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Suppose the government is concerned that the going wage rate of $6 per hour for low skilled workers is too low. In an effort to improve the "welfare" of such workers the government offers to pay each low skilled worker $100 with the condition that they do not work any hours.
a. Can this plan succeed in increasing a worker's welfare? Demonstrate.
b. Must the plan be successful? Demonstrate.
c. From the worker's prospective, on what does the success of the plan depend? Explain.
Why might it be difficult for the Fed to formally adopt inflation targeting? Would inflation targeting be a good policy for the Fed in the present economic environment
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Describe the present economic crisis situation in Europe. Why has it been so difficult for the Europeans to find a solution to this problem? Comment on what implications the crisis may have for the rest of the world if Europeans are not able to ag..
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Comment on the effect of a recession on the investment curve (only) and on the level of savings, investment, and the equilibrium real interest rate in the financial crisis that hits United States first starting in fall 2007.
How will a fall in domestic investment affect the trade surplus and net capital outflows in the domestic economy, the trade deficit and capital inflows in the rest of the world.
Banking crises crisis decreases depositors' confidence in the banking system. What would be the effect of a rumor about a banking crisis on checkable deposits in such a country?
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