a) The value of the second best alternative necessarily forsaken in order to choose an option.
b) Measure how sensitive the demand or supply is to a change in price.
c) If a country cannot afford to produce capital and invest all its resour
6th Exercise list
_ 1. If you were a supply-side economist, you would argue that high levels of government spending
a. stimulate aggregate demand that in turn creates the incentive for increased aggregate
b. add to aggregate supply because they bri
EXERCISE LIST #9
1. Explain how the price and income effect can compensate an initial trade deficit in a
certain country due to the appreciation of its currency.
2. Why was it very unpopular for a country to remain at the gold standard regime given that
1) LG is a famous Korean company that produces electronic products. An economist was hired by LG in
order to figure it out the production possibilities curves (PPC) of all the possible combinations of
products that this company has. Interestingly, it was
1. Definitions: Contrast a movement along the demand curve from a shift of demand the
curve. Is it any different one the supply curve is concerned?
2. In the following table, one can see the market for a cup of coffee:
1. (a) What is Engels law? How can you relate it with the US government
intervention in the agriculture market?
(b) What is the difference between price support and subsidy?
(c) Why is the supply of agricultural food perfectly inelastic in the short run?
Q1) Suppose a zero-coupon bond is trading at $950 and has a pair value of $1000 (paid at
maturity after one year). What is the rate of return of the bond? If the price of the bond was $909,
what should be its rate of return? What if the price was $970? Us
Suppose that the Lorenz Curve of a country is constructed based on the following function:
f (x) = (1/2).x,
f (x) = 0.25 + 1.5.(x-0.5), if 0.5x1
a) Just by looking into this function, what intuition about this country income distributi
12th exercise list
Consider the table below, describing the production process of the
agricultural sector of country X, which currently employs 20 workers.
Output (in dollars)
1000 1000 1000
Using this information, ans
Getting back to GDP.
GDP: important indicator of economic performance
But what about quality of life?
Bobby Kennedy on GDP: 'measures everything
except that which is w
5th TA session
Aggregate demand and
Progressive vs Regressive tax
Regressive taxes falls more heavily on the
lower income. (e.g. sales taxes, fixed
Progressive taxes falls more heavily o
Q1) Based on the graph below and the following information, solve the question. Propensity to save is
equal to 20%, autonomous consumption equals $100, full employment GDP is $8000 and both investment
and government expenditure equals $200.
a) Which aggre
1) Show what will happen to the 4 graphs if the price of 1 pound goes from 1.60 dollars to 1.85? (30 p.)
2) Give an example for each one of the transaction in the following items of the balance of payments and
classify it as
1. The table below describes the output and price level of an imaginary country in year 2000 and
of Price of good A
of Price of good B
10th exercise list
1- Define absolute and comparative advantage and explain David Ricardos idea.
2Brazil needs 4 hours to produce one computer and 8 hours to produce one aircraft. At the same
time, U.S. needs 2 hours to produce one computer and 6 hours to