Part one.

Explain.

Everything else constant, the international trade effect indicates that aggregate expenditures in the domestic economy fall when:

A) domestic prices fall relative to foreign prices.

B) domestic interest rates fall relative to foreign interest rates.

C) domestic prices rise relative to foreign prices.

D) domestic purchasing power rises relative to foreign purchasing power.

E) domestic interest rates rise relative to foreign interest rates.

The aggregate demand curve shows:

A) how the equilibrium level of aggregate expenditure changes in response to changes in production.

B) the amount people spend at different real GDP levels.

C) the positive relationship between the price level and real GDP.

D) the negative relationship between aggregate expenditure and real GDP.

E) how the equilibrium level of aggregate expenditure changes as the price level changes.

Which of the following is associated with an increase in the average price level?

A) A decrease in the aggregate quantity demanded

B) An increase in the aggregate quantity demanded

C) A leftward shift of the aggregate demand curve

D) A rightward shift of the aggregate demand curve

E) Aggregate quantity demanded remains unchanged but the aggregate expenditures curve shifts leftward.

Suppose an appreciation of the French franc causes U.S. prices of French wine imports to rise sharply. On the other hand, Californian wine becomes relatively inexpensive to French consumers. Other things equal, this will result in:

A) an increase in U.S. aggregate expenditures and an increase in the aggregate quantity of U.S. goods and services demanded.

B) a decrease in U.S. aggregate expenditures and a decrease in the aggregate quantity of U.S. goods and services demanded.

C) an increase in U.S. aggregate expenditures and a decrease in the aggregate quantity of U.S. goods and services demanded.

D) no change in either U.S. aggregate expenditures or the aggregate quantity of U.S. goods and services demanded.

E) a decrease in U.S. aggregate expenditures and an increase in the aggregate quantity of U.S. goods and services demanded.

The Keynesian region of the aggregate supply curve is:

A) horizontal.

B) downward-sloping.

C) upward-sloping.

D) vertical.

E) a 45-degree line.

The Keynesian region of the aggregate supply curve explains the situation experienced during the Great Depression. Therefore, we can conclude that the Great Depression was characterized by:

A) high unemployment and low inflation.

B) low unemployment and low inflation.

C) low unemployment and high inflation.

D) high unemployment and high inflation.

E) excess capacity but no unemployment or inflation.

When total planned expenditures are more than real GDP, there will be inventory accumulation.

A) True

B) False

If total planned expenditures exceed real GDP, the economy will contract, causing production of goods and services to decrease and unplanned inventories to rise.

A) True

B) False

When the aggregate expenditures function of a closed economy is plotted against real GDP, any point on the 45-degree line represents C + I + G = Y, where C = Consumption, I = Investment, G = Government spending, and Y = Real GDP.

A) True

B) False

Injections represent outflows of planned expenditures from the real GDP stream.

A) True

B) False

Injections to the economy include consumption, investment, and government spending.

A) True

B) False

Leakages are greater than injections when total planned expenditures exceed real GDP.

A) True

B) False

Other things equal, a reduction in personal income taxes will decrease consumption and will have an expansionary effect on real GDP.

A) True

B) False

Suppose for an economy, investment = $40; saving = $50, government spending + exports = 100; and taxes + imports = $110. Then for this economy, total leakages exceed total injections by $20, so there will be pressure for the economy to contract.

A) True

B) False

The paradox of thrift explains that increased savings by households could actually lower savings for the economy as a whole.

A) True

B) False

A marginal propensity to consume of 0.75 and a marginal propensity to import of 0.05 are associated with an open-economy spending multiplier of 3.33.

A) True

B) False

In general, autonomous spending increases have a lower multiplier effect on real GDP when the economy is open to international trade.

A) True

B) False

If the MPS equals 0.25 and the MPI is 0.15, then an initial change in investment spending of $250 million will result in a total change in equilibrium real GDP of $625 million.

A) True

B) False

Given a constant GDP gap, the higher the spending multiplier, the smaller will be the recessionary gap.

A) True

B) False

The recessionary gap is given by the difference between potential GDP and real GDP.

