Consider the ASAD model discussed in Lecture 5 The AD curv.pdf

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Consider the AS-AD model discussed in Lecture 5. The AD curve is given by: Yt = (t ), (4) where Yt is short-run output, t is current inflation and is an inflation target pursued by the central bank. The AS curve can be written: t = t1 + Yt + . (5) a. Explain where the two equations come from and explain the intuition behind them. b. How would you interpret and ? Which values must they assume in a steady-state, i.e. in the long run. c. Analyse the effect of making the inflation target more ambitious, i.e. the effect of lowering . Illustrate your answer in a diagram and explain the intuition. d. Suppose that the demand for domestic goods decreases abroad, so that the export share of potential output temporarily decreases. Analyse the effects on inflation and short-run output using a diagram..

Education

1) This document provides 4 problems from a macroeconomics tutorial relating to Blanchard chapter 3 on aggregate demand and aggregate supply. The problems cover topics like consumption functions, investment demand, equilibrium output, and the multiplier process. 2) Problem 1 has students draw aggregate demand schedules, calculate equilibrium output, and discuss disequilibriums. Problem 2 defines a short-run macro model and asks students to explain equilibrium, disequilibrium, and compute equilibrium values. 3) Problem 3 covers the "paradox of saving" where an increase in savings can decrease equilibrium income. It asks students to derive saving functions, show the effect of an increased MPS on equilibrium with diagrams, and consider how investment affects the

Advanced macroeconomics, 4th edition. Romer. Chapter12.12.1. T.docx

galerussel59292

Advanced macroeconomics, 4th edition. Romer. Chapter12. 12.1. The stability of fiscal policy. (Blinder and Solow, 1973.) By definition, the budget deficit equals the rate of change of the amount of debt outstanding: δ(t) ≡ D ̇(t). Define d(t) to be the ratio of debt to output: d(t) = D(t)/Y(t). Assume that Y(t) grows at a constant rate g > 0. (a) Suppose that the deficit-to-output ratio is constant: δ(t)/Y(t) = a, where a > 0. ̇ (i) Find an expression for d(t) in terms of a, g, and d(t). ̇ (ii) Sketch d(t) as a function of d(t). Is this system stable? (b) Suppose that the ratio of the primary deficit to output is constant and equal to a > 0. Thus the total deficit at t, δ(t), is given by δ(t) = aY(t) + r(t)D(t), where r(t) is the interest rate at t. Assume that r is an increasing function of the debt-to-output ratio: r(t) = r(d(t)), where r′(•) > 0, r′′(•) > 0, limd→−∞ r(d) < g, limd→∞ r(d) > g. ̇ (i) Find an expression for d(t) in terms of a, g, and d(t). ̇ (ii) Sketch d(t) as a function of d(t). In the case where a is sufficiently small that d ̇ is negative for some values of d, what are the stability properties of the system? What about the case where a is sufficiently large that d ̇ is positive for all values of d ? 12.2. Precautionary saving, non-lump-sum taxation, and Ricardian equivalence. (Leland, 1968, and Barsky, Mankiw, and Zeldes, 1986.) Consider an individual who lives for two periods. The individual has no initial wealth and earns labor incomes of amounts Y1 and Y2 in the two periods. Y1 is known, but Y2 is random; assume for simplicity that E[Y2] = Y1. The government taxes income at rate τ1 in period 1 and τ2 in period 2. The individual can borrow and lend at a fixed interest rate, which for simplicity is assumed to be zero. Thus second-period consumption is C2 = (1 − τ1)Y1 − C1 + (1 − τ2)Y2. The individualchoosesC1 tomaximizeexpectedlifetimeutility,U(C1)+E[U(C2)]. (a) Find the first-order condition for C1. (b) Show that E[C2] = C1 if Y2 is not random or if utility is quadratic. (c) Show that if U ′′′(•) > 0 and Y2 is random, E[C2] > C1. (d) Suppose that the government marginally lowers τ1 and raises τ2 by the same amount, so that its expected total revenue, τ1Y1 + τ2E[Y2], is un- changed. Implicitly differentiate the first-order condition in part (a) to find an expression for how C1 responds to this change. (e) Show that C1 is unaffected by this change if Y2 is not random or if utility is quadratic. (f) Show that C1 increases in response to this change if U ′′′(•) > 0 and Y2 is random. 12.3 Consider the Barro tax-smoothing model. Suppose that output, Y, and the real interest rate, r, are constant, and that the level of government debt outstanding at time 0 is zero. Suppose that there will be a temporary war from time 0 to time τ. Thus G(t) equals GH for 0 ≤ t ≤ τ, and equals GL there- after,whereGH >GL.Whatarethepathsoftaxes,T(t),andgovernmentdebt outstanding, D(t)? 12.4 Consider the Barro tax-smoothing model. Supp.

