Explain the following attachments.
rnr r'- r" 1.The concept of GDP is used by policy makers for many purposes that include keeping track ofthe growth of our economy and forecasting a recession; but it is also abused by some. Discuss some of the applications of GDP which may be considered improper use or abuse of the concept. 2." Even though the Great Recession ofcially ended, the unemployment rate is still considered high.' Discuss. 3.Discuss how the distribution of income among various groups of income earners have changed in this country during the past 5D years. in your opinion, do we need to initiate any policy to address the distribution of income? Make sure you provide references to anyconclusions you arrive at. 4.Many people feet the Fed, which is largely independent of Congress and the President, is too powerful. In fact, the Chairman of the Fed Board of Governors, Ben Bernanke, has been called the second most powerful person in the country. Do you think the Fed is too powerful? Should Congress have more oversight of the Fed? Share your thoughts. 5."N either monetary policy nor fiscal policy alone can be effective in formulating sound economic policies for recession.' Do you agree or disagree? Share your thoughts. Effou now should realize how important it is for economists to try and predict future conditions of the LLB. economy. Economists are also interested in the performance of the economy at a more local level. Discuss how local and national forecasts play an important role in the State and Federal levels. If here have been significant discussions on the government's scal policy during the Great Recession. in particular, many did not like the government's actions in salvaging the auto industry in providing guaranteed loans to GM and Chrysler. What is your opinion? Provide economic reasons for your opinion. vi payments accounts, still PLEsuit IsOnly foreign currency traded with the Canadian dollar. 7. For each of the following situations, outline the effect on the price of the Canadian dollar in terms of US dollars and draw a demand and supply graph that illustrates the changes that occur in the foreign exchange market for the Canadian dollar. . A contractionary monetary policy initiated by the Bank of Canada raises Canadian interest rates. b. Canada's real output rises at a time when real output in the United States is falling. c. Americans (but not Canadians) find Canada a more attractive place to make financial investments. d. Given Canada's aging population, more Canadian "snowbirds" travel to the United States each winter. e. Due to a credit crisis that affects US financial institutions more than it does Canadian ones, Canada's attractiveness as a destination for direct and portfolio investment increases. f. The Bank of Canada initiates an expansionary monetary policy that reduces Canadian interest rates.ocew/content/group/1:406fble 2593-423d-bf71-710356373a56/Problem?120sets/Lcon101P57.pdf of quantity. Then find marginal revenue as the derivative of total revenue with respect to quantity. Plot MR, and explain why it is downward sloping- (e) The monopolist's optimal quantity occurs where MC crosses MR. Mark this quantity on the graph, and make sure it matches your answer to 2(d)- (f) Also mark the monopolist's price Pm from 2(e). Is this price above or bekes ATC at that quantity? Explain why you knew that would be the case. (g) The competitive market outcome happens when the demand function crosses marginal cost (the supply function in a competitive market). Find p" and y" as if the market were competitive. Mark these on the graph. 4. This question concerns surplus and efficiency of the market under monopoly. (a) On the graph you just drew, shade/color (and label) the areas corresponding to producer and consumer surplus under the monopoly outcome. (b) Calculate consumer and producer surplus. Note that producer surplus is a trapezoid; you can calculate its area either by splitting it into a rectangle and a triangle, or by using the formula for the area of a trapezoid (Google it if you don't know). (e) Recall that producer surplus is profit plus fixed cost. Is that the case here? (d) On the graph you drew in question 2, shade/color (and label) the area that represents the deadweight loss from having the monopolist outcome (Pa. ym) rather than the com- petitive outcome (p' y') then calculate its value. 84. Consider a variant on the Aghion and Tirole (1997) model. Poppy, the principal, and Aiden, the agent, together can decide on implementing a new project, but both are unsure of which project is good and which is really bad. Given this, if no one is informed they will not do any project and both parties get zero. Both Poppy and Aiden can, however, put effort into discovering a good project. Poppy can put in effort E; this costs her effort cost - E' , but it gives her a probability of being informed of E. If Poppy gets her preferred project she will get a payoff of $1. For all other projects Poppy gets zero. Similarly, the agent Aiden can put in effort e at a cost of - e'; this gives Aiden a probability of being informed with probability e. If Aiden 2 gets his preferred project he gets $1. For all other projects he gets zero. Note also, that the probability that Poppy's preferred project is also Aiden's preferred project is a (this is the degree of congruence is a). It is also the case that a if Aiden chooses his preferred project that it will also be the preferred project of Poppy. (Note, in this question, we assume that a = [ from the standard model studied in class.) (a) Assume that Poppy has the legal right to decide (P-formal authority). If Poppy is uninformed she will ask the agent for a recommendation; if Aiden is informed he will recommend a project to implement. First consider the case when both Aiden and Poppy simultaneously choose their effort costs. Write out the utility or profit function for both Poppy and Aiden. Solve for the equilibrium level of E and e, and show that Poppy becomes perfectly informed (E = 1) and Aiden puts in zero effort in equilibrium (e = 0). Explain your result, possibly using a diagram of Poppy's marginal benefit and marginal cost curves. What is Poppy's expected profit? (b) Now consider the case when the agent Aiden has the formal decision making rights (Delegation or A-formal authority). In this case, if Aiden is informed he will decide on the project if he is informed; if not he will ask Poppy for a recommendation. Again calculate the equilibrium levels of E and e
