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1) Assume that an investor is risk-neutral (i.e. assume that the investor always chooses the investment with the higher expected rate of return even if it is riskier). If the yield on 1-year marketable CD's is 6% while the yield on 2-year marketable CD's is 7% and this investor purchased the 1year T-bill, what must (s)he expect to happen to short term interest rates over the coming year?
2) In question # 1 above, what is the expected interest rate level one year from now that would equalize the expected rate of return on one year and two year CD's if both were held for one year?
3) If the Fed lowers short term interest rates by 1/2% but investors believe this is just a temporary reduction which will only last a few months, and therefore their expectations of future short term interest rates remain unchanged, what will happen to the yield on 10 year Treasury bonds?
Derive the marginal cost curve from your answer to (c) and show the relationship between the marginal cost and marginal product of labor.
Suppose a new law establishes a minimum teacher salary that is 20 percent higher than the prevailing salary. How would you expect this law to affect the average quality of teachers and the taxes paid by the typical household?
Why it is important that prices are flexible in our economy? What happens if the government controlled the level of prices, how would this influence prices? How can you relate the law of demand to a recent purchase that you have had to make?
ACME Corporation consists of 250 grocery stores throughout the Midwest. At the starting of 2008 its statement of net worth showed the following data,
What are primarily intended to address the problem of insuring people who do not have health insurance? Would a public national health insurance system reduce total spending on health care in our economy?
In 2008, box industry was perfectly competitive. The lowest point on long run average cost curve of each of the identical box producers was $4,
rise in government spending increase employment and aggregate output in the short-run. Show graphically and use the GDP equation to support your answer.
Write an essay evaluating the role of governments in assuring that developing countries obtain a fair and adequate share of the benefits of international trade.
Write down the relationship between savings, capital formation, and consumption.
What would be your subsequent steps? Make sure you include both the positive and negative effects of your actions making sure you include the trade-offs or opportunity costs.
SAR Publisher is a monopolist in publishing a textbook on Hong Kong economy. Besides the Hong Kong market, SAR Publisher also sells this textbook in United State.
Illustrate what are the mistakes made by investors in dealing with foreign exchange investments? Provide examples.
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