What is the maximum amount you would pay at the beginning of this year for an asset that generates an income of $4900 at the end of each of four years if the opportunity cost of using funds is 6.9%? Answer: Check
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- Julie lives for two periods. She works in the first, saves some of her income, and retires inthe second and lives off her savings. For every coconut she saves today, she earns an interestrate of r = 2%. Julie’s generation comprises of 1,000 people and each generation grows byn% relative to the previous one.a. In the first period Julie saves 100 coconuts for retirement. How many coconuts will shehave when she retires?b. Now suppose that the government implements a pay-as-you-go social security system,forcing every person in Julie’s generation to pay 100 coconuts to a social security fund thatwill distribute the money to the currently old. In exchange, when Julie retires each youngperson will pay 100 coconuts to the social security fund, and the revenue will be dividedequally among the future retirees. How much will be the revenue of the social securitysystem, and how many coconuts will each retiree will receive?c. What will have to be the range of values for n so that the government’s…Explain how interest operates in a free-market economy and establisha basis for understanding the more complex interest relationship?Three students have each saved $1,000.each has an investment opportunity in which he or she can invest upto $2,000.Here are the rates of return on the students investment project:a.If borrowing and lendind are prohibited,so each student uses only personal saving to finance his or her own investment project ,how much will each student have a year later when the project pays its return?b.Now suppose their school opens up a market for loanable funds in which students ran borrow and lend among themselves at an interest rate r.What would determine whether a student would choose to be a borrower or lender in this market?c.Among these three students,what would be the quantity of loanable funds supplied and quantity demanded at an interest rate of 7 percent?At 10percent?d.At what interest rate would the loanable funds market among these three students be in equilibrium?At this interest rate,which student(s) would borrow and which student(s) would lend?e.At the equilibrium interest rate,how…
- To the nearest 0.01, what is the present value of each of the following income streams (expressed in unitsof consumption goods), when the real interest rate is r =5%, and when the real interest rate is r =1%?c) m1 =−100, mt =100 for all t =2,...,∞Explain all will rate 1) Suppose that people in the economy don't equally share ownership of the capital and that individual capital owners either lost all of their capital or none. As a result of the capital destruction, does the rental income for people who still own capital increase, decrease, or stay the same? a) Increase b) Decrease c)Stay the same 2) As a result of the capital destruction, does the labor income for workers increase, decrease, or stay the same? a) Increase b) Decrease c)Stay the same 3) As a result of the capital destruction, does share of national income paid to labor increase, decrease, or stay the same? a) Increase b)Decrease c)Stay the sameIn economics, what does capital correspond to?Select one:a. Money.b. To the productive factors supplied by nature.c. To productive factors that have been produced by other factors.d. To economic resources that are primary.e. To the inflation of each market.
- Suppose an economy produces only 2 products that will also be used for directconsumption, as per the article at the end of the exam: chicken wings and donuts. Inthe second quarter of 2021 (the base period), 180,000 pounds of chicken wings wereproduced, at a value of $3.50 per pound, while in the second quarter of 2022,production of chicken wings increased to 200,000 pounds, at a value of $3.75 perpound. In the second quarter of 2021 (the base period), 85,000 donuts were producedat a value of $0.85 per donut, while in the second quarter of 2022, donut productionincreased to 100,000 donuts, each at a value of $0.95 per donut. The population inthis economy is 1000 individuals in 2022, while the number of hours worked in 2022is 5000. Also, the quantities that were produced in 2021 represent the quantities thatwere purchased by the typical household, meaning that everything that was producedwas sold.d. Solve for the amount of labor productivity in the second quarter of 2022.e. Solve for the…5 Suppose y = 6w2x4/z5 . Suppose that w increases 6%, x increases 9% , and z increases 1% . By what percent should y increase? Your answer should be an integer with a % sign assumed to followJoanne has just completed high school and is trying to determine whether to go to communtiy college for two years or go directly to work. Her objective is to maximize the savings she will have in the bank five years from now. If she goes directly to work, she will earn $18,500 per year for each of the next five years. If she goes to community college, for each of the next two years she will earn nothing—indeed, she will have to borrow $6,000 each year to cover tuition and books. This loan must be repaid in full three years after graduation. If she graduates from community college, in each of the subsequent three years, her wages will be $35,000 per year. Joanne’s total living expenses and taxes, excluding tuition and books, equal $15,000 per year. Joanne should go to (Click to select) work junior college , since the total value of Joanne's savings would be $__ if she goes directly to work and $__ if she goes to community college.
- (50 points) Consider the two-period economy with investment discussed in class. Forthe sake of simplicity, assume that the utility is time separable and that the per-periodutility is equal to:u(C) = log CAssume also that the technology to produce the consumption goods has constant returns to scale. Moreover, capital is the only input to production. Hence the currentperiod technology can be represented as:Y = zK1where Y , K, and z stand for output, capital and total factor productivity in the currentperiod. The future period technology is akin to the current period technology. There isno government expenditure in the current and future period so that G = 0 and G0 = 0.Finally there is full capital depreciation, namely δ = 1.(a) (10 points) Write down the social planner’s problem. State the variables withrespect to which the social planner maximises.(b) (10 points) Derive the first order conditions to the planner problem. Rearrangethere condition to find the conditions characterising the…3. Consider a world in which production of a good or service consists of a number of definitive tasks, which must all be performed correctly for the product to have positive value. Each task is filled by a single worker i whose skill level qirepresents the probability the worker performs her task correctly. Mathematically, if there are n tasks in the production of a good, and average production per worker with one unit of capital is 1 when all tasks are performed correctly, the production technology can be represented as: A) Give an example of an industry for which this might be a good model of production. What does this production function imply about the tradeoff between quality and quantity of labor in a given task? In this, how does it differ from a Cobb Douglas production function? B) Find the marginal product of increasing the skill of the ith worker. Suppose now there were two firms in the same industry that will bid for workers, and can pay them differentially according to…There are 2 commodities X and Y. Total amount of labour required by X and Y = 400 units. Labour is made up of present labour (Pr) and past labour (P). The ratio for X Pr.P= 1:3 an for Y Pr:P-3:1. By utilising all the labour we can produce 100 units of both the commodities. It is also given that to produce 100 units of X we need uniform rate of capital accumulation for 4 years and to produce 100 units of Y we need accumulation for 2 years. The economy is divided into 2 periods. Period 1: where wages - $1 and Profits- 50%. Period 2: where wages -$ 2 and profits -10%. Show how profits and prices behave over the period of time. What is the solution given by Ricardo to remove Gluts from the society? Where will the economic progress halt?