Undertake a model analysis using the IS-LM model. Using the IS-LM model(WITHOUT BALANCE OF PAYMENTS), illustrate and discuss the impact of the Asian Financial Crisis on interest rates and economic activity (and thus the unemployment rate). Remember to explain any changes you have made to the curves and/or any shift
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Undertake a model analysis using the IS-LM model. Using the IS-LM model(WITHOUT BALANCE OF PAYMENTS), illustrate and discuss the impact of the Asian Financial Crisis on interest rates and economic activity (and thus the
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- You are the Economic Consultant for Zuku Farms Ghana Limited. Zuku produces cowpea in a community where producers are able to switch back and forth between cowpea and groundnut depending on market conditions. Consequently, you were tasked by the management of Zuku and you estimated the demand function for cowpea as follows: where is the quantity of cowpea demanded in bags per month, is the average price of cowpea in Ghana Cedis, is the average price of groundnut in Ghana Cedis, and Y is the income of consumers. Assuming is initially GH¢31.00 per bag, Y is GH¢1001.50 Required: Find the resulting demand function for cowpea and determine the number of bags Zuku can sell at GH¢ 45.00 per bag. Management is considering increasing price of cowpea by GH¢10.00 per bag. Advise management on this price change using the concept of price elasticity of demand. Explain why management should be worried about a reduction in the price of groundnutNestlé has a variety of big data analysts in their headquarters back in Vevey, Switzerland. One enterprising analyst, comparing sales performance of various product lines between different types of countries, notices what appears to be a recurring anomaly. More precisely, he discovers that even though the GDP per capita report for a country might be low to extremely low, grassroots data on actual sales levels and trends in those markets, such as in Mozambique, Guatemala, Zambia, Cambodia, indicate surprisingly robust demand for the sorts of food products that Nestlé makes. In trying to reduce the variance, the analyst runs and reruns the data, but cannot resolve the problem. In frustration, he consults a colleague, asking what she thinks might be going on with his data. She immediately concurs with his outlook—that is, if we were to stick with the officially reported GDP per capita data, Nestlé would wisely would postpone expanding into many of these countries. Alternatively, she…Due to inflation in Australia in December 2019, the price for petrol increased from AUD 1.35 to AUD 1.45. This caused petrol consumption to decrease from 2500 litres to 2450 litres at a 7-Eleven Petrol Station in Sydney. Also, when the price for Hyundai 7.5kW Inverter Split System Air Conditioner (Reverse Cycle) increased from AUD 950.00 to AUD 990.00; demand for these air conditioners fell from 2500 units to 2000 units. Following this condition, answer the questions below. i. Using the mid-point formula calculate the price elasticity of demand for petrol and Hyundai 7.5kW Inverter Split System Air Conditioner (Reverse Cycle).ii. Is the price elasticity of demand: elastic, unit elastic or inelastic for eachcommodity (petrol and Hyundai 7.5kW Inverter Split System Air Conditioner (Reverse Cycle)? iii. Suppose the government decides to increase tax for petrol and Hyundai 7.5kW Inverter Split System Air Conditioner (Reverse Cycle). Use two diagrams to explain the incidence of the tax…
- 18 . Effects of a government budget deficit Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate National Saving Domestic Investment Net Capital Outflow (Percent) (Billions of dollars) (Billions of dollars) (Billions of dollars) 7 55 25 -15 6 50 30 -10 5 45 35 -5 4 40 40 0 3 35 45 5 2 30 50 10Stock market Some inves-tors believe that stock prices show weekly patterns, claim-ing for example that Fridays are more likely to be “up” days. From the trading ses-sions since October 1, 1928 we selected a random sampleof 1000 days on which the Dow Jones Industrial Aver-age (DJIA) showed a gain in stock prices. The table shows how many of these fell on each day of the week.Sure enough, more of them are Fridays—and Tuesday looks like a bad day to own stocks. Can this be ex-plained as just randomness, or is there evidence here to help an investor? Day ofthe WeekNumber of“up” DaysMon 192Tues 189Wed 202Thu 199Fri 218A rice importer has three sources: Thailand, Vietnam, and China. Unfortunately, the annual amount of rice harvested is heavily dependent upon the amount of rainfall during the growing season. The tables below show probabilities and prices for wet, dry, and normal growing seasons. Rice is sold in tons. PROBABILITIES Wet Dry Normal Thailand 0.5 0.2 0.3 Vietnam 0.6 0.3 0.1 China 0.4 0.4 0.2 Price per Pound ($) Wet Wet Dry Normal Thailand 0.95 1.10 1.00 Vietnam 0.85 1.20 0.98 China 0.90 1.15 1.05 This is a maximization problem. A)True B)Flase
