Economics Answers

A California politician claims that the state must subsidize the construction of a new stadium for the Oakland Raiders because of the “positive externalities” that the team generates. Use the appropriate economic model to explain his reasoning.

A recent economic study found that the difference in prize money between the winners of downhill ski races and second-place finishers is much less than the difference in professional golf tournaments. Use an appropriate model to explain why this is the case.

Tokyo has won the right to host the 2020 Summer Olympics, but it might have made itself worse off by doing so. Use the appropriate model to explain why this is so.

Suppose Mr. Y deposits AED 100,000 into a one-year Certificate of Deposit at 5% interest. The Central Bank sets the reserve ratio for the banks at 10%.

a) Illustrate how the banks create money with the help of given information.
(Show first 5 steps)
b) Calculate the total money creation in the economy with the help of formula.

Commercial banks in United Economy have total deposits of AED 300 billion. Their reserves are AED 15 billion, two- thirds of which are with the Central Bank as deposits. There are AED 30 billion notes outside the banks. There are no coins!

Calculate-
a) The monetary base.
b) The banks’ reserve ratio.
c) Currency drain as a % of deposits.

Here are two questions about an economy that has six states,a through f, and six securities, G through L. The securities payoff matrix is X. Some securities may have negative payoffs in some states, you can think of these as forward contracts

G H I J K L
a 18 21 28 5 9 10
b 14 19 8 23 5 -5
Payoff(matrix) X c 8 11 14 -3 27 20
d 6 23 19 -1 26 14
e 19 -4 25 25 20 -10
f 1 -10 22 18 -1 7

1) Is the market complete?
Yes or No?
2)Sam wants a guaranteed income of 25$.Can you create a portfolio from the six securities to do that? If so how many units of securities H must you include in the portfolio?
a) -0.498 b) 0.200 c)4.39 d)4.57207

In response to the 2008 financial crisis, the policy maker enact the "Economic Stimulus Act of 2008" to create demand and prevent prices from falling. The content of the act can be found as follows,

1) Tax rebate to low or middle income workers
2) Tax incentive to stimulate business investment
3) Encourage loan modification to help homeowners with troubled asset by relaxing loan limit of GSEs

After 6 years, how can we justify the stimulus package?

Analyse the impact of gasoline tax on gasoline prices and output?

Suppose that when the price of a burger decreases from $2.00 to $1.75 and other things remain the same, the quantity demanded of burgers increases from 200 an hour to 400 an hour and the quantity demanded of pizza decreases from 400 an hour to 200 an hour. At the same time, the quantity demanded of soda increases from 150 an hour to 300 an hour.
a) Calculate the cross elasticity of demand for soda with respect to burgers.
b) Are soda and burgers substitutes or complements? Why?
c) Calculate the cross elasticity of demand for pizza with respect to burgers.
d) Are pizza and burgers substitutes or complements? Why?
e) Describe how the demand for soda and the demand for pizza have changed.

A government report traces the economy's stagnation in the last 15 months to massive decline in spending on commercial construction, while residential construction grew at only half pace. of recent note, however is a fall in inventories.

Does the fall in inventories appear in a positive or negative number? why?