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By what percentage more will the tax paid by the $40,000 earner be greater than that paid by the $20,000 earner? Why might some people think this unfair?
Why would anybody buy the Treasury Bond with a negative yield to maturity? How is this possible?
If a tax equal to 10 percent of the value of the wine is imposed, who pays more in taxes? Who pays the greater amount as a percentage of income?
What is an opportunity cost? How is this concept used in TVM analysis, and where is it shown on a time line? Is a single number used in all situations? Explain.
Now ind two points on the new budget line such that the new preferred choice of the consumer must fall between these points.
What is the substitution effect? Why do the substitution and income effects normally reinforce each other? Is this true for an inferior good?
If the price of a normal good increases, how will the income effect cause the quantity demanded of that good to change?
How can the budget constraint appear the same even for individuals whose tastes and preferences differ dramatically?
How is the slope of the budget constraint related to the relative prices of the goods on the horizontal and vertical axes?
What is the impact of a 10 percent increase in the price of oil on the quantity of oil demanded? What happens to total expenditures?
In 1990, the U.S. government imposed 10 percent tax on certain luxuries such as pleasure boats. What does this imply about the size of the elasticity of demand?
Predict what effect each of these proposals would have on the price and quantity of rental housing in the short run and the long run.
What is the effect of an advertising program that succeeds in discouraging people from drinking? Draw diagrams to illustrate each of your answers.
What are the short- and long-run changes in quantity supplied if prices rise by 15 percent? What happens to the farmer's revenues in each of these situations?
You are asked to propose a strategy to bring the economy out of recession.
Question 1: Provide an explanation of GDP, unemployment, and inflation as measures of economic activity.
You also know that currency appreciation improves the prospects of foreign investments which will likely increase GDP.
If the price of gasoline rises 28 percent, what effect on quantity demanded will this have in the short run? in the long run?
Compute Nominal GDP for 2006, 2007, and 2008? Show ALL work. What is Real GDP for 2006, 2007, and 2008? Show ALL work.
Increase in Housing Demand in Britain versus the United States. Draw a set of supply and demand curves showing the effects on housing prices in.
Suppose the initial equilibrium price of haircuts is $12. Draw demand and supply graphs to show the short-run and long-run effects.
What is nominal GDP? What is real GDP? What is included in each? Why are these measures important?
If price level is unchanged, what effect will a monetary policy that is contractionary have on the real income level and private placement balance of a country.
The price of gasoline rose to $2.50 per gallon. In each case, how does the trade-off between junk food and gasoline change?
What are the advantages of allowing people to buy and sell their coupons? What are the disadvantages?