- A rice importer has three sources: Thailand, Vietnam, and China. Unfortunately, the annual amount of rice harvested is heavily dependent upon the amount of rainfall during the growing season. The tables below show probabilities and prices for wet, dry, and normal growing seasons. Rice is sold in tons. PROBABILITIES Wet Dry Normal Thailand 0.5 0.2 0.3 Vietnam 0.6 0.3 0.1 China 0.4 0.4 0.2 Price per Pound ($) Wet Dry Normal Thailand 0.95 1.10 1.00 Vietnam 0.85 1.20 0.98 China 0.90 1.15 1.05 This is a maximization problem. True or False?A rice importer has three sources: Thailand, Vietnam, and China. Unfortunately, the annual amount of rice harvested is heavily dependent upon the amount of rainfall during the growing season. The tables below show probabilities and prices for wet, dry, and normal growing seasons. Rice is sold in tons. PROBABILITIES Wet Dry Normal Thailand 0.5 0.2 0.3 Vietnam 0.6 0.3 0.1 China 0.4 0.4 0.2 Price per Pound ($) Wet Dry Normal Thailand 0.95 1.10 1.00 Vietnam 0.85 1.20 0.98 China 0.90 1.15 1.05 This is a maximization problem. A)True B)FalseIn the Melitz (2003) model, trade leads to A an increase in the varieties of goods consumed by each consumer. B all firms that remain in the market becoming exporters. C an increase in varieties produced domestically. D a higher average price for goods consumed, holding the wage constant.
- In the Keynesian cross model, assume that the consumption function is given by:C = 100 + 0.7(Y – T)Planned investment is 300, government purchases and taxes are both 500 (initially a balanced budget)Carry all calculations to two decimal places.a. Graph “planned expenditure” as a function of income.b. What is equilibrium income?c. If government purchases increase to 550, what is the new equilibrium income? What is the income multiplier for government purchases?d. Based on your answer to the income multiplier in part c, what change in the level of government purchases is needed to achieve a new, higher level of income of 2200 (taxes unchanged at 500).e. Based on the tax multiplier from question 2, what change in the level of taxes is needed to achieve a new, higher level of income of 2200? (government purchases remain at 500)Suppose that this particular study compared a large group of individuals who play squash regularly with those of an equal-sized group who get no exercise at all. Playing squash does provide a good cardiovascular workout. However, we also know that squash players tend to be affluent enough to belong to clubs with squash courts. Wealthy individuals may have great access to health care, which can also improve cardiovascular health. If our analysis is sloppy, we may attribute health benefits to playing squash when in fact the real benefit comes from being wealthy enough to play squash (in which case playing polo would also be associ ated with better heart health, even though the horse is doing most of the work). Or perhaps causality goes the other direction. Could having a healthy heart “cause” exercise? Yes. Individuals who are infirm, particularly those who have some incipient form of heart disease, will find it much harder to exercise. They will certainly be less likely to play squash…Below is a list of domestic output and national income figures for a certain year. All figures are in billions. The questions that follow ask you to determine the major national income measures by both the expenditures and the income approaches. The results you obtain with the different methods should be the same. Personal consumption expenditures $245Net Foreign Factor Income 4Transfer Payments 12Rents 14Consumption of fixed capital(depreciation) 27Statistical Discrepancy 8Social Security Contributions 20Interest 13Proprietors Income 33Net exports 11Dividends 16Compensation of employees 223Taxes on production and imports 18Undistributed corporate profits 21Personal taxes 26Corporate income taxes 19Corporate profits 56Government purchases 72Net private domestic investment 33Personal Saving 20 1. Using the above data, determine GDP by both the expenditures and income approaches. A.) expenditures approach GDP B.)income approach GDP. 2. Determine NDP. 3. Now determine NI in two…