(a) Suppose that the economic is hit by a pandemic (e.g. Covid-19). The government responds to the pandemic by raising the public health spending per person (e.g spending on vaccination) temporarily (i.e. one-period only). Using the Solow growth model, assess the impact of the pandemic.

(b) Suppose that the economic is hit by a pandemic (e.g. Covid-19) which causes a temporary decrease in total factor productivity, z, as certain sectors in the economy (e.g. entertainment, travel etc.) cannot deliver the same quantity of output with physical distancing measures. In order to counteract the decrease in z due to the pandemic, the government increases temporarily G (i.e. spending on vaccines) which eliminates the pandemic in the future period completely. Using the Solow growth model (i.e. equations, graphs, and words), discuss the changes in economic variables in both periods

Suppose that a country experiences a reduction in productivity due to an increase in regulations on its energy sector. This is the equivalent of an adverse shock to the country's production function.

a) What will happen to the labor demand curve? Explain.

b) How would this change in productivity affect the labor market - that is employment, unemployment, and real wages - once the labor market reaches a new equilibrium?

c) How would this change in productivity affect the labor market in a country where the unionization of the labor force is relatively high and unions prevent real wages from falling?

2. Suppose a country has a money demand function:

(M/P)d = kY, where k is a constant parameter

Let's assume that the Money Supply grows by 10%/year and Real Income grows by

3%/year.

a) What is the average rate of inflation?

b) If real income growth was higher, how would that affect the inflation rate? Explain.

c) What is the economic meaning of k? How is it related to monetary velocity? Explain.

d) If the growth rate of monetary velocity increased steadily due to technical innovations,

how would that affect the rate of inflation? Explain.

1. True or false or "it depends"? (a) Briefly explain or qualify your answer: diversification can reduce risk only when asset returns are negatively correlated. (b) If the returns on all risky assets in the world were uncorrelated with each other, the expected return of each risky asset should be the same. 2. True or false or "it depends"? Optimal portfolios should exclude individual assets whose expected return and risk (measured by its standard deviation) are dominated by other available assets. 3. Is the following statement true or false? Explain. As more securities are added to a portfolio, total risk would typically be expected to fall at a decreasing rate. 4. You need to invest $10M in two assets: a risk-free asset with an expected return of 5% and a risky asset with an expected return of 12% and a standard deviation of 40%. You face a cap of 30% on the portfolio's standard deviation (the "risk budget"). What is the maximum expected return you can achieve on your portfolio? 5. Are the following statements true, false or uncertain? Briefly explain your answer. (a) Diversification over a large number of assets completely eliminates risk. (b) Diversification works only when asset returns are uncorrelated. (c) A stock with high standard deviation may contribute less to portfolio risk than a stock with lower standard deviation. (d) Diversification reduces the expected return on the portfolio as its risk decreases. 6. Are the following statements true or false? Give brief but precise explanations for your answers. (a) Stock A has expected return 10% and standard deviation 15%, and stock B has expected return 12% and standard deviation 13%. Then, no investor will buy stock A. (b) Diversification means that the equally weighted portfolio is optimal.

Question 2

A large group of overseas guests has arrived at the hotel where they will lodge for two weeks. Describe the different types of information that should be provided to them on arrival, to ensure they experience an enjoyable stay and one they will share with others.

Question 3

Identify at least six examples of common operational tasks that hospitality workers might undertake.

Question 4Identify six things that might be done at the end of a shift, and explain why it is a good idea to do these things at the end of each shift.

Question 5

Staff need to understand their own roles and responsibilities and the roles and responsibilities of other team members. Where will this information come from?

Question 6

Identify five tasks that might be covered by organisational policies and procedures. Do not repeat tasks that you have already identified when answering previous assessment questions.

1. (5 points) Suppose the cost of making a car is cheapest in Japan. Then Japan should specialize in producing cars.

2. (5 points) In order for an IRA to encourage savings (relative to a regular savings account), the substitution effect of higher interest rates must dominate the income effect.

3. (5 points) An index fund is a portfolio of stocks that tracks a broader index such as the Dow Jones Industrial Average or the S&P 500. Investing in an index fund is better than investing in the stock of an individual company because the index fund always has higher returns.

