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An expected utility maximizing individual has utility of eno-of-period wealth given by
u(W)= W^(1-y)-1, if y is not equal to 1ln(W), if y=1
1. Show that this individual has constant relative risk aversion and decreasing absolute risk aversion.
2. Consider the special case where y=2. Suppose that this individual is endowed with an initial wealth, Wo but his end of period wealth is subject to random income shock given as follows
$y, with probably p$0, with probability 1-p
where 0<p<1
He can purchase insurance at a cost of $c to remove the risk of receiving no income. At what level of initial wealth will he be indifferent between taking on the risk of getting no income and buying the insurance that removes the risk?
Disscuss the contrasting views of the Keynesians and the monetarists with regard to an appropriate.
In a few weeks Professor Smith will be taking his daughter Attilla to the State Fair. Calculate the Marginal Rate of Substitution (MRS).
Illustrate the position of US economy over the next couple of years using aggregate demand and supply curves if these expectations are to be realized.
Lerner Index to compute your price mark-up. What is your optimal price if you produce 1000 units.
you select to work more hours or fewer when offered a higher hourly salary.
Suppose that this price cut was completely responsible for its raise in revenues from 460 million yen in 1966 to 640 million yen in 1967. Compute the indicated arc elasticity of demand.
A nation has a lower inflation rate than all other nations, It has more rapid economic growth.
Explain the advantages and disadvantages of using a change in the tax rate to achieve the desired increase in output.
Explain why is strong home currency mitigate the growth of inflation rate locally
Assume worker productivity increased at the rate what rate of increase in RGDP would be sustainable without increasing inflation pressures.
Discuss the short-run movement toward equilibrium in the currency markets in a flexible exchange system.
Assume that Florida migrant workers are effectively unionized. What will be the impact of unionization on?
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