00 Provide precise answers.
Until August 1971, industrialized countries around the world maintained a fixed exchange rate of their currencies with the US dollar, which was linked to gold. The gold standardized system was called the Bretton Woods Fixed Exchange Rate System. This system collapsed in 1971, and since then, the dollar has not been linked to gold. Based on your understanding of the international monetary system, complete the following statements: .A exchange rate is the quoted price for a unit of foreign currency to be delivered at a specified date in the future. . The government does not set a exchange rate, which means that supply and demand in the market determine the currency's value. . When American customers import less from Europe than they export to Europe, the euro relative to the dollar. . The of a currency refers to a decrease or increase, respectively, in the foreign exchange value of a floating currency. . Under a floating regime, the government plays a significant role in managing the exchange rate by manipulating the currency's supply and demand. Currencies under such a regime are currencies. .A occurs when a country agrees to exchange its own currency for a specified foreign money unit at a fixed exchange rate and legislates domestic currency restrictions unless it has the foreign currency reserves to cover requested exchanges.1. Explain the differences between the terms in each of these pairs: a. statistics b. macroeconomics c. positive economics economic model microeconomics normative economics 2. Why do economists often choose to present statistics in charts, tables, or graphs? 3. Create a simple model to explain how you decide how much time to study and how much time to unwind each evening. You may use 64 words, charts or graphs, or equations. 4. Think of an example of a macroeconomic issue that affects an h of individual person, family. or business and explain its effect. 5. Explain the value of statistics and other data to positive economics Ford Motor Company assembly line, em and to normative economics. Using Graphs 6. Using Your Notes In what Graphs are among the most Concepha Larities Differences ways was Adam Smith a Charts & Tables vs. important tools used by econom Graphs onomics microeconomist? In what ways Micro vs, Macro Create Graphs Use the followin ations is a macroeconomist? Refer to information about Model T Fords ounding holitive is Neemjet your completed comparison and (shown above) to create two line ject of en though contrast chart.53. 54. 55. 56. 57. 58. 59. . What is the prime interest rate and how is it related to the federal funds rate? 61. 62. 63. . How did the Fed initiate a restrictive monetary policy before and after the mortgage debt 65. 66. JL' J ' " ' u LLJ' money? Which tool is the most used one by the FOMC? What happens to the supply of money when the Fed buys securities and when it sells securities? What is repo and reverse repo transactions? What happens to the supply of money when the Fed raises the reserve ratio and when it lowers it? What is the interest rate that the Federal Reserve changes to commercial banks when it lends money to commercial banks? Which monetary policy tool was introduced in 2008? What is the federal funds rate? How did the Fed initiate an expansionary monetary policy before and after the mortgage debt crisis? What is zero lower bound problem? What is quantitative easing? crisis? Skip the Taylor Rule. What is the cause-and-effect chain of expansionary and restrictive monetary policy? What are problems and complications of monetary policy? (lags, cyclical asymmetry, the liquidity trap) d) (6 pts) Between October and November 2008, nominal interest rates on 1-year US Treasuries fell from 1.72 percent to 1.31 percent. During the same time period, 1-year inflation expectations from the Thomson Reuters/University of Michigan survey fell from 3.9 percent to 2.9 percent. This implies that the 1-year real interest rate increased over the same period Circle one: TRUE FALSE UNCERTAIN e) (6 pts) Since 2005, the government of India has run a budget deficit (that is, G > T). This necessarily implies that national savings have been below total investment in India. Circle one: TRUE FALSE UNCERTAIN f) (6 pts) The Chinese government seems likely to improve social insurance programs such as health insurance as China develops. Many experts believe that such a change will ultimately decrease the savings rate in China, and which will reduce the investment rate (the investment to GDP ratio) in China. According to the Solow model, a reduction in the investment (savings) rate -holding all else constant-would reduce the growth rate of GDP per capita in the long run. Circle one: TRUE FALSE UNCERTAIN g) (6 pts) Consider two countries, Japan and the USA. The USA enjoys much higher TFP growth than Japan, but Japan saves (and invests) a higher fraction of its national income. Both Japan and the USA can enjoy the same rate of growth in real output indefinitely. Circle one: TRUE FALSE UNCERTAINPlease refer to the background information below to answer the following six questions. Two firms, X and Y, have access to seven different production processes, each one of which has a different cost (dollars) and gives off a different amount of pollution (tons). The information is summarized in the table below. Process (daily smoke) Cost to Firm X Cost to Firm Y A (6 tons) 80 330 B (5 tons 210 720 C (4 tons) 420 1180 D (3 tons) 710 1750 E (2 tons 1080 2450 F (1 tons) 1530 3380 G (0 tons 2080 4480 23. If pollution is unregulated, and negotiation between the firms and their victims is impossible, firm X will use the production process [ Answer23A ], firm Y will use the production process [ Answer23B , and the total smoke emitted will be [ Answer23C ] tons per day. 24. Suppose the city council set a tax of 295 dollars on each ton of smoke emitted each day. We would expect the firms will emit a total of [ Answer24 ] tons of smoke per day. 25. Suppose initially there is no regulation on pollution (in particular, no tax is imposed on pollution), and the city council has recently decided to cut the total pollution (smoke emissions) by half. If the city council requires each firm to cut its emission by half, the total cost of reducing the emssion to the society will be [ Answer25 ] dollars per day. 26. Continue to assume that the city council wants to cut total smoke emissions by half. Suppose the city council like to set a tax of T dollars on each ton of smoke emitted each day. To achieve the desired reduction in emission, the T should be more than [ Answer26A ] and less than [ Answer26B ]. 27. Continue from the previous question. Using tax as a tool, the total cost of reducing the emission to the society is [ Answer27 ] dollars per day. 28. From the society's perspective, to cut the emission by half, it would be optimal for firm X to adopt process [ Answer28A ] and firm Y to adopt process [ Answer28B ]
