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a. What are the fiscal policy instruments? What are the fiscal policy types?
b. Do you agree with the following statement: “Even if the Congress does not pass anynew laws to stimulate the economy, the fiscal policy is still facilitating the economicrecovery?”. Explain what this statement implies. Use the appropriate terms to describethe mechanics of the fiscal policy in this situation.
c. Currently the economy is facing an inflationary gap and the government is extremelyconcerned with the rapidly raising prices.
i. Draw an AD-AS model showing this gap (actual real GDP is $670 billion,potential output is $650 billion).
ii. MPC in this economy is 0.6. What instrument should the government use to closethis gap? Calculate all appropriate multipliers. Calculate, explain, and comparethe effect of each instrument on the budget balance.
You are the manager of a monopoly. A typical consumer's inverse demand function for your firm's product is P = 250 − 40Q, and your cost function is C(Q) = 10Q. Determine the optimal two-part pricing strategy. How much additional profit do you earn us..
Suppose both firms have entered industry. What is joint profit-maximizing level of output. How much will each firm produce. How would your answer change if firms have not yet entered industry.
Banks are currently required to hold at least 10% of their checking deposits as reserves. Many bankers would prefer that the required reserve ratio be lowered to 0% (as in Canada and England, where there are no reserve requirements). Explain why this..
The first national bank received 3,000 inquiries following the latest advertisement decribing its 30-month IRA accounts in the Boston World, a local newspaper. The most recent as in similar advertising campaign in Massachusetts Business, a regional b..
Assume a good where its equilibrium price is 40 and its equilibrium quantity is 3.0 units. Compute the supply surplus when price is 60. Take into consideration that the elasticity of supply is 1 and the elasticity of demand (-1)
Assume that The United States passes a law that allows an additional 1 million persons to immigrate to the United States each year. Discuss the effects that this will have on the Production Posibilities Fromtier. (identify at least 3 effects)
The evidence shows that, over the last 25 years, spending on research and development in the rich countries has
You are the manager of a monopolistically competitive firm. The inverse demand curve you face is P = 50 – 4Q. Your cost function is C(Q) = 10 + 2Q. What level of output should you produce to maximize profits? What is your profit and what will happen ..
Explain how the velocity of money is likely to change when the following stabilization policies are undertaken. How will this change in velocity affect the impact of the stabilization policy?
There are two firms in a market for commercial dry suits. The market demand curve is P = 4,000 – 2.5Q, and each of the two firms has a total cost curve of C = 1,000 q with zero fixed costs. They have decided to collude with each other in order to obt..
Does under presentation of women and racial minorities on the bench hurt justice? Would citizens' views of the fairness of courts improve if more nontraditional people became judges?
Suppose for a moment that someone with legislative power decides to abolish Fractional Reserve Banking and passes a law that forces banks to only lend the money they own, that is M0. What would be the economy-wise implications of such a change in the..
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