1 plz answer 3) 6 points Open Economy in the Short Run Economic expansion throughout the rest of the world raises the world interest rate Use the Mundell Fleming (IS LM ) model to illustrate graphically the impact of an increase in the world interest rate (r ) on the nominal exchange rate (e) and level of output (Y ) in a small open economy with a floating exchange rate system (4) 10 points The Model of AD and AS Assume that an economy is initially operating at the natural rate of output (Y ) A short run aggregate supply equation is given by Yt Y (Pt P e t ), where Y is output, P is the price level, P e is the expected price level, and 0 (a) 2 points What is the slope of the aggregate supply curve (b) 3 points According to the sticky price model, the value of depends on the fraction of firms with sticky prices Other things being equal, if a greater proportion of firms follows the sticky price rule, what happens to the slope of the AS curve (c) 5 points Use the model of aggregate demand and aggregate supply to illustrate graphically the short run and long run effects on price and output of an unexpected expansionary monetary policy change 3 (5) 10 points The Phillips Curve Suppose that an economy has the Phillips curve t e t 0 5(ut 0 06) (a) 2 points What is the natural rate of unemployment (u n ) (b) 4 points Use the Phillips curve diagram to illustrate graphically how the inflation rate () and unemployment rate (u) change in the short run to an unexpected expansionary monetary policy (c) 4 points Use the Phillips curve diagram to illustrate graphically how the inflation rate () and unemployment rate (u) change in the short run to an expected expansionary monetary policy (6) 10 points Consumption Theories (a) 3 points What were Keynes's three conjectures about the consumption function (b) 2 points What is the consumption puzzle (c) 3 points How does the Permanent Income Hypothesis (PIH) resolve the puzzle (d) 2 points Demographers predict that the fraction of the population that is elderly will increase over the next 20 years What does the Life Cycle Hypothesis (LCH) predicts for the influence of this demographic change on the national saving rate That is, will the national saving rate increase or decrease Why Beverly is planning a summer vacation and is about to book a hotel room online for $149 a night However, when she gets to the reservation screen, you are informed that she will be charged an additional $30 a night in various taxes that she has to pay to the hotel Between Beverly and the hotel, who is carrying the larger share of the economic burden of the taxes What ultimately determines whether Beverly or the hotel bear the majority of the economic burden Question 2 Roland has started his own line of perfumes Each of his bottles of perfume is priced $5 The table shows his supply plan with marginal cost, how many bottles of perfumes should he produce Bottles of Perfume Marginal Cost ($) 1 5 2 8 3 10 4 6 5 2 Question 3 Fei, Morgan and Lakesha are all in the market for new Levi's jeans The marginal benefits for each pair of Jeans per year for each of them is provided in the following table a If the price of a pair of Levi's jeans is $32, how many pairs of jeans will each person purchase b How much consumer surplus does each of them received from the last pair of jeans purchased c How much consumer surplus will each of them received for each of the pairs they buy at a price of $32 Quantity Fei Morgan Lakesha 1 $85 $40 $90 2 $60 $32 $75 3 $32 $24 $55 4 $20 $16 $32 5 $15 $8 $25 You are interested in evaluating a program that offers entrepreneurship training to unemployed youth The non governmental organization (NGO) implementing the program has compiled a list of unemployed youth who might be interested in the program To assess the impact of the program, they suggest comparing the incomes of youth who enroll in the training program to the incomes of youth who were not interested in the program You learn that 50 percent of the unemployed youth on the NGO's list of potential participants come from poor households the remainder come from non poor households Unemployed youth from poor households are typically unable to find even short term, casual work so all the poor youth on the NGO's list are interested in the training program However, non poor youth can often earn money doing casual work for their parents or relatives as a result, only half of the non poor youth on the NGO's list are interested in the program 1 An average worker in Brazil can produce an ounce of soybeans in 20 minutes and an ounce of coffee in 60 minutes, while an average worker in Peru can produce an ounce of soybeans in 50 minutes and an ounce of coffee in 75 minutes a Construct a table with data about both producers b Graph the production possibilities frontier of Brazil and Peru c Who has the absolute advantage in coffee Explain d Who has the comparative advantage in coffee Explain e If the two countries specialize and trade with each other, who will import coffee and who will import soybeans Explain

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 08, 2024

1 plz answer 3) [6 points] Open Economy in the Short Run Economic expansion throughout the rest of the world raises the world interest rate.

