Q. How does government determine the average real GDP growth rate that is necessary to keep unemployment rate constant in an economy?

Q. Elucidate the differences among a currency board, a fixed exchange rate system and a pegged exchange rate. Why is this important? Q. A government tax on luxury goods changes the equilibrium price and quantity of those goods. Discuss the implications for the consumer surplus, producer surplus and welfare. Use relevent diagrams to support your answer.

Q. Consider two firms, A and B that produce super computers. Each can produce the next generation super computer for math (M) or for chip research (C). However, only one can successfully produce for both markets simultaneously. Also, if one produces one type, the other might not be able to successfully produce the same type, because of the limited market. The following payoff matrix illustrates the problem.

Scenario AA
Firm B
M C
Firm A M 2, 1 2, 2
C 1, 1 3, 2

Does a Nash equilibrium exist? (Answer yes or No). If a nash equilibrium exists, give the payoffs