Economics Answers

4. A country faced an unexpected build-up of foreign exchange earning

following a positive price shock on the country’s main export in the international market. This gain was, however, accompanied by a soaring

inflation. How and under what conditions, if any, can the build-up of

the foreign exchange reserve trigger inflation?

 Homework Assignment:  

Determine the present value of each perpetuity 

Perpetuity 

Annual Amount 

Discount rate 

A 

$20,000 

8% 

B 

100,000 

10 

C 

3,000 

6 

D 

60,000 

5 

If technological change increases structural unemployment, why do most governments and economists encourage such change?

6. Suppose that declining resource supplies reduce potential output in each period by 4%. What kind of monetary policy would be needed to maintain a zero rate of inflation at full employment?

What is price elasticity of demand? Do you expect the price elasticity of demand for the following goods to be elastic or inelastic? Elaborate your answer.

Beef and Chicken

Haircare products available in the market.

Apple Inc. products.

Insulin for diabetes patients.

Use of electricity.

2. As the economy slipped into recession in 1980 and 1981, the Fed was under enormous pressure to adopt an expansionary monetary policy. Suppose it had begun an expansionary policy early in 1981. What does the text’s analysis of the inflation-unemployment cycle suggest about how the macroeconomic history of the 1980s might have been changed?

1. The Case in Point titled “Some Reflections on the 1970s” describes the changes in inflation and in unemployment in 1970 and 1971 as a watershed development for macroeconomic thought. Why was an increase in unemployment such a significant event? 

The text outlines three kinds of unemployment: Frictional, Structural, and Cyclical. The Bureau of Labor Statistics describes a fourth kind, seasonal unemployment, as: “The seasonal fluctuations in the number of employed and unemployed people reflect not only the normal seasonal weather patterns that tend to be repeated year after year but also the hiring (and layoff) patterns that accompany regular events such as the winter holiday season and the summer vacation season.” Of the four, structural unemployment is the most challenging for people.

In this discussion assignment, provide an example of each kind of unemployment you have either experienced or witnessed. Consider what you might personally do to avoid structural unemployment in your own career.

Question

A firm has the following information on production and costs from past data:

Output (Y) 0 6 12 18

Total Cost (TC) 9 2775 5361 8199

If the total cost function is known to be TC=aY3+bY2+kY+f, and the demand for the product of the firm is Y=320-(1/2)P. answer the following:

Determine the coefficient of the cubic cost function.

Derive all cost and revenue curves and the profit function.

Show that the MC cuts the AVC when AVC is at its minimum point. Plot the relevant graph indicating all points.

The House of Music sells low cost turntables and speakers. The total revenue equation for sales the two products is given by

TR = QT – 6QT2 + 100 QS – 4QS2 + QTQS

where QT and QS are quantities of turntables and speakers, respectively. The marginal cost of turntables is $20 and the marginal cost of speakers is $10.

i) Are the two goods substitutes or complements?

ii) What is the profit-maximizing rate of output for each good?

iii) What would be the profit-maximizing rate of output if there were no demand interdependence between the two goods?