Each brief must include your name, course number, and start ti.docx

jacksnathalie

Each brief must include your name, course number, and start time of class. Any deviation from the proper format will result in no points. Facts: Pinpoint the determinative facts of a case, i.e., those that make a difference in the outcome. Your goal here is to be able to tell the story of the case without missing any pertinent information but also not including too many extraneous facts either. Make sure you have clearly marked the parties’ names and positions in the case (Plaintiff/Defendant or Appellee/Appellant). Issue: Formulate the main issue or issues in the case in the form of questions, preferably with a yes or no answer, which will help you more clearly state the holding in the next section of the case brief. Holding: The holding should directly respond to the question in the Issue. Analysis: This is the most important part of your brief as it describes why the court ruled the way it did. This part of your brief traces the court’s reasoning step by step, so be sure that you record it without gaps in logic as well. FAILURE TO FOLLOW THE ABOVE RULES WILL RESULT IN NO CREDIT ECO 301 C Problem Set 3 Deadline: Friday, April 24 1. An economy has a Cobb-Douglas production function. Capital income is 1/4 of real GDP. The depreciation rate is 8% and the saving rate is 5%. (a) Assume there is neither population growth nor technological progress. (i) Find the steady-state capital per worker, output per worker, and consumption per worker. (ii) Would output Y grow at the state state. If yes, at what rate? What about capital K? (b) Assume that the population grows at a rate 0.7% and there is no technological progress. (i) Find the steady-state capital per worker, output per worker, and consumption per worker. (ii) Would total output Y grow at the state state. If yes, at what rate? What about capital K? (c) Assume that rate of population growth is 0.7% and the rate of labor- augmenting technological progress is 2%. (i) Find the steady-state capitalper e¤ective worker, outputper e¤ective worker, and consumption per e¤ective worker. (ii) Would output per worker Y=L grow at the state state. If yes, at what rate? What about capital per worker K=L? (iii) Would output Y grow at the state state. If yes, at what rate? What about capital K? (iv) Would real rental rate r grow at the steady state? If yes, at what rate? What about the real wage w? (v) Assume the economy is at the steady state. Use growth accounting to calculate what portion of output growth is due to: (v-i) an increase in capital (v-ii) an increase in labor (v-iii) an increase in total factor productivity (vi) Assume the economy is at the steady state. You are a policy maker and your goal is to maximize steady-state consumption per e¤ective worker. By how much should you change the saving rate in the economy (use a "+" for an increase and a "�" for a decrease)? Give an example of a policy that could achieve such a change. Now, assume that your policy is impl ...

