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Expectations of policy variables
Using the IS-LM model for the following:
a. Suppose an economy gets into a liquidity trap. If the central bank manages through 'forward guidance' to persuade everyone that it will maintain the interest rate at 0 for the next few years, explain what might happen today to the IS curve and thus to equilibrium output.
b. Suppose a government announces that its fiscal policy will have to be tighter in future years to cope with the future fiscal implications of the ageing population. How will this announcement affect the economy today? Will it have more or less impact if the policy begins to be implemented today, rather than in the future? Does it matter how far into the future the policy will be implemented?
The rancher who owns the land is willing to sell the land for 2 million. Should the government proceed with this project (with no end date), assuming that annual benefits are steady at 110,000 per year? The interest rate is 4 percent.
Why, according to Keynes, is an economy in recession and why can such a recession be prolonged? Illustrate and discuss
Ralph Sampson, the company's CEO, want to cut back on production of the fishing anchor so that the company can make more yacht anchors.
Suppose you are considering starting your own consulting firm. You estimate if that if you did not start the firm, your starting salary at a job would be $40,000/yr. The revenues from this firm are expected to be $1,500,000. Determine the pre-tax acc..
Identify three cost classifications used in decision making and provide examples of each. Hint: not manufacturing cost?
Suppose the factory Afro-Puffs Inc. produces wigs. As a by-product of this wig production, they also produce dangerous emissions of toxic gases (as a result of the strong glue used to hold the hair in place). The De-Lite car factory, down the road, e..
All this is known to both players. Suppose both players behave according to the level-k thinking model discussed in class. Two players simultaneously guess a number.
Referring to text Chap 3 “ Product Innovation Charter”, explain what are the benefits of this up front charter document early on during the product development process ?? Also, explain your personal experience of the benefits you experienced from dev..
Suppose that two firms compete simultaneously in quantities. The inverse demand function is given by P = 12 - Q where Q = Q1 + Q2 is the sum of the quantities produced by firms 1 and 2 respectively. Assume also that these firms have NO COSTS. If firm..
Yesterday it paid a dividend of $3. What was the average annual growth rate of dividends for this firm?
Sailright Inc. manufactures and sells sailboards. Management believes that the price elasticity of demand is -3.0. Currently, boards are priced at $500 and the quantity demanded is 10,000 per year. Show all work in your answers. If the price is incre..
Nadine Chelesvig has patented her invention. She is offering a potential manufacturer two contracts for the exclusive right to manufacture and market her product. Plan A calls for an immediate single lump sum payment to her of $210,000. Plan B calls ..
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