1. A computer company is considering lowering the price of its laptop computer to promote sales. However, it worries that this will reduce desktop computer sales. It finds the cross product of demand to be 1.5. Are its concerns legitimate?
2. Why is it important to account for the net foreign factor income when calculating domestic income instead of national income?
3. Explain the impact of each of the following upon commercial bank reserves: (a) the Federal Reserve sells government bonds in the open market to private buyers; (b) the commercial banks reduce their indebtedness to the Federal Reserve Banks; (c) the Treasury makes a number of large disbursements in accelerating space research.
4. In the wake of trade war between US-China who gains and who loses from a protective tariff? Explain.