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1. Use a diagram to explain the "new economics" proposition of monetary policy effectiveness. Describe the underlying assumptions of the new economics model. What is the policy ineffectiveness proposition?
2. Use the following figure:
a. to demonstrate the gains and losses to a short put and a long put on dollars with identical maturity dates, where the strike price is 0.50DM/$1, and the option premiums are identical at 0.05DM. Is there a net gain to short and long puts in this example? Why or why not?
b. Will a short put be exercised if the market price at maturity is greater than the strike price? Why or why not? Will a long call be exercised if the market price at maturity is lower than the strike price? Why or why not? Use properly labelled diagrams to support your answers. Assume that the strike price on each option is 4.2DM/$1, and that the option premiums are identical at 1.1DM/$1.
c. Explain the motives of both the seller and buyer of a straddle. Use properly labelled diagrams to support your explanation. Assume that the strike prices are 0.50DM/$1, that the option premiumon the call is 0.05DM/$1, and that the option premium on the put is 0.035 DM/$1.
Economists who work for thegovernment are often called upon to make policyrecommendations. Why do you think it is important for thepublic to be able to differentiate normative statements frompositive statements in these recommendations?
Explain how bank losses from mortgage backed securities could lead to an investment bank becoming insolvent and going bankrupt. Your explanation should use a somewhat realistic T-Account
You will choose an industry of interest to you (preferably one you are involved with or plan to be involved with). You will use the tools we developed in class to evaluate the future growth and profitability of this industry by investigating factors ..
What is the Consumer Price Index (CPI) and How has the CPI behaved since the year 2000? What have been the causes of these changes? In your response, include a graph of the CPI for this period and cite your source.
Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. Plot the resulting yield curve.
Suppose we consider the woman's labor market experirnce EXPER and its square EXPER2 , to be instrumental for WAGE . Explain how these variables satisfy the logic of insrumental variables
If a representative firm with long-run total cost given by TC = 50+2q+2q^2 operates in a competitive industry where the short-run market demand and supply curves are given by Qd = 1,410 - 40P and Qs = -390 +20P, its long-run profit maximizing leve..
Could you calulate the total, average variable, and average cost, when a company marginal cost of production is $5.00 per unit.
a) Should the Federal Reserve Board focus exclusively on the problem of inflation b) What other goals are appropriate for Federal Reserve policy c) What is the appropriate goal for the inflation rate d) How effective is Federal Reserve monetary polic..
A decision maker wishe to minimize the cost of producing a given level of total benefit, B = 288. The cost function is C = 6x + 3y and the total benefit is B = xy. Set up the Lagrangian adn then determine the levels of x and y at the minimum level of..
Elucidate that the indirect utility fuction of quasi convex function of prices and income
Write down the game table of this game. Does any player have a strictly or weakly dominated strategy? Is this game dominance solvable using IESDS?
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