1 plz answer

3) [6 points] Open Economy in the Short Run Economic expansion throughout the rest of the world raises the world interest rate. Use the Mundell-Fleming (IS LM ) model to illustrate graphically the impact of an increase in the world interest rate (r ) on the nominal exchange rate (e) and level of output (Y ) in a small open economy with a floating-exchange-rate system (4) [10 points] The Model of AD and AS Assume that an economy is initially operating at the natural rate of output (Y ). A short-run aggregate supply equation is given by Yt = Y + (Pt P e t ), where Y is output, P is the price level, P e is the expected price level, and > 0 (a) [2 points] What is the slope of the aggregate supply curve? (b) [3 points] According to the sticky-price model, the value of depends on the fraction of firms with sticky prices. Other things being equal, if a greater proportion of firms follows the sticky-price rule, what happens to the slope of the AS curve? (c) [5 points] Use the model of aggregate demand and aggregate supply to illustrate graphically the short-run and long-run effects on price and output of an unexpected expansionary monetary policy change 3 (5) [10 points] The Phillips Curve Suppose that an economy has the Phillips curve t = e t 0.5(ut 0.06) (a) [2 points] What is the natural rate of unemployment (u n )? (b) [4 points] Use the Phillips curve diagram to illustrate graphically how the inflation rate () and unemployment rate (u) change in the short run to an unexpected expansionary monetary policy (c) [4 points] Use the Phillips curve diagram to illustrate graphically how the inflation rate () and unemployment rate (u) change in the short run to an expected expansionary monetary policy (6) [10 points] Consumption Theories (a) [3 points] What were Keynes's three conjectures about the consumption function? (b) [2 points] What is the consumption puzzle? (c) [3 points] How does the Permanent Income Hypothesis (PIH) resolve the puzzle? (d) [2 points] Demographers predict that the fraction of the population that is elderly will increase over the next 20 years. What does the Life-Cycle Hypothesis (LCH) predicts for the influence of this demographic change on the national saving rate? That is, will the national saving rate increase or decrease? Why?

Beverly is planning a summer vacation and is about to book a hotel room online for $149 a night. However, when she gets to the reservation screen, you are informed that she will be charged an additional $30 a night in various taxes that she has to pay to the hotel.

Between Beverly and the hotel, who is carrying the larger share of the

economic burden of the taxes?

What ultimately determines whether Beverly or the hotel bear the majority of the economic burden?

Question 2

Roland has started his own line of perfumes. Each of his bottles of perfume is priced $5. The table shows his supply plan with marginal cost, how many bottles of perfumes should he produce?

Bottles of Perfume	Marginal Cost ($)
1	5
2	8
3	10
4	6
5	2

Question 3

Fei, Morgan and Lakesha are all in the market for new Levi's jeans. The marginal benefits for each pair of Jeans per year for each of them is provided in the following table.

a. If the price of a pair of Levi's jeans is $32, how many pairs of jeans will each person purchase?

b. How much consumer surplus does each of them received from the last pair of jeans purchased?

c. How much consumer surplus will each of them received for each of the pairs they buy at a price of $32?

Quantity	Fei	Morgan	Lakesha
1	$85	$40	$90
2	$60	$32	$75
3	$32	$24	$55
4	$20	$16	$32
5	$15	$8	$25

You are interested in evaluating a program that offers entrepreneurship training to unemployed youth. The non-governmental organization (NGO) implementing the program has compiled a list of unemployed youth who might be interested in the program. To assess the impact of the program, they suggest comparing the incomes of youth who enroll in the training program to the incomes of youth who were not interested in the program. You learn that 50 percent of the unemployed youth on the NGO's list of potential participants come from poor households; the remainder come from non-poor households. Unemployed youth from poor households are typically unable to find even short-term, casual work; so all the poor youth on the NGO's list are interested in the training program. However, non-poor youth can often earn money doing casual work for their parents or relatives; as a result, only half of the non-poor youth on the NGO's list are interested in the program.

1. An average worker in Brazil can produce an ounce of soybeans in 20 minutes and an ounce of coffee in 60 minutes, while an average worker in Peru can produce an ounce of soybeans in 50 minutes and an ounce of coffee in 75 minutes. a. Construct a table with data about both producers b. Graph the production possibilities frontier of Brazil and Peru. c. Who has the absolute advantage in coffee? Explain. d. Who has the comparative advantage in coffee? Explain. e. If the two countries specialize and trade with each other, who will import coffee and who will import soybeans . Explain.