1. In a paragraph, explain what the balance of payments is and how current account surpluses and deficits work and how they impact the balance of payments. Give an example illustrating a scenario where the current account balance would increase and an example of where it would decrease.

In a second paragraph, explain what exchange rates are and how they operate. Explain how appreciation and depreciation impact exchange rates and the current accounts. Give an example of how exchange rates impact trade, tourism and travel. You should have 3 well thought out examples.

In a third paragraph, explain how foreign exchange markets work and how exchange rates impact the market. Give an example of how exchange rates impact the supply and demand of currency.

Draw a correctly labeled graph illustrating one of your examples from the second paragraph and add an explanation that details how you drew the graph and what you included in it.

2. Discuss the various price indices used to measure inflation in Pakistan. Comment on current situation of inflation in Pakistan using any Economics/ Business newspaper

3. Which is more efficient to use government expenditures or taxes to bring the economy from a recessionary gap to non-inflationary full employment level? Why?

4. Work problem number 17 from section 4.4 of your book (page 194) using the revenue function R(q)=450q and the cost function C(q)=9900+2q2. Round your answers to the nearest whole number.

a) At what quantity is profit maximized?

q =

b) What is the total profit at this production level?

profit =

5. The cost function for a product is C(q)=q375q2+1875q+1120 for 0q50 and a price per unit of $579.

Round your answers to the nearest whole number.

a) What production level maximizes profit?

q =

b) What is the total cost at this production level?

cost = $

c) What is the total revenue at this production level?

revenue = $

d) What is the total profit at this production level?

profit = $

6. Would you recommend a Balance Budget Multiplier method to bring the economy from a recession to non-inflationary full employment level? Why?

7. If I have just graduated college and landed my first job making $50,000 a year. I plan to marry and have two children and own a home. I also want to retire having at least $1 million dollars put away. How would I make this happen?

8. Draw a circular flow diagram and describe how it works

9. Because of sluggish sales in new homes around the nation, 22% of the construction workers in that industry are unemployed.

This raised the national unemployment rate to 7%. a. Problem?

b. Fix?

c. Fiscal Policies?

10. Identify the type of unemployment that would be present if each of the following individuals was actively looking for work. Explain.