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1. Consider two projects. The first project pays benefits of $90 today and nothing else. The second project pays nothing today, nothing one year from now, but $100 two years from now. Which project would be preferred if the discount rate were 0%? What if the rate increased to 10%? 2. Suppose that the original before-tax demand curve is P = 98-2Qd and that supply is P = 2+2Qs. Now suppose a $3 unit tax is imposed on consumers.a. Use supply and demand diagrams to show the effect of a $3-unit tax imposed on the demand side. b. What is the before-tax equilibrium price and quantity?c. What is the after-tax equilibrium quantity?d. Calculate the economic incidence incurred by producers and the economic incidence incurred by consumers.e. How much tax revenue is raised?
A firm sells its product in a perfectly competitive market where other firm charges a price of $90 per unit. The firm's total costs are C(Q) = 50 + 10Q + 2Q2. How much output shoul
Figure below demonstrates a more developed version of the circular flow. In this figure we see how goods flow through various sectors of the economy. Figure Money in the c
Derive the conditions for steady state in the Solow model. What are its implications? In what respects is the golden rule different from the steady state?
neoclassical
Q. Define do you mean by GDP growth? By (nominal) GDP-growth we mean the percentage change in (nominal) GDP over a specific period of time. Real GDP growth is defined as percen
Limitations of the theory of rational expectations: Critics of this theory note that if policy makers have more information about the economy or their own actions than d
Financing of Fiscal Deficit: Since the size of balanced budget of the multiplier is small, it is not for all time possible to get the needed demand expansion by raising the exp
Analyze how taxes and subsidies impact market efficiency. Speculate if market efficiency would be increased or decreased without issues of taxes and subsidies. Justify your respons
Q. State the Marginal Productivity Theory. What are its features and assumption? Marginal Productivity Theory of distribution states that in a capitalist economy the demand for
AD-curve, just like before, displays combinations of Y and P where both goods market and money market are in equilibrium. At any given instance, even when we have inflation, aggreg
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