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Home is a small open economy with perfect capital mobility. Initially, it is in its long-run equilibrium and domestic assets and foreign assets are prefect substitutes. Recently, residents in Home have undertaken many protest (nonvviolent so far) demanding more freedom and greater say in future decisions. Many believe that this kind of the political unrest might have negative impacts on the economy and people worry that the negative impacts include the following: 0 Making domestic assets become more risky and the risk premium (on domestic assets) becomes positive. (Hint: think about what happens to domestic real interest rate) 0 Lower business condence. a) Use the long-run classical model of an open economy to evaluate the people's concerns mentioned above on the country's output, consumption, investment, net exports, real exchange rate, and price level. Explain and support your answer by m loanable funds market diagram and m foreign exchange market diagram. (15 points). h) Based on your answer in part (a), is there anything the central bank can to if it wants to offset the effect of the change in risk premium on the country's real interest rate? Explain. (5 points). Please answer all questions. All questions carry equal points. 1. Explain the differences between ling term and short term economic growth. Define features of long term growth. What is the impact of long term economic growth on business? 2. Explore the economic situation in one of the counties in Africa (your choice). Dene the most urgent issue that should be resolved in near future and discuss in detail on how to resolve it. 3. Write an essay about why it is important to know and understand economics for every person. 4. Describe 10 principles of economics. Explain what questions economics addresses as well as the principles of how economy works. For example, national income. production etc. Short Answer Questions Question 1: what is the difference between producer surplus and economic profits? Question 2: In a perfectly competitive market, firms earn zero economic profits in the long run. Explain why. Question 3: Explain why the marginal revenue curve of a monopolist lies below the market demand curve. Question 4: The two primary methods of regulating monopoly power are to a) increase competition or h) set the price equal to the competitive price. Explain in words why neither of these regulations are desirable if the monopoly is a natural monopoly. Question 5: Consider a monopolistic market in which a specific tax has been applied to the good. Explain in words what would happen to the consumer surplus, producer surplus, government revenue, and deadweight loss if regulators replaced the specific tax with an ad valorem tax (assume the two tax options lead to the same reduction in quantity). Question 1 \"COVID-l9 Impact on Economy\" Assume the economy of country A is in a long-run equilibrium with full employment. The nominal wage of workers are xed in the short run. a) Draw a graph which shows the short-run aggregate supply, long-run aggregate supply, 4'; aggregate demand. Describe the equilibrium point and show each of the following: -H- . 93'.- i) Equilibrium output, labelled Y1 ' ' ii) Equilibrium price level, labelled P1. b) Owing to the outbreak of C OVIDIQ, the export market of country A has decreased. On your graph in part a), describe in details on the effect of lower export on the equilibrium in the short run, labelling the new equilibrium output and price level Y2 and P2, respectively. c) Based on your result in part b), what is the impact of lower export on real wages in the short run? Explain. (1) Show, with a new graph, how the economy will return to its new equilibrium in the long run if the govennnent does not intervene. Explain. e) Suppose the government decides to increase expenditure on new equipment. (i) What component of aggregate demand will change? Explain. (ii) What is the impact on the long-run aggregate supply? Explain. (Remarks: From part a) to e), students 5110qu illustrate with diagrams, graphs, tables and graphics to support your arguments whenever appropriate.)