..Solve the following questions.,,

32. If the economy is suffering from a recessionary gap, the Fed should conduct monetary policy by the money supply. A) expansionary; decreasing B) expansionary, increasing C) contractionary; decreasing D) contractionary; increasing 33. A reduction in interest rates due to an increase in the money supply will shift: A) aggregate demand to the left. B) aggregate demand to the right. C) short-run aggregate supply to the left. D) short-run aggregate supply to the right. 34. In the long run, an increase in the quantity of money: A) increases real output. B) increases prices causing inflation but not long-run output. C) increases real interest rates and real production output. D) has no impact on output or prices in the economy. 35. If at the current interest rate, the demand for money is $300 billion and the supply of money is $200 billion, then the interest rate will A) fall. B) rise. C) remain unchanged. D) be in equilibrium. 36. When compared to fiscal policy, monetary policy is: A) quicker and easier to implement. B) slower and more cumbersome to implement. C) more dependent on Congressional approval. D) more likely to produce an offsetting net export effect. 37. Other things equal, a tight monetary policy during a period of demand pull inflation will: A) lower the interest rate and increase investment, and real output. B) lower the price level and increase investment, and GDP. C) increase productivity, aggregate supply, and real output. D) increase the interest rate, reduce investment, and reduce aggregate demand. 38. Monetary policy affects GDP and the price level by: A) changing aggregate supply. B) changing aggregate demand. C) changing the aggregate amount of labor supplied in the market. D) changing fiscal policy. 39. Expansionary monetary policy increases all of the following except A) aggregate demand. B) government spending. C) consumption spending. D) investment spending.Sora Industries has 68 million outstanding shares, $126 million in debt, $54 million in cash, and the following projected free cash flow for the next four years: Year 2 3 Earnings and FCF Forecast ($ million) Sales 433.0 468.0 516.0 547.0 574.3 2 Growth vs. Prior Year 8.1% 10.3% 6.0% 5.0% 3 Cost of Goods Sold (313.6) (345.7) (306.5) (384.8) 4 Gross Profit 154.4 170.3 180.5 180.5 5 Selling, General, & Admin. (93.6) (103.2) (109.4) (114.9) Depreciation (7.0) (7.5) (9.0) (9.5) 7 EBIT 53.8 50.6 62.1 65.2 8 Less: Income Tax at 40% (21.5) (23.8) (24.8) (26.1) a. Suppose Sora's revenue and free cash flow are expected to grow at a 4.7%% rate beyond year four. If Sora's weighted average cost of capital is 13.0%%, what is the value of Sora sock based on this information? The stock price for this case is $ ]. (Round to the nearest cont.) 8 Loss: Income Tax at 40% (21.5) (23.8) (24.8) (26.1) 0 Plus: Depreciation 7.0 10 Less: Capital Expenditures (7.7) (10.0) (9.9) (10.4) 11 Loss: Increase in NWC (6.3) (8.6) (5.6) (4.9) 12 Free Cash Flow 25.3 24.6 30.8 33.3 a. Suppose Sora's revenue and free cash flow are expected to grow at a 4.7%% rate beyond year four. If Sora's weighted average cost of capital is 13.0%%, what is the value of Sora stock based on this information? b. Sora's cost of goods sold was assumed to be 67% of sales. If its cost of goods sold is actually 70% of sales, how would the estimate of the stock's value change? c. Roturn to the assumptions of part (a) and suppose Sora can maintain its cost of goods sold at 67%% of sales. However, the firm reduces its selling, general, and administrative expenses from 20% of sales to 16% of sales. What stock price would you estimate now? (Assume no other expenses, except taxes, are affected.) d. Sora's net working capital needs were estimated to be 18% of sales (their current level in year zero). If Sora can reduce this requirement to 12% of sales starting in year 1, but all other assumptions are as in (a). what stock price do you estimate for Sora? (Hint: This change will have the largest impact on Sora's free cash flow in year 1.) a. Suppose Sora's revenue and free cash flow are expected to grow at a 4.7%% rate beyond year four. If Sora's weighted average cost of capital is 13.0%, what is the value of Sora stock based on this information? The stock price for this case is $ . (Round to the nearest cent.)4. After the pandemic is over, the loss of government revenue due to the economic lockdown and the cost of the worker compensation scheme, made government debt soar and the treasury asks you for advice on how to reduce government debt. a) Currently, the citizens of Korona pay a flat tax on labour income of 20% and a proposal by the minister is to increase the tax rate to 30% if income exceeds the threshold of $20,000. Give your assessment of the likely effect of the proposal on labour supply, paying particular attention to the underlying forces at work. Briefly comment on how these forces may affect government revenue. [You can include a graph if it helps to illustrate your reasoning; word limit 250 words; 8 marks]. b) An alternative policy proposes to introduce a tax on inheritances to raise the same amount. Assess the effect on welfare of this inheritance tax allowing for different behavioural responses. [word limit 200 words; 6 marks]. c) Contrast the proposals in a) and b) regarding the potential for off-shore tax evasion. [word limit 200 words; 6 marks].Sarah estimated using the OLS method with annual data for the years 1965-2008 (T=44): LnH, = -4.76 + 1.87 LnY, - 1.23 r, + ur (-1.5) (3.8) (-4.0) R' = 0.41 DW = 0.79 Where: LnH, = logarithm of housing; LnY, = logarithm of the gross national product; n = the mortgage rate; it = estimated residuals; DW is the Durbin-Watson statistic; The figures in parentheses are the t-statistics. ver the following questions: Test the model for first-order serial correlation. (4 marks) Assuming the error term of the model follows an AR(1) process, James uses the estimate of the autocorrelation coefficient (p) implied from the Durbin-Watson statistic and corrects the model. What is the estimated value of p? Explain how the estimated value of p could be used to make the correction. (7 marks) What test would be appropriate to test for higher-order serial correlation? (2 marks) In order to correct for autocorrelation the model was re-estimated using the Cochrane-Orcutt iterative method. The new estimation produced a restricted RSS of 0.565. Under what conditions is it appropriate to use this method? (2 marks) The model was re-estimated again, this time adding InHe, In Yer and ney to the list of the original variables. This produced an unrestricted RSS of 0.458. Perform the Hendry-Mizon common factor test. Clearly state your hypothesis and explain whether the results from the Cochrane-Orcutt method are reliable.d) Consider the following model of supply and demand for holidays abroad: On = at aPitas Yit uit Out = B1 + BP, + un (3) Where: Qadr is quantity demanded; Or is quantity supplied; P is price; Y is average income of households; W/ and wa are independent random errors. Answer the following questions: Which variables are exogenous and which are endogenous? Explain your answer. (3 marks) (ii) Using the order condition, check the identification of each equation. What do you conclude from your answer about the possibility of estimating each equation