Criteria Mark 1. Professional Presentation 1 · Well organiz.docx

faithxdunce63732

Criteria / Mark 1. Professional Presentation/ 1 · Well organized, neatly presented, word processed, spelling, grammar, and punctuation · Name and student number as well as lab partner/s name, date and time of experiment · In-text referencing, reference list at end of report 2. Title and Abstract/ 1 · Title: concise title directly above abstract (even if you have it on the cover page already) · Abstract: Brief description of the experiment, the major results, associated uncertainties, comparison with theoretical results/expected results. 3. Introduction and Aims/ 1 · A brief paragraph describing key physics and relevant background · At the end of the introduction, state the aims of experiment 4. Procedure and Apparatus/ 0.5 · Describe the equipment used, you may include labeled sketches, drawing, or photographs of apparatus · Describe how you conducted the experiment. Remember to use past tense, you are telling the reader what you have done. 5. Risk Assessment/ 0.5 · Use a risk assessment matrix (under lab section of Blackboard) to: (i) Consider the health and safety risk of this experiment to yourself and others in the laboratory. (ii) Determine what measures you would put in place to mitigate/reduce these risks where possible. · Attach the risk assessment at the end of your report after the references list 6. Data, Critical Analysis and Uncertainties / 2 · Data presented in numbered table format with proper titles and headings ie. “Table 1: Description of Some Tabulated Data” · Figures to presented with number headings and with proper titles and headings ie. “Figure 1: Graph of some Data” · You should write text which refers to/describes data in tables and plots · Show calculations of key parameters and calculations of uncertainties where necessary · Present data in scientific notation where applicable · Use appropriate SI units – eg. metres (m), seconds (s), metres per second (m/s). 7. Summary and Discussions /2 · Brief summary the experiment and aims · Describe the results and put them in context with the expected or theoretical values – do they match? If not, why? You may need to do some research for this part. · Identify the major source(s) of uncertainty and how they contribute to the final uncertainty · Statements describing ways to improve the precision and/or accuracy of the final result by improving the method employed as well as considering alternative equipment · Unnecessary repetition of method or results will not be considered as discussion 8. Answers to specific questions /2 MOD001072 MANAGING THE ECONOMY Weeks 7-8 Classical model- small open economy * Weeks 7-12 The three topics WKS 7-8 CLASSICAL MODEL‘Long run’ –flexible pricesOpen economy WKS 9-10 IS-LM [‘Keynesian’] MODEL‘Short run’ – fixed pricesOpen economy WKS 11-12 INFLATIONARY EXPECTATIONSAdaptive expectationsRational expectations HOLIDAY BREAK * WEEKS 7-8 SUMMARY CLASSICAL MODEL0. Classical models –basic features, closed v.

AD SFLS

ianhorner3

This document discusses aggregate demand and aggregate supply models. It begins by introducing the AD/AS model framework and its four components: long-run aggregate supply, short-run aggregate supply, long-run aggregate supply, and aggregate demand. It then focuses on aggregate demand, explaining the downward slope of the AD curve through the wealth, interest rate, and exchange rate effects of price level changes on consumption, investment, and net exports. It also discusses how shifts in consumption, investment, government spending, or net exports from non-price factors change the AD curve. The document provides examples and diagrams to illustrate these concepts.

Final Exam Essay QuestionsNotice that unless specifically in.docx

ssuser454af01

Final Exam Essay Questions Notice that unless specifically instructed, you will not be required to use graphs to answer these questions. You may find it helpful though. International Trade 1. Suppose that two countries (US and Cuba) conform to the assumptions of the Heckscher-Ohlin model and initially do not trade with each other. Only two products are produced—textiles are labor intensive while steel is capital intensive. Cuba has relatively more labor than does the US. Labor and capital are mobile between industries. A. Explain which products each country should export and why. [That is, do not just say that Cuba has a comparative advantage in good X—you must explain why it has a comparative advantage.] B. What would be the expected effect of opening trade on wages and returns to capital in Cuba in the long run? Explain. 2. a. For the policies below, note a small country’s imposition of the policy will increase (+), decrease (-), or have an unclear effect (?) on the variables listed vertically. (Please note, you do not have to explain; just note the direction of change.) Assume that transfers among domestic citizens have no effect on welfare. Tariff Export subsidy Import quota Export tax Domestic price Domestic consumer surplus Domestic producer surplus Government revenue Net national welfare If any of the effects are unclear, provide a brief explanation. b. For each, explain the nature of any deadweight losses in detail, i.e. compare the costs of domestic production and consumer benefits with the reduced or expanded trade. 3. Suppose the assumptions of the Ricardian model apply. Let LA = country A's endowment of labor =100 units; LB = country B's endowment of labor = 100 units. The unit labor coefficients for the two countries for good S and C are: aLc = 2L/c, aLs = 10L/s; bLc = 10L/c, bLs = 1L/s. a. What is the opportunity cost for C in each country? Provide specific numbers (i.e. number of S per C). b. Explain which country has the absolute advantage in each good. c. Explain which country as the comparative advantage in each good. d. What is the range of potential relative prices for mutually beneficial trade? Provide specific numbers (i.e. number of C per S). e. For one particular possible trading price, show the PPF for both countries and the relevant post-trade national income (presuming full specialization). 4. Illustrate and explain how the US (a large country in international oil markets) can benefit from imposing a tariff on petroleum. Which group or groups ultimately pay for the tariff? What are the major drawbacks for a country pursuing this policy? How would consumers of petroleum in Europe be affected by the tariff? 5. Illustrate and explain how a Australia (a large country in the international iron ore markets) can benefit from imposing an export tax on iron. Which group or groups ultimately pay for the export tax? What are the major drawbacks for a country pu ...

