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1. Explain why the government deficit rises as the economy contracts.
2. You are given the following information about the economy in 2010 (all in billions of dollars):
a. Find equilibrium income. Show that the government budget deficit (the difference between government spending and tax revenues) is $5 billion.
b. Congress passes the Foghorn-Leghorn (F-L) amendment, which requires that the deficit be zero this year. If the budget adopted by Congress has a deficit that is larger than zero, the deficit target must be met by cutting spending. Suppose spending is cut by $5 billion (to $75 billion). What is the new value for equilibrium GDP? What is the new deficit? Explain carefully why the deficit is not zero.
c. Suppose the F-L amendment was not in effect and planned investment falls to I = 55. What is the new value of GDP? What is the new government budget deficit? What happens to GDP if the F-L amendment is in effect and spending is cut to reach the deficit target? (Hint: Spending must be cut by $21.666 billion to balance the budget.)
consider the following cobb-douglas production function for the bus transportation system in a particular city: Q = aL(B1)F(B2)K(B3) where L = labor input in worker hours F = fuel input in gallons K = capital input in munber of buses Q = output me..
Use the definition of derivative to explain why the derivative of an odd (even) function is even (odd).
Find a stable matching π' determined by the DAA when the Ms propose (Show the process). Is the matching π' efficient? Explain.
On the basis of the information regarding the risk involved in the two projects, you come up with the following probability distributions for the projects:
A worker will be paid $3,000 if she gets at least 40 answers right and $2,500 otherwise. For either type, an hour of studying is as bad as giving up $20 income. What is the equilibrium of this scheme?
Now suppose that there is a second ?rm with cost function c1 (q) above. Whichever cost function ?rm 1 chooses, the second ?rm will observe this choice and then have the option of entering the market or not. If he does not enter, ?rm 1 remains a mo..
fred has accepted a new job and the new company will match his contribution to a retirement fund. for every dollar
In the absence of participation incentives, will a confused student ask a question when it would be socially efficient to do so?
Assume that the reserve requirement is 5%. All other things equal, will the money supply expand more if the Federal Reserve busy $2,000 worth of bonds or if someone deposits in a bank $2,000 that he had been hiding in his cookie jar
A box of chocolates is to be shared by two children. The box contains ten milk chocolates and ten plain chocolates. Neither child likes plain chocolates. Describe the Paretoecient allocations.
In your second part of the essay, assume an economist estimates the present value of benefits (PVB) of the proposed policy to be $ 4.2 billion and the present value of costs (PVC) to be $ 5.6 billion. Is this proposal feasible? Explain briefly.
In the context of development priorities, what are the relative roles of central banks, commercial banks, development banks, informal and unorganized sources of credit, and microfinance such as the Grameen Bank of Bangladesh?
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