A) True

B) False

If the spending multiplier equals 6 and equilibrium real GDP is $32 billion below potential real GDP, then total planned expenditures need to decrease by approximately $5.33 billion to close the recessionary gap.

A) True

B) False

Foreign repercussions of changes in domestic imports cause the true domestic spending multiplier to be less than 1/(MPS+MPI)

A) True

B) False

Suppose the multiplier effect for Japan is 0.8 for any $1 billion change in U.S. government purchases. Therefore, Japanese real GDP will rise by $8 billion when U.S. government spending rises by $10 billion.

A) True

B) False

In reality, the simple spending multiplier [1/(MPS+MPI)] is applicable only to countries whose imports are a substantial fraction of income in foreign countries.

A) True

B) False

An increase in U.S. imports from Mexico will cause a decrease in income for Mexican individuals and businesses.

A) True

B) False

If German imports of French products are very important in determining the volume of German exports to France, we would expect the actual German spending multiplier to be larger than 1/(marginal propensity to save +marginal propensity to import).

A) True

B) False

The Keynesian aggregate expenditures model assumes that price level is constant.

A) True

B) False

A change in the price level in an economy will be depicted by a movement along the AE curve and not by a leftward or rightward movement of the curve.

A) True

B) False

Wealth is considered to be a nonincome determinant of consumption.

A) True

B) False

A depreciation of the U.S. dollar will result in an increase in aggregate expenditures in the country.

A) True

B) False

When the price level in an economy falls, the demand for bonds and other nonmonetary financial assets rises.

A) True

B) False

The aggregate demand curve depicts a negative relationship between real GDP and the general price level.

A) True

B) False

Ceteris paribus, a decline in the general price level in the United States will make foreign-produced goods relatively more expensive to U.S. residents and increase the aggregate demand of domestic goods.

A) True

B) False

A decrease in the general price level is associated with an upward shift in the aggregate expenditures function.

A) True

B) False

If the equilibrium level of income is solely a function of aggregate supply, then the aggregate supply curve must be in the Keynesian region.

A) True

B) False

The portion of the aggregate supply curve that is a positive function of the general price level represents excess capacity and unemployed resources.

A) True

B) False

A horizontal aggregate supply curve indicates that equilibrium real GDP is determined by aggregate supply.

A) True

B) False

According to economists, the fixed-price model of macroeconomic equilibrium depicts the modern economy most closely because it assumes that aggregate supply is independent of price.

A) True

B) False

A major drawback of the Keynesian approach to macroeconomic equilibrium is the assumption that the supply of goods and services in the economy always adjusts to aggregate expenditures

A) True

B) False.

Task06

*Please illustrate your logic, reasoning, equations, steps and calculations clearly!

The demand curve for pizza in the Smalltown is: Qd = 120 - P, where Qd represents the quantity demanded of pizza in the Smalltown, and P represents the market price of pizza.

There are TWO pizza restaurants in Smalltown now: Restaurant A and Restaurant B. Both of them have the same cost of production, that is Restaurant A's total cost of production is TCA= 600 + 24qA , and Restaurant B's total cost of production is: TCB= 600 + 24qB, where qA and qB are the output level chosen by Restaurant A and B, respectively. Restaurant A and B strategically interact with each other.

a) If Restaurant A and B enter into a collusion agreement and split the market, what will be the market (total) equilibrium quantity and market equilibrium price? (4 points)

b) If Restaurant A and B choose their output (quantity produced) to maximise profit, do you think that they will both honor their collusion agreement? What are the levels of output for each restaurant and the market equilibrium price? Please explain with equations/models and your reasoning clearly. (8 points)

c) If Restaurant A and B get into a competition by choosing their price level, what will be the equilibrium market price and equilibrium market quantity? (2 points)

d) Given the answer from part c), what will be the possible problem(s) facing by Restaurant A and B? (4 points)

e) Given the market demand and cost function stay the same as above, and if the number of restaurants increases to 5. If restaurants compete by choosing quantity produced, what will be the equilibrium market (total) quantity and price? (4 points)

Now, let the market demand curve: Qd = a - bP ("a" and "b" are the unknown parameter); the number of restaurants increases to 3 (Restaurant A, B, and C) and Restaurant A's cost function is: TCA= FA + cAqA; Restaurant B's cost function is: TCB= FB + cBqB; Restaurant B's cost function is: TCC= FC + cCqC, where FA, cA, FB, cB, FC, cC are all positive numbers.

f) Please find the best response function of Restaurant A, B, and C in general form, respectively. *Here, only the best response function of Restaurant A, B, and C would be enough, you don't need to solve the equilibrium. (10 points).

