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estion: Ms. Matilda Bracken is a Certified Financial Planner (CFP) with many years of successful experien... Ms. Matilda Bracken is a Certified Financial Planner (CFP) with many years of successful experience. In 2017, she decided that she was not adequately appreciated in her current position with a large financial institution in Windsor, Ontario. Given this, she resigned on November 1, 2017. After several months of investigation, she decided to take a position with Retirement Planners Ltd. (RPL), a Canadian controlled private corporation located in London, Ontario. She commenced working for RPL on May 1, 2018. She owned a home in Windsor which she had acquired several years ago for $375,000. Because of the depressed real estate market in this area, she was eventually forced to sell the property for $275,000 in October 2018, resulting in a $100,000 loss on this property. Because of the uncertainty surrounding the sale of her Windsor property, she moved into an apartment when she arrived in London on May 1, 2018. The apartment was rented on a monthly basis until November 30, 2018. After she accepts an offer to purchase her Windsor house, she finds a home in London that she purchases on November 1, 2018 for $420,000. She moves into this new home on December 1, 2018. Other Information: 1. Because of her strong professional reputation, RPL paid her a signing bonus of $12,000. The signing bonus was paid on June 1, 2018. 2. During the period May 1, 2018 through December 31, 2018, Matilda earned salary of $124,000. Of these earnings, $120,125 was paid during the period with the remainder paid in the first pay period of 2019. The company withheld the following amounts from her salary: Income taxes ---$18,650 CPP ---$2,564 EI ---$836 RPP Contributions ---$3,700 Payment for personal use of automobile ---$880 3- RPL contributed $3,500 on Matilda's behalf to the Company's RPP 4- RPL provides group medical coverage to all of its employees. The private health plan premiums paid by RPL on Matilda's behalf cost $562 for the year. 5- On December 12, 2018, a bonus of $10,600 was accrued for Matilda. Matilda received $5,300 of this bonus on December 29, 2018, with the remainder being paid on January 17, 2019. 6- During the year, Matilda received two non-cash gifts, a birthday gift worth $350 and a Christmas gift worth $300. 7- Because of the need to invest some of her additional income, RPL provided Matilda with financial counseling services. The value of these services as $1,200. 8- In order to assist her move, RPL agreed to compensate her for one-half of the $100,000 loss on the sale of her Windsor home. The $50,000 payment was made on December 1, 2018. 9- In order to help Matilda with financing her new London residence, RPL provided her with a $220,000 interest free housing loan. The funds are provided to Matilda on November 1, 2018. Assume that the prescribed rate for all of 2018 is 2 percent. 10 - RPL has a stock option plan for its employees. Under this plan, employees are permitted to acquire a limited number of option shares at 10 percent below their fair market value on December 1 of each year. The company hires valuators to determine the fair market value at each of those dates. Matilda acquires 200 shares on December 1, 2018 for cash of $7,200. On December 15, she sells 100 of these shares for $4,100. 11- Matilda paid $1,600 in CFP dues in 2018. RPL's policy is to reimburse 50 percent of such professional dues. RPL reimbursed her $800 in December, 2018. 12- RPL provides its professional employees with a membership in the London Curling Club. They believe this is a useful venue for entertaining clients of the Company. The cost of this annual membership was $1,300. 13- RPL provides Matilda with a vehicle that was purchased in 2018 for $45,200, including HST. The vehicle was used by Matilda for all months during the period May 1, 2018 through December 31, 2018. During this period, she drove the vehicle a total of 52,000 kilometers, of which 40,000 were related to her employment duties. RPL pays all operating and maintenance costs, a total of $8,900 during the period that Matilda used the car. RPL withheld $110 per month from her salary to pay for her personal use of the vehicle. 14- Matilda's new job requires her to meet with clients outside of regular office hours throughout the week. RPL will sign a T2200 stating that she is required to pay for certain employment expenses without reimbursement and use a portion of her home for work. Matilda has set aside a separate room in her apartment to be used exclusively to meet the clients. She used this office space between May 1 and November 30, 2018. This home office occupied 150 square feet of the 1,250 square feet available in her apartment. The home office in the residence she moved into on December 1, 2018 will not be available for use until 2019. RPL has agreed to let Matilda use head office space as needed during December. Home office related costs are as follows: Monthly rent ---$2,200 Office furniture ---$3,400 Computer purchase ---$896 Stationary and office supplies purchased --$147 Monthly phone line charge (7 months) ---$210 Employment related long distance calls (7 months) ---$110 Electricity charge (7 months) ---$350 Paint for apartment ---$165 Property insurance (7 months) ---$175 15- Matilda received an allowance of $325 per month for 7 months to cover the costs of maintaining a workspace in her home. **Required: Determine Matilda's net employment income for 2018.

