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Suppose a country has a money demand function (M/P)^d = kY, where k is a constant parameter. The money supply grows by 12% per year, and real income grows by 4% per year.
a) What is the average inflation rate?
b) How would inflation be different if real income growth were higher? Explain.
c) How do you interpret the parameter k? What is its relationship to the velocity of money?
d) Suppose, instead of a constant money demand function, the velocity of money in this economy was growing steadily because of financial innovation. How would that affect the inflation rate? Explain.
You want to buy a new car. You plan to borrow the entire purchase price of $25,000. Dealer offers two choices: (i) an immediate $1500 rebate and financing at the regular rate of 7.2% APR for 48 months, or (ii) low percentage financing for 48 months. ..
A consumer has preferences u(x) = 2x 1 2 1 + x2. The price of good 1 is p1 > 0 and the price of good 2 is 1. You may restrict your attention to interior solutions throughout. Explain whether these preferences are i) monotonic, ii) quasilinear, iii) e..
List out at least one policy action that the Federal Reserve has taken to confirm that direction. Explain the effects of monetary policies on the economy's production and employment.
A corporation just issued a 10 year, zero coupon bonds having a YTM of 10%. Under current tax law, how much interest can the corporation deduct in the first year?
If/when the proper research is done businesses can maximize profits while developing new products as well as promote their current products in the most advantageous of ways.
Suppose Country A is a small open economy that takes world prices as given. What would be the effect on wages and rents in A if it were to experience an inflow of foreign capital? Use a diagram AND a table to convey your answer. Which groups would fa..
Romans utility function os U(x,y)=6xy. The prices of goods x and y are $12 and $15. The indifference curve is tangent to his budget constraint, where he is consuming 20 units of good x. How many units of good y must he be consuming?
Assume that only one health condition ever afflicts people for which one treatment is available, costing $100,000. The condition is very bad, so all consumers would be willing to pay for the treatment even if they did not have insurance. Consumers al..
Why is organic food a positional good? What other ways do wealthy people have an advantage in avoiding pesticides? How does this relate to global inequality? How are organic foods produced, marketed, and sold in a capitalist society? Compare and cont..
Consideration is being given to the investment of $420,000 at time zero for machinery and equipment to be depreciated using 7 year straight line depreciation starting in year 1 with the half-year convention. Annual sales are projected to be $450,000 ..
International trade benefits both partners, though not necessarily all citizens. Absolute advantage determines trade specialization. Tariffs are generally preferred by economists over quotas. The U.S. has a large trade deficit with China, although it..
Suppose that the U.S. noninstituional adult population is 230 million and the labor force participation rate is 67 percent. Illustrate what would be the size of the U.S. labor force.
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