Problem Set 4_Unsolved

Problem Set 4_Unsolved - Lahore School of Economics...

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Lahore School of Economics Macroeconomics II – Spring 2011 BSC II – Section B and C Problem Set 4 Due Saturday, 2     nd     April, 2011     1) Suppose the government levies a tax on oil companies equal to a proportion of  the value of the company’s oil reserves. (The government assures the firms that  the tax is for one time only). According to the neoclassical model, what effects  will the tax have on business fixed investment by these firms? What is the firm’s  face financing constraint?  2) It is an election year, and the economy is in a recession. The opposition candidate  campaigns   on   a  platform   of  passing   an   investment   credit,   which   would   be  effective next year after she takes the office. What impact does this campaign  have on economic conditions during the current year?  3) The model of business fixed investment examines the benefits and costs to firms 
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This note was uploaded on 02/13/2012 for the course ECON 101 taught by Professor Malrani during the Spring '05 term at Bunker Hill.

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Problem Set 4_Unsolved - Lahore School of Economics...

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