4. Consider the effect of interest rates on consumption today. Increasing interest rates always has a negative substitution effect (decreases consumption today) and a positive income effect (increases consumption today.

Consider the production of wine and cheese in France and Spain. This table gives the number of necessary hours to produce each (labor is the only input): France Spain 1 Kilo of Cheese 4 6 1 Bottle of wine 6 12 1. (5 points) For each good, which country has an absolute advantage? For each good, which country has a comparative advantage?

2. (5 points) Is it in Spain's interest to develop trade relationships with France? Is it in France's interest to trade with Spain? Is France more competitive at producing both goods?

3. (5 points) Suppose that France and Spain are under autarky (no trade). Draw the production possibility frontier for each country for the number of goods they can produce in one day (24 hours, one worker).

4. (5 points) France and Spain decide to trade and suppose they agree to trade one bottle of wine for k kilos of cheese. What values of k would make both France and Spain strictly better off under trade? Draw the new consumption set for each country under trade. How has it changed and why?

Suppose there are only two goods in the world: tea and coffee. In both the US one pound of tea requires 3 hours of labor to produce and one pound of coffee requires 2 hours of labor to produce. A worker can choose to work either in the tea industry or in the coffee industry (skills are completely transferable across industries) and consider the case when the labor market is perfectly competitive, and the market for tea and coffee are also perfectly competitive. 3 1. (5 points) What is the ratio of the price of tea to the price of coffee?

2. (5 points) Suppose that on the international market, due to the different production functions by different countries, we can trade k pounds of tea for 1 pound of coffee. For what values of k will the US choose to export tea? For what values of k will the US choose to export coffee

3. (5 points) For what values of k will the US be strictly better off under trade than under autarky? Why?

The problem of the firm given in class was to maximize the nominal firm value subject to technology and capital law of motion constraints. Note that the class derivation used net investment as the investment concept and the optimal condition that implicitly defines capital/investment demand was given by, mpkt = r (1) where r > 0 is the real interest rate. If instead I had used gross investment as the investment concept, the optimal condition that implicitly defines capital/investment demand would be given by, mpkt = r + (2) where 0 1 is the depreciation rate of capital. Note that the object (firm value) that would need to be maximized under the gross investment concept in real terms would be given by max n1,n2,k2 f(k1, n1) w1n1 [k2 k1(1 )] + 1 1 + r [f(k2, n2) w2n2 + k2(1 )] Let the production function for all t = 1, 2 be given by, f(kt , nt) = k t n 1 t , 0 < < 1 (3) Answer the following questions:

1. (5 points) Qualitatively justify (using words) why r + is the appropriate measure of marginal cost for undertaking investment activity. (Hint: You may want to think in terms of opportunity costs.)

2. (2 points) Given the production function provided above, determine the marginal product of capital mpk.

For the following, suppose that rather than the firm owning its own capital that they instead rent capital period by period from a firm that owns the capital. Let r k > 0 denote the real rental rate of capital. Under this structure, the object that needs to be maximized by the renting firm after substituting constraints is given by, max nt,kt X 2 t=1 1 1 + r t1 k t n 1 t wtnt r k t kt

(3 points) Under the firm owns its own capital structure, k1 was not a choice variable. Explain why it is fair to say that k1 is a choice variable under the capital renting model.

4. (2 points) TRUE, FALSE, or UNCERTAIN? Under the formulation given above, the real rental rate of capital r k t is a choice variable. State the implicit assumption being made in the model as it relates to price taking by the renting firm.

5. (2 points) Under the provided structure, we can ignore the discount factor and take a derivative for arbitrary t. That is, the optimization problem simplifies to, max nt,kt k t n 1 t wtnt r k t kt Calculate the derivative with respect to kt .

6. (2 points) Set the derivative calculated above equal to zero and state the inverse capital demand function. That is, the real rental rate of capital should be on the left hand side and some function of capital should be on the right hand side.

7. (2 points) TRUE, FALSE, or UNCERTAIN? Suppose that the real rental rate of capital increases then the renting firm's demand for capital will decrease ceteris paribus(holding all else equal).