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Question 1
a Discuss two reasons why the GDP deflator gives a different rate of inflation than the CPI does. In calculating the real GDP of an economy, explain whether you will use the GDP deflator or the CPL.
b The Gini coefficient in Hong Kong was 0.525 in 2001 and 0.533 in 2006. Explain whether income inequality in Hong Kong has decreased or increased between these years. If an economy has a Gild coefficient of 1.000, what is the distribution of income?
Question 2
a Suppose your salary for this year remains the same as last year. Does that mean your real income remains the same? Explain.
b Suppose the people of an economy consume only two goods, namely food and clothing. The production of goods and services in this economy consists of 50 units of food, 100 units of clothing and 40 units of machinery for production for both years.
Food
Clothing
Machinery for production
Year 1 price
$10
$5
$20
Year 2 price
$15
$25
i Find the nominal GDP for the current year and the base year. Show all your workings.
ii What is the percentage increase in the CPI?
iii What is the percentage increase in the GDP deflator?
Assume the only choice variable is x. The total benefit function is B(x) =170x - x2 and the cost function is C(x) = 100 - 10x + 2x2
The consumption taxes the government collects in a given period are not restricted to be levied on consumption from only in that period.
Your cousin has just bought a used car for $6000.He is to pay for it as follows.A $2,000 down payment and 24 end of month payments of $177.28.What nominal annual interest rate is being paid?What is the actual interest rate?
Illustrate what are the arguments in favor of trade restrictions, and what are the counterarguments. According to most economists, do any of these arguments really justify trade restrictions.
An emissions fee is paid to the government, whereas an injurer, who issued and held liable, pays damages directly to the party harmed by an externality. What differences in the behavior of victims might you expect to arise under these two arrangem..
Joe owes Willy $5,000 from an old gambling debt. Joe knows that there is no way he can repay the debt in the near future. He asks Joe if he will take a $25,000 life insurance policy that has a cash surrender value
What is the highest profit or lowest loss availability to this firm?Should this firm operate or shut down in the short run? Why? What is the relationship between marginal revenue and marginal cost as the firm increases output?
What are the major differences between capitalism, communism, and socialism? B. Discuss the three major economic indicators and how they are indicative of our current economic climate.
You are the manager of an organization in America that distributes blood to hospitals in all 50 states and the District of Columbia.
Computer the amount of manufacturing overhead incurred for the month. Suppose all costs are actual. Using actual costing, compute the cost of one unit.
Illustrate what is the major pros of the real GDP measure. Construct a price index giving all products equal weight.
Suppose the number of points on an economics midterm (P) can be characterized by the following procution function: P=5H-4B; where H is the number of hours spent studying for the exam and B is the number of beers consumed the week before the exam.
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