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Suppose that a country's money supply is $1,200 million and its domestic credit is equal to $800 million in the year 2005. The country maintains a fixed exchange rate, the central bank monetizes any government budget deficit, and prices are sticky.
a. Compute total reserves for the year 2005. Illustrate this situation on a central bank balance sheet diagram.
b. Now, suppose the government unexpectedly runs a $100 million deficit in the year 2006 and the money supply is unchanged. Illustrate this change on your diagram. What is the new level of reserves?
c. If the deficit is unexpected, will the central bank be able to defend the fixed exchange rate?
d. Suppose the government runs a deficit of $100 million each year from this point forward. What will eventually happen to the central bank's reserves?
e. In what year will the central bank be forced to abandon its exchange rate peg and why? f. What if the future deficits are anticipated? How does your answer to part (e) change? Explain briefly.
Julia can fix a meal in 1 hour, and her opportunity cost of one hour is $50. Jacque can fix the same kind of meal in 2 hours, and his opportunity cost of one hour is $20. Will both Julia and Jacque be better off if she pays him $45 per meal to fix..
ten bidders in an oral auction have the following values for an antique clock 10 9 8 7 6 5 4 3 2 1. if bidders of the
Suppose that you can work anywhere from 0 to 24 hours per day at a wage of $1 per hour. You are subject to a tax of 50% on all income over $5 per day (the first $5 is untaxed). You elect to work 10 hours per day.
Assume that the most efficient production technology available for making vitamin pills has the cost structure given in the following table. Note that output is measured as the number of bottles of vitamins produced per day and that costs include ..
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What is the average of these five amounts?
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which way do we shift the demand curve? Why?
Using the regression results and other computations from Assignment 1, determine the market structure in which the low-calorie food company now operates.
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