Economics Answers

the importance price elasticity of supply in manufacturing sector and agriculture sector.

Inflation has remained low for the past three years but you have come to the conclusion that trend is ending and inflation will increase significantly over the next 18 months. Assume you have reached this conclusion prior to other investors reaching the same conclusion. What adjustments should you make to your bond portfolio in light of your conclusions

discuss with the use of examples, whether the government should directly provide certain goods and services in an economy

1. Company X wrote a check for 9,500.00 payable to Andrew Reyes and it cleared with the bank for the same amount. The accounting book of the company however shows that the same check issued to Mr. Reyes was recorded as 5,900.00. What is the effect of this entry to the bank or book balance? What will you do to reconcile the book and bank balances?

In the real business cycle model, suppose the government spending increases temporarily.

1. Determine the effect on labour market, holding the interest rate constant? [5 pts]

2. Explain what impact this temporary increase in government spending has in the goods market, holding the interest rate constant? Illustrate with graphs. [10 pts]

3. Suppose that the interest rate increases in response to this temporary increase in government spending. How will it affect the labour market and the goods market? Illustrate with graphs. [5 pts]

4. Argue that the price level could go up or down. Specify the conditions under which the price level goes up. Illustrate graphically. [ 6pts]

5. Determine whether investment and average labor productivity increases or decreases. [2 pts]

6. Are these predictions consistent with the business cycle facts? (Draw a table) [7 pts]

In the coordination failure model, suppose that there is a permanent increase in government spending.

1. Determine how this will affect output and employment. Illustrate graphically by drawing both the labor market and the output market. [15 pts]

2. Will real output become more or less volatile over time? [5 pts]

Consider the following numerical example using the Solow growth model. Suppose that

F (K, N) = zK1/2N1/2

Furthermore, assume that 5% of the capital is lost each period due to depreciation, the population grows by 1% each period, the consumer in this economy saves 20% of his income and the total factor productivity is z = 2. The unit period is one year.

1. Find the steady state per-capita quantity of capital (k*), production (y*) and consumption (c*). [5 pts]

2. Find the steady state quantity of capital per worker that maximize consumption per worker in this model. [4 pts]

3. Derive the golden rule steady state per-capita consumption (c**), production (y**) and saving (s**). [6 pts]

Show that the cardinal ordinal approaches have basically the same equilibruim conditions.

In a perfectly competitive and constant cost industry, all firms are identical. If the market demand function is:Q^D=600-P, a typical firm’s cost function is:

TC=q³- 20q² +120q

1. In the long run, what is the firm’s equilibrium production decision?
2. In the long run, what is the market equilibrium price and quantity? What is the industry’s long run supply curve?
3. In the long run, how many firms will stay in the industry?
4. If the government decide to impost a $7 tax per unit, what is the new long run equilibrium market price and quantity? 
5. How many firms are producing after the tax? 

Think about a monopolist, the market (inverse) demand function is: P = 30-2Q, his cost function is: C(Q) = 5+ Q²

1. What is the monopolist’s optimal quantity and price? 
2. What is the monopolist’s highest profit?