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Asymmetric Information and the Credit Market. Sean is a rice farmer. To grow rice, he must buy seeds, which cost $100. Rice production is risky. If he gets a GOOD harvest, Sean earns revenues of $500. If, instead, he has a BAD harvest his revenues are $0. After Sean plants the seeds, he must decide to either WORK HARD or BE LAZY. If he chooses to WORK HARD, he will have a GOOD harvest with 80% probability. If he chooses to BE LAZY, he only has a 20% probability of having a GOOD harvest.
Assume that Sean has $100 in wealth, so he can buy the seeds and plant rice without a loan.
What is the expected value of Sean's consumption if he chooses to WORK HARD?
Aggregate demand management refers to the changing of policy variables like government expenditures, taxation (fiscal policy tools) or money supply and interest rates (monetary policy tools) to attain a target level of GDP. Why is there an inverse re..
q1. if the equilibrium level of aggregate expenditure is 80 billion as well as there is a reduction in consumption of 2
A monopolist with a straight-line demand curve finds that it can sell two units at $12 each or 12 units at $2 each. Its marginal cost is constant at $3 per unit. Given the demand curve, draw the MR, and MC curves for this monopolist.
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Assume quantity theory of money holds with constant K and Kf. Suppose Mexico wants to stabilize the exchange rate of its currency with US dollar (dollars/peso). (1) If US is running a 5% inflation rate solely due to the increase of money supply, what..
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If bonds of similar risk are currently earning a 10% rate of return, how much should the Complex Systems bond sell for today?
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Suppose that corn currently costs $4.00 per bushel and that wheat currently costs $3.00 per bushel. Also assume that the price elasticity of corn is 0.15, while the price elasticity of wheat is 0.20. If the government imposes a per-bushel tax on co..
List and describe the four types of unemployment. Using the expenditure approach, give an equation for GDP. Now explain it. If the CPI for 2006 was 170 and the CPI for 2007 is 204, what is the current inflation rate?
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