large durable goods are supposed to increase. In return, this is to help pull us out of a recession. However, this policy of extraordinarily low interest rates has not stimulated investment demand. Why do you think this is the case (hint - think Keynes and animal spirits).
b) How might this policy be exasperating the recession (hint - think of savers and the wealth effect)
c) A colleague of mine said that ‘monetary policy does nothing but create bubbles in the economy'. Do you agree with this statement? How did the low interest rate environment of the ‘post dot com' bubble day help to contribute to the housing bubble? Do you forsee another market bubble in the economy (ie, in the housing market or stock market or in ‘gold stocks' - explain relating low interest rates to a new bubble).
a) (10) Suppose a pharmaceutical company estimates that if they spend $1 billion on the development of a new drug, they can expect to earn $100 million in accounting profit as a result (so their stream of future revenue would be $100 million higher t..
As noted earlier in this chapter, IBM fell on hard times during the 1980s and ultimately abandoned its no-layoffs policy in the 1990s.
Assume that fixed costs remain at $250. When the price of a variable input changes which other costs will increase? Compare the costs you calculate for table two to the costs calculated in table one to find your answers.
a producer of synthetic motor oil for automobiles and light trucks has made the following statement one quart of
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A road building contractor has received a major highway construction contract that will require 50,000 m^3 of crushed stone each year for 5 years. The stone can be obtained from a quarry for $7.80/m^3. As an alternative, the contractor has decided to..
in a multiple regression model using 310 students to explain college grade point average the following explanatory
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