Terrorist attacks foster instability and may a… Show more Shifts in the Production Possibilities Frontier (PPF) Terrorist attacks foster instability and may affect productivity over the short and long term. Do you think the September 11, 2001, terrorist attacks on the World Trade Center and the Pentagon affected short- or long-term productivity in the United States? Explain your response and show any movemens in the PPF. • Show less
1.Kelly tells Jimmy she will pay him $1,000 if he builds a shed in her backyard. Kelly is a(n)
(3) Cost of Basket in… Show more Consumer Price Index Product (1) Qty in Market Basket (2) Prices in Base Yr (3) Cost of Basket in Base Yr (3) = (1) x (2) (4)Prices in Current Yr (5) Cost of Basket in Current Yr (5) = (1) x (4) Twinkies 365 Pkgs $089/pkg $324.85 $0.79 $288.35 Fuel Oil 500 Gallons $1.00/gal $500.00 $1.50 $750.00 Cable TV 12 months $30.00/mo $360.00 $30.00 $360.00 Total $1,184.85 $1,398.35 Calculate a new consumer price index for the above data. Assume that current-year prices of Twinkies, Fuel oil, and cable TV are $0.95/pkg, $1.25/gal, and $15/mo, respectively. Calculate the current year’s cost of the market basket and the value of the current year’s price index. What is the year’s percentage change in the price level compared to the base year? • Show less
1. PART 2 (NEW GRADER – 35 points – 5 for f) and g) 10 for h) and 15 for graph)) Draw a desired
1- why would one be unable to associate particular amounts of calender time with the concepts of mar
Due Wednesday, 9/30 at the beg… Show more Homework #4 – Desired Capital, User Cost and Goods Market Equilibrium Due Wednesday, 9/30 at the beginning of class – no late papers accepted! Instructions: Please show all work or points will be taken off. Good luck! 1. PART 1 (35 points total – 5 points for each part and 10 points for the diagram) You own a golf course in Florida and you need to determine how many golf carts you need to buy to maximize profits. Please answer the following questions given the information below. A brand new golf cart costs 400 rounds of golf and the rate of depreciation is 15 (.15%) The real interest rate is 5% (use .05 in calculations). The expected marginal product of capital is given by MPK f = 420 – 5K. a) What is the user cost of capital and what is it expressed in?? b) How many golf carts should you buy to maximize profits (i.e., what is K*)? Draw a graph (the uc / MPK graph) depicting the state of affairs and label this initial profit maximizing point as point A. A completely labeled and correct graph is worth 10 points. c) Now suppose the (local) government with all their financial shortfalls embarks on a campaign to raise revenue to fund the fire department by imposing a so-called “luxury tax” (we know it as τ) equal to 20% of gross revenue What happens to the profit maximizing number of golf carts? Please show all work and label as point B on your uc/MPK graph. d) Now explain why your profit maximizing K* has changed. Please be specific using the firm’s profit maximizing condition (explain the intuition!). Start your answer with “If I did not change my capital input (my K*), then I would not be …….(you can finish the rest!) ……………..” e) The Federal government, knowing all about the financial pains encountered by state and local governments given the Great Recession, decide to offer an investment tax credit equal to 15% (this is in addition to the tax already imposed by the local government). What is your desired capital stock (K*) now? (Hint: An investment tax credit effectively reduces the price of capital to the firm – think of it as this – under the investment tax credit – you buy a golf cart (cost = 400 rounds of golf) and you get a 15% rebate from Uncle Sam so the investment tax credit adjusted price of the golf cart is now 340 rounds of golf [(1-.15) x 400 = 340]. Please show all work again and label this as point C on your uc/MPK diagram. • Show less
A wealthy businessman wants to start a permanent fund for supporting research on sustainability. The… Show more A wealthy businessman wants to start a permanent fund for supporting research on sustainability. The donor plans to give equal amounts of money for each of the next five years, plus one gift now (i.e., six donations in total), so that $100,000 per year can be withdrawn each year forever, beginning in year six. If the fund earns interest at a rate of 8% per year, how much money must be donated during each of years 0 through 5? • Show less
Which of the following statements is consistent with what happened during the Great Reces… Show more QUESTION 2 Which of the following statements is consistent with what happened during the Great Recession? Aggregate demand and long-run aggregate supply decreased, causing unemployment to rise to 10%. Aggregate demand and short-run aggregate supply increased, causing potential GDP to decrease. Housing prices fell during the Great Recession, causing a decrease in consumer wealth. This decrease in wealth led to a decrease in aggregate supply and a decrease in potential GDP. Consumer sentiment fell prior to and during the Great Recession, leading to a decline in expected income that decreased the aggregate supply curve. 13.5 points QUESTION 3 Which of the following statements is consistent with what happened during the Great Depression? The Great Depression had an unemployment rate greater than the Great Recession that was largely due to a decrease in aggregate supply. The unemployment rate was over 25% at the height of the Great Depression. This spike in unemployment was caused by the large decrease in aggregate demand. It took four years for potential GDP to return to its pre-Depression level after the Great Depression. Faulty macroeconomic policies were not a part of the cause of the Great Depression. 13.5 points QUESTION 4 According to classical economics, a decrease in aggregate demand causes the price level to _____________ in the long run. On the other hand, an increase in aggregate demand causes the price level to _____________ in the long run. These changes occur because of _____________. increase; decrease; government intervention increase; decrease; price flexibility decrease; increase; government intervention decrease; increase; price flexibility 13.5 points QUESTION 5 According to Keynesian economists, prices tend to be ______________. As a result, Keynesian economists focus on _____________ changes and aggregate ____________. flexible; long-run; demand flexible; short-run; supply sticky; short-run; demand sticky; long-run; supply 13.5 points QUESTION 6 How many months did the Great Recession last? 1.5 6 18 48 13.5 points QUESTION 7 Identify whether the following statement is more likely to come from a classical economist or a Keynesian economist. “The recent decline in consumer confidence will likely spell disaster for the economy.” Keynesian classical 13.5 points QUESTION 8 Identify whether the following statement is more likely to come from a classical economist or a Keynesian economist. “There is no reason to believe that most prices will take more than several months to adjust in either direction.” Keynesian classical • Show less
Some personal computer software is sold at special discounts to students. Other software is provided… Show more Some personal computer software is sold at special discounts to students. Other software is provided in a less powerful version for students. Why do publishers offer discounts to students? What is the purpose of developing less powerful editions? • Show less
