Economics Answers

State True, False or Uncertain. An economy that is open to capital flows has two channels for the monetary transmission mechanism, while an economy closed to capital flows has only one. [Hint: Explain in the context of an increase in interest rates in both types of economies.]

State True, False or Uncertain. The increased availability of credit cards has resulted in an increase in the money supply.

State True, False or Uncertain. Because it is no longer backed by the potential for conversion to gold, modern Canadian fiat currency is no longer able to serve as a form of money.

State True, False or Uncertain. Neoclassical growth theory tells us that the widespread adoption of new technologies will increase potential GDP and potential GDP per worker.

State True, False or Uncertain. If an aggregate production function exhibits diminishing marginal product and constant returns to scale then a doubling of the labour force leads to a doubling of aggregate output.

State True, False or Uncertain. In the short run, changes in GDP can be thought of as stemming from changes in the employment rate of labour, while in the long run, changes in GDP can be thought of as stemming from changes in the labour force and/or changes in labour productivity (output per employed worker).

The Nottinghamshire Research Observatory in England calculated that students who attend Nottingham Technical University spend about £2,760 each in the local economy for a total of £50.45 million. In total, the impact of their spending on the local economy is £63 million. Calculate the size of the student spending multiplier.

(a) Solve the following problem graphically:
Min C = 0.6x1 + x2
Sub to 10 x1 + 4 x2 ≥20
5 x1 + 5 x2 ≥20
2 x1 + 6 x2 ≥12
x1 , and x2 ≥0

(b) Why does the solution occur at a corner point only? Give reasons.

A monopolist’s demand curve is given by P = 100 – 2q.
(a) Find his marginal revenue function.
(b) At what price is marginal revenue zero?

From the following data, obtain the two regression equations Y on X and X on Y.
X 2 4 6 8 10
Y 5 7 9 8 11