Clearly answer the following giving explanation question.,,,

1.Thoroughly discuss and graphically illustrate the difference between the following:

a) Demand and quantity demanded.

b) Supply and quantity supplied.

c) Movement along a curve and factors that lead to shifts in demand and supply curves.

2) Elasticity, Demand & Supply

a) Define the price elasticity of demand and price elasticity of supply.

b) Explain the components of the demand and supply elasticity formulas.

c) Why do elasticities of demand and supply tend to diverge between the short run and the long run?

d) Suppose the price elasticity of demand for natural gas -0.2 in the short-run and -0.7 in the long-run. If natural gas rates were increased by 28%, what would be the impact on the quantity demanded in the short-run? How about the long-run?

3) Substitution & Income Effects, Normal & Inferior Goods?Discuss with appropriate diagrams.

a) What is the substitution effect?

b) What is the income effect?

c) Why do substitution and income effects typically reinforce each other when we consider normal goods?

d) Is this true for an inferior good?

4) Profit Maximization and the Firm's Cost?Discuss with appropriate diagrams.

a) In a competitive market, what rule determines the profit-maximizing level of output?

b) What is the relationship between a firm's supply curve and its marginal cost curve?

c) What determines a firms' decision to enter a market?

d) What is the role of the average variable cost curve in determining whether firms will exit the market?

e) Under what circumstances are the entry and exit rules asymmetric?

5) Consumer Surplus, Producer Surplus?Discuss with appropriate diagrams.

a) Graphically demonstrate consumer surplus in the market for Butterfinger candy bars.

b) The city of Springfield, USA levies a tax on Butterfinger bars to help pay for the onslaught injured skateboarders in the emergency trauma center. Apparently, Bart Simpson wannabes get a bit over confident in their boarding abilities and end up with physical trauma. Show what happens to consumer surplus as a result of this tax.

c) Show what happens to producer surplus.

d) Show the deadweight loss, if any?

6) Efficiency, Welfare & Externalities

a) Discuss the notion of externality(s)?

b) Are they good or bad from an efficiency point of view?

c) Provide some everyday examples of positive and negative externalities with a brief discussion.

d) What is a public good?

e) Give an example of a pure public good.

7) Imperfect Markets

a) Discuss how the assumptions of the basic competitive model must be relaxed so that we may consider economic situations that are more realistic.

b) Define and provide an example of the following market structures:

i) Monopoly

ii) Oligopoly

iii) Monopolistic Competition

iv) Natural Monopoly

c) Discuss and graphically illustrate the welfare implications of the above market structures.

i) Can governmental intervention improve welfare?

ii) Can governmental intervention be harmful in some special cases?

8) Efficiency and the Competitive Model

a) Why are trade-offs unavoidable?

b) How are incentives important in understanding choices?

c) Why is there a trade-off between equity and efficiency?

d) After a voluntary exchange, why are both parties better off?

e) Define Pareto Efficiency and discuss the appropriateness of employing General Equilibrium Analysis in its assessment.

9) To Snoop Dogg, throw-back jerseys and bling-bling are normal goods.

a) Graphically, demonstrate how the budget constraint shifts if his income increases.

b) Choose an arbitrary benchmark point on the initial budget constraint as the

consumption combination selected by Snoop Dogg.

c) Now find two points on the new budget constraint such that the new preferred choice

of Snoop Dogg must fall between these points.

1. Which of the following is an example of the asset demand for money?

a. Marianne uses money in her checking account to buy groceries every week

b. Since the stock market has been volatile lately, Jean holds most of her savings in a bank accont.

c. Joan believes gold is an excellent store of value

d. Carla keeps $2,000 in a bank account in case of emergencies.

2. Which of the following events would be likely to decrease the supply of? money?

a. The Fed decreases reserve requirements for banks?

b. The Fed conducts an open market purchase of bonds.

c. Bank perceive loans to be less risky and are willing to hold fewer excess reserves.

d. The Fed increases the discount rate relative to the federal funds rate.

3. Suppose that initially the money supply is ?$3 ?trillion, the price level equals 3?, the real GDP is ?$5 trillion in? base-year dollars and income velocity of money is 5.

Then suppose that the quantity of money in circulation remain fixed but the income velocity of money doubles.

If real GDP remains at its? long-run potential? level, calculate the equilibrium price level.

4. Consider the following data. The money supply is $3?trillion, the price level equals 4?, the real GDP is ?$4 trillion in? base-year dollars.

Calculate the income velocity of money.

5. Suppose that? currently, the economy is overutilizing its resources.is overutilizing its resources.

Which of the following correctly describes what type of monetary policy the Fed might choose and how the policy would change the?economy?

a.The Fed could use a contractionary monetary policy to reduce short - run aggregate supply and GDP.

b. The Fed could use an contactionary monetary policy to reduce aggregate demand and GDP.

c. The Fed could use an expansionary monetary policy to increase aggregate demand and GDP.

d. The Fed could use an expansionary monetary policy to increase short ? run aggregate supply and GDP.

6. Suppose that the Fed judges inflation to be the most significant problem in the economy and that it wishes to employ all three of its policy? instruments, then the Fed will engage in

a. open market? sales, decreasing the reserve? requirement, and increasing the discount rate.

b. open market? purchase, increasing the reserve? requirement, and increasing the discount rate.

c. open market? purchase, increasing the reserve? requirement, and decreasing the discount rate.

d. open market? sales, increasing the reserve? requirement, and increasing the discount rate.

7. In the money supply affect the economy indirectly because

a. Interest rates increase causing planned investment to decrease, which causes a decrease in aggregate demand.

b. people have insufficient money balances, and thus, aggregate deman decreases.

c. People spend excess money balances and thus aggregate demand increases.

d. Interest rates decrease, causing planned investment to increase, which causes an increase in aggregate demand.

e. There is no indirect effect of the money supply on the economy.

8. Let's denote the price of a nonmaturing bond? (called a?consol) as Pb. The equation that indicates this price is Pb=1/r, where I is the annual net income the bond generates and r is the nominal market interest rate.

a. Suppose that a bond promises the holder ?$200 per year forever. The nominal market interest rate is 4 percent. Calculate the? bond's current?price. ?

1. Which of the following are considered money in the c. The Fed increases the interest rate it pays on U.S. economy? Which are not? Explain your answers reserves. by discussing each of the three functions of money. d. Citibank repays a loan it had previously taken a. a U.S. penny from the Fed. b. a Mexican peso e. After a rash of pickpocketing, people decide to c. a Picasso painting hold less currency. d. a plastic credit card f. Fearful of bank runs, bankers decide to hold more 2. Explain whether each of the following events increases excess reserves. or decreases the money supply. g. The FOMC increases its target for the federal a. The Fed buys bonds in open-market operations. funds rate. b. The Fed reduces the reserve requirement.Question 4 A If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, thenA calculateA the real value of outputA (Y).A