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a) The commodity and money markets of Juja farm, a hypothetical economy are as given below: Commodity Market Y = C + I C = 1000 + 0.8Y I = 2000 – 0.75r Money Market Lt = 0.25Y (Transactions and precautionary demand for money function) Ls = 1000 – 0.5r (Speculative demand for money function) Ms = 3200 (Money supply function) Required: i) Mathematically derive both IS and LM curves. (6 marks) ii) Derive the equilibrium level of Income and rate of interest. (4 marks) iii) If the money supply is increased by 80, what would be the effect on the equilibrium level of income and rate of interest in Juja farm economy?
- A product has a price elasticity of supply of +3.0. Calculate how much quantity supplied changes if the price falls from $13 to $11.70, while output was originally 5,000 units.
The advocates of ‘’Resource Dependence’’ approach believe that they want to create their monopoly and there is no need to rely on others rather others should rely on them.
In this context, discuss the BREXIT referendum initiative took by United Kingdom to exit from European Union?
Analyse the BREXIT’s impact on UK’s economy.
Develop arguments whether UK’s decision to remain aloof bear fruitful results for it?
Define carefully the difference between movements along the AD curve and shifts of the AD curve. Explain why an increase in potential output would shift out the AS curve and lead to a movement along the AD curve. Explain why a tax cut would shift the AD curve outward (increase aggregate demand).
Case Study 1 – The Economic Daytime Running Light
75% of driving takes place during the daytime.
2% of fuel consumption is due to accessories (radio, headlights, etc.). Cost of fuel = $4.00 per gallon.
Average distance traveled per year = 15,000 miles.
Average cost of an accident = $2,800.
Purchase price of headlights = $25.00 per set (2 headlights).
Average time car is in operation per year = 350 hours.
Average life of a headlight = 200 operating hours.
Average fuel consumption = 1 gallon per 30 miles.
Answer the following set of questions:
1. What are the extra costs associated with driving with headlights on during the day?
2. What are the benefits associated with driving with headlights on during the day? 3. What additional assumptions (if any) are needed to complete the analysis? 4. Is it cost effective to drive with headlights on during the day?
Froyd Review & Training Center Inc. is expanding its school facilities starting 2001. The program requires the following estimated expenditures:
P1,000,000 at the end of 2001
P1,200,000 at the end of 2002
P1,500,000 at the end of 2003
To accumulate the required funds, it establish a sinking fund constituting of 15 uniform annual deposits, the first deposit has been made at the end of 1992. The interest rate of the fund is 2% per annum. Calculate the annual deposit.
Indicate whether there are weaknesses in the organization’s internal control system. If there’s any, discuss the weaknesses identified and suggest ways to address these.
1. The proprietor’s brother serves as an accountant and a cashier at the same time.
2. Operating expenses are paid primarily through checks, except for small amount payments.
3. Cash receipts are not deposited to banks until the next morning because the cashier is too busy.
4. Each and every payment must be approved according to the company’s line of authority.
Suppose all bidders’ values are uniform on [0, 1]. Construct a revenue-maximising auction. What is the reserve price?
Suppose the bidders’ values are i.i.d., each according to a uniform distribution on [1, 2]. Construct a revenue-maximising auction for the seller
. In an industry with inverse demand curve p = 100 - 2Q there are four firms, each of which has a constant marginal cost given by MC = 20. If the firms form a profit-maximizing cartel and agree to operate subject to the constraint that each firm will produce the same output level, how much does each firm produce?
2. What is the duopoly Nash-Cournot equilibrium if the market demand function is Q = 1000 - 1000p and each firm’s marginal cost is 28¢ per unit?
Suppose we have an annuity with 5 annual payments of
Rs.5000 each, starting at the beginning of the year, and the
interest rate is 10% per year. The future value of annuity is
