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use illustrative diagrams to explain the effects of a monetary contraction on output, composition of output, interest rate, and on the exchange rate under the flexible exchange rate system
a) The Covid-19 pandemic as well as Brexit has severely disrupted worldwide supply chains. This disruption has forced many domestic producers to source essential inputs from local, more expensive suppliers instead of foreign, cheaper ones.
(i) Discuss, and illustrate (using the WS-PS model and Phillips Curve model) how this supply shock is likely to impact the labour market and inflation expectations moving forward. (6)
(ii) Provide an example of a supply-side policy that you think government could pursue in an attempt to reduce these supply-side impacts from Covid and Brexit. (4)
(a) According to John Keynes liquidity preference depends on three motives. Explain. [15 marks]
Suppose the economy is operating at equilibrium, with Y0 5 1,000. If the government undertakes a fiscal change whereby the tax rate, t , increases by .05 and government spending increases by 50, will the budget surplus go up or down? Why?
economy was examined by Arthur M. Okun (1928-1980). How was the theory of
business cycle placing an important position in his work? Elaborate.
Supply. Explain using appropriate diagrams
Using suitable graphs, briefly explain the behavior and basic characteristics of following oligopoly models
a) Sweezy oligopoly model
b) Cournot oligopoly model
c) Stackelberg oligopoly model
d) Bertrand oligopoly model
Provide a real -world example of a market that approximates each oligopoly setting, and explain your reasoning
e) Cournot oligopoly model
f) Stackelberg oligopoly model
g) Bertrand oligopoly model
List some empirical examples to support each theory which explains why the short-run aggregate supply curve is upward sloping.
Daniel’s current wealth is $1000. He has been given a lottery ticket which has a 40% probability that he will win $24 and a 60% probability that he will win $600. Daniel’s utility function is u(w) = √w where w is his wealth. Calculate the least that Daniel would be willing to accept for him to sell the lottery ticket if he is an expected utility maximize.
Suppose you have a house worth $200,000 (wealth). Your utility of wealth is given by U(w) = ln(w). There is a small chance that a fire will damage your house causing a loss of $75,000. You estimate there is a 2% chance of fire.
a) What is your expected wealth?
b) What is your expected utility from owning the house?
c) Suppose you can add a fire detection/prevention system to your house. This would reduce the chance of a bad event to 0 but it would cost you $C to install. What is the most you are willing to pay for the security system? (Here is an identity you will find useful
#340153 on Dec 2023