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a. Suppose the central bank increases the rate of growth of the money supply. What effect will this increase in money growth have on seignorage in:
(1) The short run; and
(2) The medium run? Explain.
b. What is meant by debt monetization? Explain your answer with appropriate graph of the IS-LM model.
Consider the following data
Y
X
5
64
2
87
12
50
9
71
15
44
6
56
25
42
16
60
Plot a graph of Y against X
Find the correlation between Y and X
Test at 5% level of significance whether the correlation is significant or not
assume a pfizer has a monopoly in the antidepressants and pfizer cannot price discriminate Use a graph to illustrate the market price of Zoloft sold
Second question
2.consider a lottery with two equally likely outcomes ,$25 and $144,with associated utility function of individuals A,Ua(m)=root of 100m and individual B,Ub(m)=5m square
A.determine expected utility and utility of expect ed value of the lottery for each individual ?
B.define and compare certainty equivalent of individual A and B ?
C.compare risk premium of individual A and B ? why risk premium of individual A is higher ?
D.Compare and interpret the absolute risk aversion ,rA(m) of the two persons ?
3).consider a farmer in a rural village and a business man in an urban area that adopt various risk reduction strategies in Ethiopia .Assume also that most farmers in Ethiopia do not insure for crop and livestock failure and businessmen also hardly insured against property loss.
A) suggest at least two strategies adopted to reduce risk by each agent ?
B) explain concisely how each strategy can reduce risk by agents ?
1 a farmer faced with the choice of agricultural project A or B.in project A (crop production project ) and project B(dairy farming project ),the outcomes and the probabilities of out comes are as follows ፡
Project A
.10 percent chance of earning the profit of birr 16 million .
.80 percent chance of earning the profit of birr 9 million .
.10 percent chance of earning nothing .
Project B
.40% chance of earning the profit of birr 16 million .
. 30% chance of earning the profit of birr 8 million
.30% chance of earning nothing .
A.what are the expected values of these two projects .
B.which project should you recommend to the farmer and why ?
C.if the utility function of the farmer is u(w)=root of wealth ,where w is wealth of the farmer and which project should the farmer choose and why ?
Consider the following for a firm. Its stock price (P0) is at $50, its payout ratio (POR) is 0.4, its EPS1 is $2.00, and investor required return is 10%.. What is the percentage of capital gains?
A sample of 20 observations corresponding to the regression model
Y i =α + βX i + U i gave the following data.
∑y = 21.9
∑x = 186.2
∑ (x− ¯ x)(y− ¯ y) = 106.2
∑ (y− ¯ y) 2= 86.9
∑ (x − ¯ x) 2= 215.4
(a) Estimate α and β
(b) Calculate the variance of our estimates
What effect will each of the following have on the demand for small automobiles
such as the Mini-Cooper and Smart car? Answer with graph.
i. Small automobiles become more fashionable.
ii. The price of large automobiles rises (with the price of small autos remaining
the same).
iii. Income declines and small autos are an inferior good.
iv. Consumers anticipate that the price of small autos will greatly come down in
the near future.
v. The price of gasoline substantially drops.
- Consider the following for a firm. Its stock price (P0) is at $50, its payout ratio (POR) is 0.4, its EPS1 is $2.00, and the investor required return is 10%. What is its required rate of return on equity?
The Bok Chicken Factory is trying to figure out how to minimize the cost of producing 1200 units of chicken parts. The production function is q = 100L0.5 K0.5. The wage rate is birr 9 per hour and the rental rate on capital is birr 4 per machine hour.
Find the minimum cost of producing 1200 units.
Find the maximum output that can be produced for a total cost of birr 720.
