Q1. Check and answer the questions that follow

Question 3: Unconventional monetary policy: financial policy and quantitative easing The IS curve represents the equilibrium in the goods market and the LM curve represents the equilibrium in the money market. As mentioned in the text, the following are the equations for the IS-LM curve: IS relation: Y = C(Y - T) + I(Y, r + x) + G LM relation: r = F Where the interest rate is the policy interest rate adjusted for expected inflation. Assume that the rate at which firms can borrow is much higher than the policy interest rate, hence the premium, x, in the IS equation is high. a) After the global financial crisis several European economies adopted quantitative easing, better known as QE. Quantitative easing is an expansionary monetary policy used by the central bank, to buy financial assets from distressed commercial banks and large private institutions to facilitate the flow of credit in the financial markets. If QE proves to be successful, interest rates would decline, hence inducing increased investment and higher output. What is the effect on the IS-LM model? b) Most emerging market economies did not have to resort to quantitative easing since their policy interest rates were quite high allowing for consecutive expansion of money supply and subsequent lower interest rates. However, it was the advanced economies with their interest rates approaching the zero level that were obliged to use this unconventional tool of monetary policy. Explain why OF was an imperative tool during the uncertainty and the low interest rates that prevailed during the global financial crisis. c) One reason that quantitative easing was not successful is that it did not meet the outlook for higher expected inflation. What other reasons could explain why QE has not proved very effective?Google has started a project to scan all books and make those that are not copyrighted available to people free of charge. Why is it important that only books without a copyright are available? If all books were scanned and available free of charge, copyright holders would face a positive incentive to continue writing and publishing books. If all books were scanned and available free of charge, copyright holders would face a negative incentive to continue writing and publishing books, C. If only copyrighted texts were scanned and available free of charge, copyright holders would face an indirect incentive to continue writing and publishing books. d. If only non-copyrighted books were scanned and available free of charge, copyright holders would face a negative incentive to continue writing and publishing books. If only non-copyrighted books were scanned and available free of charge, copyright holders would face an indirect incentive to continue writing and publishing books. 5. Kelly is an architect, and she is trying to decide whether to hire Lawrence, a draftsman, to assist with her work. Kelly could hire Lawrence at $20 per hour, but it would take him three times as long to complete a task as it takes Kelly. Kelly is able to earn $90 per hour and has more architectural jobs than she is able to handle. Which of the following is true? Kelly should not hire Lawrence because it would be faster for her to do the work herself. b. Kelly should do the drafting work herself because she has the lower opportunity cost. C- Lawrence should be hired at the $20 per hour wage rate. d. Lawrence should be hired, but only if he is paid more than $30 per hour. Kelly should hire someone who earns minimum wage instead of Lawrence. 6. Why would economists find it surprising if the CEO of a large company does his of her own housework? The opportunity cost of a CEO's time is quite high because they have an abundance of time to spend on housework. b The opportunity cost of a CEO's time is quite low because they have a scarcity of time to spend on housework. C. The opportunity cost of a CEO's time is quite low because they have an abundance of time to spend on housework. d. The opportunity cost of a CEO's time is quite high because they have a scarcity of time to spend on housework. C. The opportunity cost of a CEO's time is equal to that of everyone else that works at the same company. 7. A town on the Gulf Coast is battered by a massive hurricane that destroys most of its productive resources. The community's production possibilities frontier (PPF) would show an inward shift of the PPF. b. outward shift of the PPF. C. outward rotation along the x axis. d. outward rotation along the y axis. increase in opportunity cost. When testing a paper airplane on a campus quad, which of the following would be an exogenous factor? a the weight of the paper used in making the plane b. the ratio of wingspan to plane length the height of the body of the plane d. the level of wind encountered