Task07.

Question 1 Use the Model of Demand and Supply to explain why the price of buffet dinners has decreased recently in Dhaka City. Your answer should include a well-labeled diagram. Question 2 Two candidates, Mr A and Mr B, are running for presidency in Country Z. The people of Country Z can elther vote for Mr A or Mr B. We are interested to study and analyze the total number of votes received by each of the two candidates. Discuss in detail how we can apply the model of Production Possibility Frontier (PPF) in this case. Your answer should include a well-labeled diagram. Discuss how the definition of the PPF needs to be adjusted and modified in this situation. Question 3 The president of Country Z wants to adopt the free market economic system and has come to you for advice. You are the economic advisor of Country Z. a) What would be your advice to the president of Country Z? Discuss your point of view in detail. b] The price of rice has been increasing rapidly in Country Z. Discuss all the possible ways Country Z can tackle (manage) the problem of increasing price of rice. No need to draw diagrams in this answer. Question 4 You have decided to open a small business in Country Z and you want to hire some employees for your business. a) Discuss why you will need a rationing device when hiring employees. b) Discuss in detail about the rationing device you will use when hiring employees. c) Discuss how your choice of rationing device might affect the society of Country Z. d) Discuss how you can use the concept of incentives and negatives to get the best out of your employees. Is this situation related to optimization or efficiency? Discuss in detail. Question 5 Mara and Dona are both consumers and producers of butter and bread. They are both living in a barter economy. The following are the production schedules of Mara and Dona: Production schedule of Mara Production schedule of Dona Butter (units per day) | Bread (units per day) Butter (units per day) | Bread (units per day) 6 0 8 0 3 6 4 4 0 12 0 8 Using the given situation show that specialization and trade can benefit individuals and societies. Show all steps in your analysis. Explain in detail. You can assume that the terms of trade are 5 units of bread for 4 units of butter. Question 6 Discuss in detail how the concept of transaction cost and economic growth may be connected. Try to explain the connection as clearly and precisely as you can. There is no need to draw any diagram.Competition regulator Rod Sims warns that Australia Post's plan to jack-up the price of stamps to $1 is "not a done deal", as unions gear up for a concerted campaign before a final decision is made in December. Communications Minister Malcolm Turnbull has backed the beleaguered mail service's plan to introduce a two-speed mail service, with a regular service operating two days slower than the current delivery speed and the addition of a premium-rate priority service which could cost as much as $1.50 per letter. But before Australia Post can increase the price of ordinary stamps for their standard, slower service from 70 cents to $1, the Australian Competition and Consumer Commission must approve the increase. Chairman Rod Sims said they would carefully consult with industry, unions and the public before making their decision with any prise rise proposed to apply from January 4, 2016. The ACCC issues paper questions whether it is appropriate to hit consumers with a 43 per cent price rise in one-hit and whether a "price path over time" is "more appropriate". "It is not a done deal, it is extremely complex because of the cost allocation, falling demand and question of which service you focus on," ACCC chairman Rod Sims told The Australian Financial Review. "If you just look at stamps, they are still losing money in 2016-17 but does stamps underpin the bulk mail price, which [when] combined with stamps they are making money in 2016-17." The groups have commissioned a report from ACIL Allen consulting, which shows the mail industry employs 131,709 full-time jobs and contributes $14.2 billion to the economy. "It's ridiculous to increase the price of stamps by 43 per cent without considering the full ramifications on the total industry," Bill Healy of the Printing Industries Association of Australia said. Based on the above article, what kind of barriers to entry have allowed Australia Post to continue as a monopoly in providing postal services for standard mail in Australia? Explain