International Finance and MacroeconomicsLecture Notes Sectio.docx

mariuse18nolet

International Finance and Macroeconomics Lecture Notes Section 4 1 Some Preliminaries We will now develop a model to analyze the impact of domestic and external shocks on output, interest rates, exchange rate and the trade balance. We will start with a model without capital flows and then later introduce capital flows. We will analyze both fixed and floating exchange rate systems. First some comments about notation and simplifying assumptions. I will assume that NI = NL = U = 0 and that prices are set in the currency of the exporter (PCP) with P̄ = P̄∗ = 1. These assumptions imply that CA = TA and GNP = GDP, which is also disposable income. We will refer to Y as income or output. Since P̄ = 1, it is both nominal and real output. It is also equal to disposable income. Finally, we now refer to X and M as the dollar value of exports and imports. Previously we referred to them as quantities. For exports this makes no difference as P̄ = 1. Since M is the dollar value of imports, it is equal to EP̄∗ times the quantity of imports. 2 No Capital Flows; No Money We will start with a simple model in which there is only a goods market and foreign exchange market. We abstract from the money market, which we introduce later. Goods market equilibrium is represented by Y = C + I + G + X −M (1) Output is equal to the sum of private consumption, investment, government consumption, exports, minus the part of these spending components that is imports of foreign goods. Assume that private consumption has a constant part C̄ and a part that is proportional to income: C = C̄ + cY (2) where c < 1 is the marginal propensity to consume. Assume that imports takes the form M = M̄(E) + mY (3) 1 Here M̄(E) is the part of imports that is a function of the exchange rate E, capturing both the price and quantity response to a change in the exchange rate. Imports also rises with income, which is reflected in the second part, mY . Here m is the marginal propensity to import. Exports is modeled analogously: X = X̄(E) + m∗Y ∗ (4) We will assume that the Marshall Lerner condition is satisfied, so that X̄(E)−M̄(E) depends positively on E. Finally, we holdgovernment consumptionand investment exogenously fixed: G = Ḡ (5) I = Ī (6) Substituting the expressions for C, I, G, M and X into the goods market equilibrium equation (1), we have Y = 1 s + m ( C̄ + Ī + Ḡ + X̄ −M̄ + m∗Y ∗ ) (7) Here s = 1 − c is the marginal propensity to save. I will now start with a fixed exchange rate system. So far we have described goods market equilibrium. Under a fixed exchange rate system the central bank will absorb any excess demand or supply for foreign exchange. The foreign exchange market equilibrium is then simply described by E = Ē, which is the fixed exchange rate that the central bank stands ready to defend. Given that exchange rate, X̄ and M̄ are fixed as well. From (7) we have the following output effect of a change in government consumption: .

Pricing interest rate derivatives (ext)

Swati Mital

The document discusses pricing interest rate derivatives using the one factor Hull-White short rate model. It begins with an introduction to short rate models and the Hull-White model specifically. It describes how the Hull-White model can be calibrated to market prices by relating its parameter θ to the market term structure. The document then discusses implementing the Hull-White model using trinomial trees and pricing constant maturity swaps.

Consider the following plot summary of "The Emperor's New Clothes" by Hans Christian Andersen. Two swindlers arrive at the capital city of an emperor who spends lavishly on clothing at the expense of state matters. Posing as weavers, they offer to supply him with magnificent clothes that are invisible to those who are stupid or incompetent. The emperor hires them, and they set up looms and go to work. A succession of officials, and then the emperor himself, visit them to check their progress. Each sees that the looms are empty but pretends otherwise to avoid being thought a fool. Finally, the weavers report that the emperor's suit is finished. They mime dressing him and he sets off in a procession before the whole city. The townsfolk uncomfortably go along with the pretense, not wanting to appear inept or stupid, until a child blurts out that the emperor is wearing nothing at all. The people then realize that everyone has been fooled. Although startled, the emperor continues the procession, walking more proudly than ever. Which of the following characteristics of product quality has been most severely violated? Serviceability Aesthetics None. Quality is what the customer perceives it to be. Durability Performance.

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Consider the ASAD model discussed in Lecture 5 The AD curv.pdf

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