Part I (311' points] 1. Use the following version of Model 1 to address pans a e. WP = on 411*]. + d2*K + d3*RM (1] Endogenous Exogenous L5 = so + 51*(wm)+ gram: (2) w. P, L, L'.Y K,RM,EITC L=L' {3) AD,C.I,T M,l-L,G Y = 100*L-7KJ (4) AD = k*Mz'P (5) EITC=earned income tax credit AD = C + I + G (6) C = 3* (Y-T) (7;. T = .25*Y (a) Y = AD (9) a. Determine the reduced form equation for employment. b. Determine the reduced form equation for output (income). c. Identify the Aggregate Supply curve. d. Use the results from a. b, and c to determine how an increase in the earned income tax credit (Elm-subsidies to low income workers) would affect employment. output. real wages, and the price level. Use the results from a1 b, and c to determine how a rise in governmental purchases [G] would affect employment. output, real wages. and the price level. Pan 1]. Answer two of the following three questions (20 points each]. Be sure to show your work. 2. Use the data in the table below to represent a household's consumption and income for each given year. - Use a xed weight index fLaspeyres] to determine how much income has changed for this household from year 1 to year 2. . Use a current weight index (Paasche) to determine how much income has changed from year 1 to year 2. . Use a chain weighted index to determine how much income has changed between the two years. Steak (pounds) Price Quantit $10 100 3. $20 80 The data in the table below describe key features of the trade relations between China and three of its major trading partners. Use these data to answer parts a. and b. Exchange rates are expressed in Chinese Yuan or Renminbi terms. Country Share of Exchange Rate Exchange Rate Price Index Price Index USA 30% 8.28 RMBJ$ 6.30 RMBI$ Trade 2012 zoos (CPI) 2012 (CPI) 1:15 RMBJEuro 3.25 RMBJEuro NA NA 12.9 Yen! RMB 12.8 YenJ'RMB 23D a. Calculate the trade weighted exchange rate for China for 2012, assuming that the 2005 rate equals 100. How much has it changed since 2005'? [Be ear-4h! to use appropriate units in your cofcufoomJ b. Assume that China's price index in 2005 was 100 and that for 2012. it stands at 130. How has the real exchange rate between the U.S 5:. China changed between 2005 and 2012'? c. Explain why the real exchange rate represents terms of trade. 1. Briefly explain the difference between the following a) Price effect, income effect and substitution effect. b) Marginal product and Average product c) Short run and long run in production 2. a] For a production function, prove that the Marginal Rate of Technical Substitution ( ) is equal to the ratio of marginal Products.( -) b) Find the MRTS for the production function q = 3103 407 3. Consider the production function q = LK + 0.5L?K - 0.313K a) Write the short run production function if capital = 20. b) Find marginal product of labor and average product of labor for the short run production function. 4. a) Define elasticity of substitution. How is it measured mathematically? b) If labor and capital are perfect substitutes in a production function, what do you think the elasticity of substitution would be? c) If labor and capital are used in fixed proportion, what do you think the elasticity of substitution would be?Total points possible: 40 1. For the following production function q = 5k 0.2/0.2 a. Find the MRTS b. Find the elasticity of production for capital and labor (Hint: Don't forget that q = 5/0.210.2 when simplifying the equation) C. Find the elasticity of substitution d. Is the technology represented by the production function q = (405 + (0.5)2 able to substitute between capital and labor better, worse, or the same as compared to the technology captured by the production function q = 5/0.2/0.24. Consider a 2-person/2-good exchange economy in which person 1 is endowed with (e], e;) and person 2 is endowed with (ef, e?) of the goods x1 and X2. Part A: Suppose again that tastes are homothetic, and assume throughout that tastes are also identical. (a) Draw the Edgeworth Box and place the endowment point to one side of the line connecting the lower left and upper right corners of the box. (b) Illustrate the contract curve (Le. the set of efficient allocations). Then illustrate the set of mutually beneficial trades as well as the set of core allocations (c) Why would we expect these two individuals to arrive at an allocation in the core by trading with one another? (d) Where does the competitive equilibrium lie in this case? Illustrate this by drawing the budget line that arises from equilibrium prices. (e) Does the equilibrium lie in the core? (f) Why would your prediction when the two individuals have different bargaining skills differ from this? Part B. Suppose that the tastes for individuals 1 and 2 can be described by the utility functions ul = xax; and ul = x1 x2 Bi- (where a and B both lie between 0 and 1). (a) Derive the demands for X1 and X2 by each of the two individuals as a function of prices P1 and p2 (and as a function of their individual endowments) (b) Let piand p2 denote equilibrium prices. Derive the ratio p2/pi. (c) Derive the equilibrium allocation in the economy - i.e. derive the amount of X1 and X'2 that each individual will consume in the competitive equilibrium (as a function of their endowments) (d) Now suppose that a = B, ie. tastes are the same for the two individuals. From your answer in (c), derive the equilibrium allocation to person 1