Economics Answers

Consider the following IS–LM model: C = 150 + 1/2YD T = 300 G = 300 I = 150 + 1/3Y − 10 000ρ ρ = i + x (M/P) d = 2Y − 20 000i M/P = 2600 a. Imagine the external finance premium (x) is zero. Derive the IS relation. b. Derive the LM relation. c. Solve for the equilibrium real output and interest rate. d. What is the cost of bank loans and the equilibrium level of investment? e. Now suppose that firms’ capital drops following a severe slump in stock prices and banks charge an external finance premium (x) on loans to firms equal to 0.5%

Suppose that the production function is given by 𝑦=0.5√𝐾√𝐿

a) Derive the steady-state levels of output per worker and capital per worker in terms of the saving rate, s, and the depreciation rate, δ.

b) Derive the equation for steady-state output per worker and steady-state consumption per worker in terms of s and δ.

Two goods have a cross-price elasticity of demand of +1.2 (a) would you describe the

goods as substitutes or complements? (b) If the price of one of the goods rises by 5 per

cent, what will happen to the demand for the other good, holding other factors constant?

1. Suppose that Yt follows the Moving Average process of order 1 (MA(1)) model Yt=ϵt−θϵt−1, where ϵt is i.i.d. with E(ϵt)=0 and Var(ϵt)=σϵ2 .

a) Compute the mean and variance of Yt

b) Compute the first two autocovariances of Yt

c) Compute the first two autocorrelations of Yt

Graph the following budget lines:

a) 10 F + 20 C = 400

b) 5 F + 10 C = 400

c) 10 F + 10 C = 400

d) 20 F + 20 C = 400

Compare a) to b), a) to c), and a) to d). Which comparisons represent income changes and which represent price changes

1) For the case of perfect complements, draw a budget line and a family of ICs. What is the

consumer’s most preferred market basket?

2) For the case of perfect substitutes, draw a budget line and a family of ICs. What is the

consumer’s most preferred market basket?(Hint: The ICs, which are straight lines in this

case, can have a different slope than the budget line)

I = 1000 PM = 20 PP = 5 • Where: I: income; PM: price of meat; PP: price of potato

1) Budget equation? Graph?

2) TU = ( M – 2 ) PM: quantity of meat, P: quantity of potato Which consumption possibility to maximize TU?

3) Write new budget equation when PP = 10. Which consumption possibility to maximize TU?

A forex trader from Mumbai collects the below information regarding the exchange rate between INR and USD:

Bid Price: INR / USD = 74.2400

Ask Price: INR / USD = 74.2500

If the bid and ask rate for USD-EUR are available as USD 1.16776-1.16782/EUR, what would be the bid-ask rates for INR/EUR, using the cross-rate method

"\\Delta" Y = - c (T ₂ - T ₁) - (M ₂ - M ₁)

May i know what is the -c ?

What is your opinion about the quote below.

"Social media can be a force of both GOOd and EVIL".