Economics Answers

Calculate GDP using the Income and Expenditure Approach. (Both approach should be the same answer). Show all working for both Approaches

(all figures are in billions of dollars):

Item Amount ($)

Government purchase of goods and services 1,721.6

Exports 1,096.3

Receipts of factor income from the rest of the world 382.7

Depreciation (consumption of fixed capital) 990.8

Net fixed Investments 688.2

Corporate income taxes 265.2

Consumption expenditures 6,739.4

Indirect business taxes 664.6

Imports 1,475.8

Payments of factor income to the rest of the world 343.7

Inventory change 56.5

Social security contributions 702.7

Undistributed corporate profits (retained earnings) 130.3

Government transfer and interest payments 1,366.3

Personal interest payments 286.2

Personal taxes 1,235.7

Examples of price charges per minute by AT&T for long-distance telephone calls within the United States at different times of the day and week are as follows:

  Washington Phil. D.C. Washington, D.C.

D.C. to Phil. to St. louis to L. A.

Peak (8am - 5pm

Monday - Friday) $0.21 $0.22 $0.24

Evenings 5pm - 11pm

Monday - Friday $0.13 $0.13 $0.14

Nights & weekends $0.11 $0.11 $0.12

 a. Are there differences in incremental or outlay costs per minute for AT&T for telephone calls made during peak hours compared to telephone calls made at other times of the day?

b. Why do you think AT&T charges different prices per minute for telephone calls made during peak hours compared to telephone calls made at other times of the day?

Consider the Ramsey model seen in class. Assume population grows at rate n, and labour-

augmenting technology grows at rate g. Relative risk aversion is constant and equal to

θ.

1. For an initial value of capital per efficiency unit, k(0), use a phase diagram to sketch the different

paths along which the economy may evolve for different levels of c(0) chosen, given the Euler

equation (derived from the household’s optimization problem) and the steady state condition from

Solow.

2. Do these paths also satisfy the household budget constraint and the requirement that capital

cannot be negative? Why or why not?

3. Show that steady state capital (per efficiency unit) in the RCK framework is always lower than the

golden rule level. Provide intuition for this result.

Which of the following is not true:

A. Cyclical unemployment exists because of recession

B. Full employment requires that no cyclical unemployment exists on the labor market

C. Structural unemployment exists because of mismatched worker skills and job availability.

D. It is logically impossible for both the unemployment and the employment rates to both simultaneously increase or decrease

E. Frictional unemployment on the labor market arises from a lack of information in the labor market.

Explain each of the following statements using supply-and-demand diagrams.

a) “When a cold snap hits Florida, the price of orange juice rises in supermarkets throughout the

country.” (2.5 Marks)

b) “When the weather turns warm in New England every summer, the price of hotel rooms in

Caribbean resorts plummets.” (2.5 Marks)

c) “A strike by steelworkers raises steel prices.” (2.5 Marks)

d) “The price of station wagons rises.” (2.5 Marks)

QUESTION EIGHT

a) What are the main features of the perfectly competitive market? (6 marks)

b) With the help of well-labeled diagrams, compare the long run equilibrium of a firm under a

perfectly competitive market structure and a monopoly market structure. (14 marks

Explain the term “opportunity cost”. (4 Marks)

ii) Illustrate with examples the practical importance of this concept with reference to

the individual, the firm and the state (6 Marks)

(b) Define the following with examples,

i.Economics

ii.microeconomics

iii.macroeconomics

What is a Hubbert curve? Draw an example of a typical hubbert curve. Be sure to include the x and y axis label.

You have been hired as the Chief Strategist and Policy Analyst for a commercial bank in your jurisdiction. You are to assess the impact the global financial crisis of 2007/2009 had on the pace of the Basel 2/3 reform agenda in your jurisdiction. What are the implications of the current covid 19 on this agenda and what are five immediate steps that you will take to position your institution as a resilient bank for the future

Problem 9. Kutahya’da 3 pizza firmasinin (Pizza Il Forno, Dominos Pizza, Pizza Express) oldugunu varsayalim. Asagidaki tabloyu kullanarak pizza piyasasina ait piyasa arz egrisini elde ediniz.

5

Fiyat ( ) 5

5.5 5.75

6 6.25

Brownie fiyati ( )

1 1.5 2 2.5

Dominos Pizza 30

40

50

60

70

Talep edilen miktar (ortalama gelir 3,000 ) 2,400

1,600

800

400

Pizza Express 20

25

30

35

40

Talep edilen miktar (ortalama gelir 5,000 ) 3,600

2,800

2,400

1,800

Pizza Il Forno 25

30

35

40

45

Table 2.1 contains information on three techniques for producing $15 worth of bar soap. Assume that we specified “$15 worth of bar soap” because soap costs $3 per bar and all three techniques produce 5 bars of soap ($15 = $3 per bar × 5 bars). So you know each technique produces 5 bars of soap.

a. What technique will you want to use if the price of a bar of soap falls to $2.75? Which technique will you use if the price of a bar of soap rises to $4? To $5?

b. How many bars of soap will you want to produce if the price of a bar of soap falls to $2.00?

c. Suppose that the price of soap is again $3 per bar but that the prices of all four resources are now $1 per unit. Which is now the least-profitable technique?

d. If the resource prices return to their original levels (those shown in the table) but a new technique is invented that can produce 3 bars of soap (yes, 3 bars, not 5 bars!) using 1 unit of each of the four resources, will firms prefer the new