Economics Answers

Consider the following Cobb Douglas Production Function:

Y =√K √N

when K = 49 and N = 81

2.2 Is this production function characterised by constant returns to scale? Demonstrate.

2. What will happen to the equilibrium price and quantity of butter in each of the following cases? You should state whether demand or supply or both have shifted and in which direction using the appropriate diagrams:

a) A rise in the price of margarine

b) A rise in the price of bread

c) A rise in the demand for bread

d) An expected increase in the price of butter in the near future

e) A tax on butter production

Suppose we observe that the equilibrium price of a particular good has decreased significantly over the past 5 years, with virtually no change in the equilibrium quantity. Which of the following is the most likely explanation? Over the past 5 years:

A. both supply and demand have decreased.

B. supply has increased but demand has decreased

C. both supply and demand have increased

D. demand has increased but supply has decreased.

Using the multiplier process, explain the effect of a rise in investment on output and price in

an economy.

Think of a good or service you might like to provide to your community. Then, describe how you would supply the good or service. How would you go about estimating demand for your good or service? Evaluate whether there would be enough demand for there to be a “market” for your good or service.

What are the two main types of asset price bubbles? Discuss some of the policy responses

to possible bubbles.

Explain the dynamics of financial crisis.

What is inflation targeting? Elaborate its usefulness in the short-run and the medium-run.

Since the effects of policy are uncertain, more active policies lead to more uncertainty. 

Explain this statement in the context of using monetary policy as a tool to expand output 

during recession.

What is inflation targeting? How the target inflation rate can be achieved by central banks

using Tylore rule?