Economic outcomes, Public Economics

Assignment Help:

Suppose that economic outcomes can be classified as either good or bad. Governments differ in ability and this affects the likelihood of good outcomes. There are two types of governments: high ability or low ability. The prior probability that a government is high ability is 1/2. The probability that the economy is good given that the government is high ability is 3/4, while the probability that the economy is good given that the government is low ability is 1/4. In this case, the incumbent government can manipulate the economy and the electorate will learn (update) their beliefs about the ability of the incumbent government based on the observed state of the economy.

a) What is the probability that the government is high ability given that the economy is good? What is the probability that the government is high ability given that the economy is bad?

b) Suppose that the probability of the opposition being of a high type is 1/2. Voters vote for the government with the highest probability of being of a high type. What is the probability that the incumbent government will win an election against the opposition if the economy is good? What is the probability the incumbent government will win if the economy is bad?


Related Discussions:- Economic outcomes

Policy implementation , Your organisation has tasked your to reduce the rat...

Your organisation has tasked your to reduce the rate of a particular type of incident or particular type of high risk hazards which is commonly occurring. Your task requires you to

Micro economic, Explain the nature &importance of micro economic?

Explain the nature &importance of micro economic?

Welfare and subsidies, what are the costs and consequences of providing the...

what are the costs and consequences of providing the subsidies and welfare?

Cost-based methods - indirect opportunity cost, Normal 0 false ...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Importance of elasticities of demand and supply, QUESTION 1: Assuming t...

QUESTION 1: Assuming that you are a consultant on the ‘Light Rail' project and you are asked to forecast demand for this mode of transport. What are the forecasting techniq

Complex systems as tool for policy process, Quantitative policy process dep...

Quantitative policy process depends on a portfolio of tools that have been drawn from a variety of disciplines besides discretionary political decision. Over the past two decades

Public finance, What are the objectives of pubic finance

What are the objectives of pubic finance

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd