Question 1 - Consider the following table.
|
Quantity
|
Total Cost
|
|
0
|
$ 46
|
|
2
|
$ 47
|
|
4
|
$ 48
|
|
6
|
$ 49
|
|
8
|
$ 51
|
|
10
|
$ 57
|
|
12
|
$ 65
|
|
14
|
$ 75
|
|
16
|
$ 87
|
(1) Suppose that the price of the product is $5. How many units will the firm produce in the short run?
(2) In the long run, will the price rise or fall from the current level at $5? Explain the reason.
Question 2- Consider a hypothetical economy that produces only oranges and olives. The production and price data for the years 2010, 2012, and 2013 are as follows.
|
2010 (Base Year)
|
2012
|
2013
|
|
Product
|
Price
|
Qty
|
Price
|
Qty
|
Price
|
Qty
|
|
Orange
|
$3
|
4,000
|
$3.50
|
4,100
|
$4
|
4,300
|
|
Olive
|
$5
|
200
|
$6.00
|
210
|
$8
|
220
|
(1) Compute the GDP deflators for the years 2012 and 2013.
(2) Using the GDP deflators computed in (1), calculate the inflation rates of the years 2012 and 2013.
Question 3- Consider an economy in which GDP is $8.2 trillion, public saving is -$0.2 trillion (negative number), taxes are $0.8 trillion, private saving is $3.0 trillion, export is $0.4 trillion, and import is $0.5 trillion. Calculate consumption, government purchases, national saving, and investment.
Question 4- Suppose that the T-account for First California Bank is as follows.
|
Assets
|
Liabilities
|
|
Reserves
|
$50,000
|
Deposits
|
$500,000
|
|
Securities
|
50,000
|
|
|
|
Loans
|
400,000
|
|
|
The Bank currently holds the reserves as required by the Fed, and all other banks in the nation do just the same, i.e., hold the exact amount of reserves as required by the Fed.
(1) Suppose that the Fed buys $20,000 securities from First California Bank, as part of the Fed's policy action to continue "quantitative easing." Draw the new T-account for First California Bank right after the purchase by the Fed.
(2) Suppose that all banks, including First California Bank, continue to holds the exact amount of required reserves. As a result of the Fed's purchase of $20,000 securities from First California Bank, how much of money supply will change? Is the change in money supply an increase or a decrease?
Question 5- Smith, a U.S. citizen, has been working as an executive of a telecommunication company in U.S., and her annual salary in 2014 was US$250,000. Her salary was expected to remain unchanged if she continued to work in the company. At the end of the year 2014, however, she was recruited by a media company in Brazil, so she started working in Brazil from January 2015, making an annual salary of US$360,000. Assuming that the amount of her salary equals the amount of her contribution to the production in the company she works for, how much the annual U.S. GDP and GNP in 2015 was changed due to her job relocation?