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Suppose that the economy is thought to be 2 percent above potential (that is, the output gap is 2 percent) when potential output grows 4 percent per year. Suppose also that the Fed is following the Taylor rule, with an inflation rate of 2 percent over the past year. The federal funds rate is currently 3 percent. The equilibrium real federal funds rate is 3 percent, and the weights on the output gap and inflation gap are 0.5 each. The inflation target is 1 percent. a. Is the federal funds rate currently too high or too low? By how much? Show your work. b. Suppose that a year has gone by, output is now just 1 percent above potential, and the inflation rate was 1.5 percent over the year. What federal funds rate should the Fed now set (assuming that the inflation target does not change)?
Major events in our country and around the world tend to have economic advantages for some segments of society and disadvantages for others. Determining who benefits can be tough for negative events
Consider a firm selling two products, A and B, that substitute for each other. Suppose that an entrant introduces a product that is identical to product A. What factors do you think will affect (a) whether a price is initiated, and (b) who wins t..
Daily commuter demand is variable, yet stable and known. Demand for sporting events is uncertain, and depends on the quality of the match, as well as on unpredictable events, like the weather. How would you price these two events differently
Employ the following equation to demonstrate why the firm producing at the output level where MR=MC will also be able to maximize its total profit
Managerial decisions are affected primarily by microeconomic forces. By and large, managerial decisions are not affected by either microeconomic or macroeconomic forces.
Which one, shirts or sweaters, has a demand elasticity that will allow you to increase the price, sell fewer units BUT still increase your revenues?
Think a small open economy with a fixed exchange rate system. Assume there is a general expectation that central bank will revalue the domestic currency in the future
Using the mortgage calculator spreadsheet available on VISTA, produce a graph which displays, for each month, the amount of repaid principal (also called normal paydown) and the interest paid when the nominal mortgage rate is r = 5.33% compounded ..
What will be the equilibrium price? What will be the equilibrium output for the industry? For each firm? What will profit or loss be per unit? Per firm? Will this industry expand or contract in the long run?
Scarcity shapes decisions about how to distribute goods. Because resources are scarce consumers buy fewer good.
Monopolistically competitive industries consist of a large number of firms, none of which has a large market share. Oligopoly is different. This market structure involves an industry that is dominated by a small number of firms.
Imagine your company has put you in charge of developing a sustainability plan, a common framework your organization will use to achieve its sustainability goals. Devise two strategies you would have your company adopt, and explain why you believe..
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