Economics Answers

Assume we have three state economy and two assets :

P(0) = [110.2472 111.7749] 108.5714 131.9048 P(1) = 117.3077 105.7692 119.4175 105.8252

Can you find a set of pseudo-probability consistent with this economy?

State whether the slope of the LM and IS curve is negative or positive ,support your answer

Explain the relationship between the rate of interest and demand for money within the Keynesian theory of money demanded.

How does this differ from the classical quantity theory of money demand?

Compare the effects of an autonomous increase in government spending in the IS-LM curve version of the Keynesian model with the effect of the same shift within the classical model

Suppose the following information describes the economy of a hypothetical country::

C        = 200 + 0.9Y_d

I         = 100

G        = 250

X        = 200

Z         = 50 + 0.12Y

t       = 20%

Using the multiplier approach, calculate the equilibrium income.

• A. 1925
• B. 1750
• C. 2950
• D. 2000

Following are the demand and supply function of a market

QD A = 8000 - 1000Px, QS A = - 4000+2000Px

i) Find out the market clearing price and quantity.

ii) Plot, on one set of axes, the market demand curve and the market supply curve

for commodity A and show the equilibrium point.

iii) Is the equilibrium stable? Explain.

Do we need cashless transactions what are the modes of cashless transactions

State whether each of the following is true, false or uncertain and explain why.

a) If a good is a normal good. then the substitution effect and the income effect are of the same sign.

b) If a consurner has Cobb-Douglas preferences, it is possible for one of the goods to be a Giffen good.

c) If a consumer has quasi-linear preferences over two goods, then her consumption of neither good depends on her level of income.

Suppose u = x1^1/2 x2^1/2 Initially we have p1 = p2 =1. but then p1 rises to 2. The consumer’s income is $40

a) . Solve for the optimal points both pre and post price change and show these point on a clear complete graph.

b) Define in words what the CV associated with this price change represents for this consumer. Using the method covered in class, solve for the CV associated with this price change for this consumer. Show this on a graph.

c) Define in words what the EV associated with this price change represents for this consumer. Solve for the EV associated with this price change for this consumer. Show this on a graph.

d) Which measure of welfare change is larger? Why?

1. Consider the market for minivans. For each of the events listed here, identify if the determinants of demand or supply are changed. Also indicate whether demand or supply increases or decreases. Then draw a diagram to show the effect on the price and quantity of minivans. Finally, show the new equilibrium price and quantity as a result of the change. (HINT: start with an initial equilibrium on the Demand and Supply diagram). a. People decide to have more children.