State whether the following are True (T) or False (F). Your answer must also have
enough supporting explanation that is consistent with your choice.
Without the presence of speculative bubbles, the current price of the stock should be
equal to the sum of the present value of its future dividend payments.
State whether the following are True (T) or False (F). Your answer must also have
enough supporting explanation that is consistent with your choice.
With free capital mobility and less trade barriers, the workers in the rich countries
will suffer lower real wage rates than before because of globalization.
State whether the following are True (T) or False (F). Your answer must also have
enough supporting explanation that is consistent with your choice.
Assuming that the economy is at the natural level of output, a tax-cut will boost the
output in the long run.
State whether the following are True (T) or False (F). Your answer must also have
enough supporting explanation that is consistent with your choice.
The IS curve is downward slopping because higher output results in higher
savings.
State whether the following are True (T) or False (F). Your answer must also have
enough supporting explanation that is consistent with your choice.
Hyperinflations distort prices, but they have no effect on real output.
Imagine you are playing a role as a member of Board of Governors of the Federal
Reserve System, such that you have the right to attend the Federal Open Market
Committee meeting to affect monetary policy by changing the federal funds rate (the
policy tool you possess is to change the interest rates via the federal funds rate). During
the March meeting, members discuss the following three issues:
a. the prospect of an upcoming recession, if they are not already in one,
b. the spiking oil price, and
c. the liquidity shortage generated by the subprime mortgage crisis.
Please tell me what your suggestions are for solving each problem and why you
think so.
Imagine you are playing a role as a member of Board of Governors of the Federal
Reserve System, such that you have the right to attend the Federal Open Market
Committee meeting to affect monetary policy by changing the federal funds rate (the
policy tool you possess is to change the interest rates via the federal funds rate). During
the March meeting, members discuss the following three issues:
a. the prospect of an upcoming recession, if they are not already in one,
b. the spiking oil price, and
c. the liquidity shortage generated by the subprime mortgage crisis.
At the mean time, European Central Bank and the Bank of Japan haven't touched
rates since credit problems emerged last year. The Reserve Bank of Australia and
Central Bank of Taiwan have been even raising rates. How will you predict the
trend of exchange rate movements between U.S. dollar and the other currencies?
Please explain your prediction with theories connecting to this problem.
Suppose that the market for textbooks in the National Chengchi University
neighborhood is represented by the following market demand curve: Q = 60 − P
Suppose that the market for textbooks in the National Chengchi University
neighborhood is represented by the following market demand curve: Q = 60 − P
Suppose that a second bookstore may open across the street from the University
Bookstore and that the new bookstore has an identical total cost curve. If the new
bookstore decides to open then the next decision it makes will be how many books
it would like to sell. Suppose that it can sell either 15 or 30 books. After observing
the new bookstore's choice of quantity the University Bookstore must choose a
quantity of books to sell and it can also choose either 15 or 30 books. The books
they sell are identical and the prices are the same. If the University bookstore sells
30 books then will the new bookstore be able to earn positive profits? Can the
University Bookstore credibly commit to selling 30 books? What will be the profits
of the two firms in the backward induction solution?
Suppose that the market for textbooks in the National Chengchi University
neighborhood is represented by the following market demand curve: Q = 60 − P
Finally suppose that before the new bookstore opens it must obtain a permit from
the government. If the University Bookstore pays the government $200 to maintain
its monopoly power then the new store will not be awarded a permit. If the
University Bookstore does not pay that $200 then the government will grant the
new bookstore the permit. Will the University Bookstore pay the $200 fee? If the
government can only gather the “tax revenue” from this monopoly charter fee (no
sales tax in this question), what is the highest amount they can possibly collect?
Find Susan's demand functions for museum and monument visits.
Suppose that the price of admission to a museum is $10 and the price of admission
to a monument is $5. What are Susan's demands for museum and monument visits?
What is the (own price) elasticity of Susan's demand for museum visits at these
prices?
Suppose that the price of admission to a museum falls to $8. What are Susan's
demands for museum and monument visits?
Putting museum visits on the x-axis and monument visits on the y-axis, illustrate in
an indifference curve diagram of Susan's optimal choice of museum and monument
visits when the prices of each are $ 10 and $5 respectively.
Illustrate in your diagram the effect of the decrease in the price of admission to
museums (from $10 to $8) on her demands for museum and monument visits. Make
sure to clearly indicate the income and substitution effects in your diagram for
both activities. Which effect (the income or substitution) is larger on her demand for
museum visits?
The United States embargo against Cuba forbids imports of Cuban cigars into the
country. American people can still get hold on those products through black market
transactions, but they have to pay higher prices than European pay for the same
products. With Fidel Castro stepped down last month, there is a chance that the U.S.
might lift the long-lasting embargo in the future. If that happens, please predict how the
prices of Cuban cigars will change in the U.S. and Europe, and how the wages of
Cuban cigar workers will be affected. Please also write down the assumptions you use
in the analysis explicitly.
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