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Explain why the Leontief paradox and the more recent Bowen, Leamer, and Sveikauskas results reported in the text contradict the factor-proportions theory.
What argument would trade economists make against seeing these wage cuts as a reason to block outsourcing of computer programming?
Is this a shortsighted policy or a rational one in view of the interests of union members? Analyze How does the answer depend on the model of trade?
Can we still say that raising cattle is land-intensive compared with farming wheat? Why or why not?
Explain this result in terms of the example in the question above. How might things change if the border were open, with no restrictions on immigration?
Do you agree with your colleague? Discuss the advantages and disadvantages of imposing an explicit Taylor rule on the Fed.
Suppose the real interest rate increases to 5%, but everything else remains as in part (a). Compute the debt-to GDP ratio in 10 years.
Consider again an increase in government spending with no change in taxes. How does the output effect compare to the output effects in parts (a) and (b)?
What is the primary deficit/surplus ratio to GDP? What is the inflation-adjusted deficit/surplus ratio to GDP?
New Zealand rewrote the charter of its central bank in the early 1990s to make low inflation its only goal. Why would New Zealand want to do this?
Suppose the government amends the constitution to prevent government officials from negotiating with terrorists. What are the advantages of such a policy?
What was the effect of the policy switch on the one-year interest rate? What does a declining spread imply about expectations of financial market participants?
What do you expect would happen to stock prices if the risk premium decreased unexpectedly? Explain in words.
Explain why an inverted (downward-sloping) yield curve may indicate that a recession is coming. What does a steep yield curve imply about future inflation?
Find the current nominal interest rate on Treasury securities with five-year maturity. Now find current interest rate on inflation indexed Treasury securities.
Discussion: Technological progress, agriculture, and employment. If all sectors start having the productivity growth that took place in agriculture.
How might policy changes in (a) through (d) affect the wage gap between low-skill and high-skill workers in the United States?
What was the purpose of this symbolic gesture? How can the Fed's decision to use expansionary monetary policy in the future affect the short-run response?
Discuss how the belief in the New Economy, combined with the increase in stock prices, affected consumption spending.
What is the present discounted value of labor income at the beginning of life? Suppose there are n people born each period. What is total saving in the economy?
What is the maximum you should be willing to pay in tuition to attend this professional school?
What is this consumer's human wealth? By how much could this consumer increase consumption now and in the future?
What happened to stock prices on the day of the announcement? To what degree do you think financial market participants were surprised by FOMC's announcement?
Explain the trade-offs associated with the use of uniforms. What were the benefits? What were the costs?
Explain why the price of grooming licenses was zero. Illustrate your answer with a complete graph.