Economics Answers

Farmer Billy has a plot of land on Long island. On farmer billy's land, he grows corn and soy beans for harvest and feeds his diary cattle the corn so they produce milk. FARMER billy enters the market with the soy beans and milk for sale. Farmer billy also consumes some of the soy beans and milk he produces. His preferences for soy beans and milk may be described by Cobb-Douglas, where soy beans assume a fixed 40% of his consumption expenditures and he only consumes soy beans and milk. Farmer billy can sell one cup of soy beans for $3 and one quart of milk for $2. Farmer billy enteres the market with 400 cups of soy beans and 200 quarts of milk..Which of the following are farmer billy's real endownments?

In a given market, demand is described by the equation: QD=1800-10P and supply is described by: QS=200+10P.
(i) determine the equilibrium price and quantity
(ii) Graphically illustrate price and quantity

(a) Given the following information, determine which asset gives the best investment opportunity based on the calculated rate of return on asset? Show all calculations.
Risk Free Rate = 4.5%
Market Rate of Return = 7%

Table 7.1
Stock Beta Value
ECoin Investment LLC -0.2
Green Energy Inc. 1.0
Non Fossil Corp. 1.3
IoT Software Ltd. 0

(b) (i) How does the rate of return on these four companies stock compare to the market rate and the risk-free rate?
(ii) Which of the investments you might opt not to invest but instead purchase government bonds? Give reasons.
(iii) What can you deduce about the relationship between the return on an asset and the market rate or free interest rate when beta of the asset is 1 and 0 respectively?

(b) As a prospective business owner in the waste management business, you have researched the waste management truck market and you are attracted by two similarly functional truck offers. An identical cash price of $550,000 for the ARSLAN truck and the HIDRO-MAX truck with two different monthly repayment schedules offered by the respective financiers.

The repayment schedule for the ARSLAN truck requires a down payment of 10% while the repayment schedule for the HIDRO-MAX truck requires a down payment of 15%. If the repayment is over a period of 7 years at an annual loan rate of 6%, what would be the monthly repayment amount for both schedules? Assume that the monthly repayment starts 1 month after the mortgage contract is signed and the down payment made. Show all calculations.

Suppose the government decides to pursue an expansion army fiscal policy. Within the AD-AS framework, what will be the impact on the economy?
1.Aggregate supply in the economy will decrease at various price levels.
2.Aggregate demand in the economy will decrease at various price levels.
3.Total production and employment will increase, while inflation decrease.
4.Real GDP, the general level of prices and employment will increase

If the government decides to increase personal income tax to raise its tax revenue, what will be the impact on the economy?
1.Both the price level and the equilibrium level of real output will decrease.
2.Both aggregate demand and aggregate supply will increase.
3.Price level will increase, and total production will decrease.
4.Price level will decrease, and total production will increase.

The cost of production in the South African (SA) economy accelerated, due to rising prices of electricity and petrol in the country, which led to an increase in the prices of domestic goods and services relative to foreign goods and services. This will likely lead to a (n)...
1.Increase in the net export and aggregate spending in the South African economy.
2.Inrease in the demand South African goods by foreign countries.
3.Increase in the quantity of goods and services demanded in the South African economy.
4.Decrease in the quantity of goods and services demanded in the South African economy.

Aggregate spending will increase if...
1.real wealth falls
2.interest rate falls
3.consumption falls
4.investment falls

Between points c and d, the opportunity cost of tons of wheat is tons of steel.

Based on the international trade effect, how would an increase in the price level in South Africa affect the exchange rate and aggregate demand?
1.Rand will appreciate; the quality of aggregate demand will decrease.
2.Rand will depreciate; the quality of aggregate demand will increase.
3.Exchange rate will remain unchanged; the aggregate demand will decrease.
4.Exchange rate will increase; the aggregate demand will increase.