Homework Help for Economics

1. 5. Your neighbor’s first name is “Loss” and his last name is “Aversion”. Mr. Loss Aversion expresses his utility with the following function: u(x)x^0.4, (x^0.4) where x is a possible payoff. Mr. “Aversion” coefficient of loss aversion λ is 2. His reference point is $50, his α(coefficient of diminishing marginal sensitivity for gains) is 0.1 and his β( coefficient of diminishing marginal sensitivity for losses) is 0.8.
   
   Please answer the following: ( show all work and round to the nearest 2 decimal points).
   
   a) What's Mr. "Aversion" utility if he wins $100?
2. b) According to Prospect Theory, what is his utility (value) for winning the same amount of $100?
3. c) Explain why there is a difference between the answers in part (a) and part (b).
4. d) Suppose that Mr. Aversion lost $100. What's his utility according to the prospect theory model?
5. e) Explain why the utility of gaining $100 (part b) is not symmetric to the utility of losing a $100 (part

d). [hint: v(x) is not symmetric to -v(-x)]

1. A covid antigen rapid test has an accuracy rate of 65% (the probability the test show positive results when the patient has covid). The probability of having covid is 2% and the probability that the test is producing a positive result is 70%. What's the probability that a person taking the test and seeing a positive result has covid? (Show work)

Capital Accumulation as a Source of Growth— Work It Out

Consider an economy described by the production function:

Y = F(K, L) = K0.60L0.40

a. What is the per-worker production function? y =    

b. Assuming no population growth or technological progress, find the steady-state capital stock per worker (k*), output per worker (y*), and consumption per worker (c*) as a function of the saving rate and the depreciation rate. k* =     y* =     c* =  

2. Which of these is a characteristic of a market economy?

A. Limited business rights

B. Competition between businesses

C. Government control and ownership of property.

D. Nationwide pricing rules for goods and services.

Part I: Basic Economic Principles—-Matching

1. Scarcity

2. Opportunity Cost

3. Resources

4. Socioeconomic Goals

5. Business Cycle

A. Government objectives linking economic activity and social needs.

B. Condition that exists because there are not enough resources to satisfy human wants.

C. Item or mean required to do something else.

D. Refers to the pattern of rising and declining production which characterizes our economy.

E. The value of what is given up when making an economic decision.

1. How could the Congress use fiscal policy to expand the economy during a Recession?

2. Identify and explain one step the Federal Reserve might take contract the economy in order to slow inflation.

What is the description of Gross Domestic Product (GDP)?

What is the description of Consumer Price Index (CPI)?

What is the description of Unemployment Rate?

What does Gross Domestic Product(GDP) tells about the economy?

What does Consumer Price Index(CPI) tells about the economy?

What does Unemployment Rate tells about the economy?

Traditional Economy

What to Produce?

How To Produce?

For Whom To Produce?

Examples -

Advantages/Disadvantages -

Command Economy

What to Produce?

How to Produce?

For whom to produce?

Examples -

Advantages/Disadvantages -

Market Economy

What to produce?

For whom to produce?

Examples -

Advantages/Disadvantages -

1. Analyse how a rapid expansion in world economic activity will affect an economy under a free-floating exchange rates regime

suppose that big bucks bank has the simplified balance sheet shown below.  The reserve ratio is 20 percent.

What is the maximum amount of new loans that big bucks bank can make?

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Question 3: 

 Assume that the United States economy is operating at full employment. 

1. Using a correctly labeled graph of the long-run aggregate supply, short-run aggregate supply, and aggregate demand, show each of the following. 
1. Current price level, labeled PL1 
2. Current output level, labeled Y1 
2. Assume that personal savings in the United States increase. Using a correctly labeled graph of the loanable funds market, show the impact of the increase in personal savings on the real interest rate. 
3. Based on the real interest rate change identified in part (b), 
1. will interest-sensitive expenditures increase, decrease, or remain unchanged? 
2. what will happen to the rate of economic growth? Explain. 
4. Assume that the real interest rate of the euro zone increases relative to the real interest rate of the United States. Draw a correctly labeled graph of the foreign exchange market for the euro and show the impact of the change in the real interest rate in the euro zone on each of the following. 

(i) Demand for the euro. Explain. 

(ii) Value of the euro relative to the United States dollar 

1.  Assume that the United States current account balance is zero. Based on the change in the value of the euro identified in part (d)(ii), will the United States current account balance now be in surplus, be in deficit, or remain at zero?

Question 2: 

Exchange rates and interest rates are important for macroeconomic decision making. 

1. How does an increase in Japan’s government budget deficit affect each of the following? 

1. The real interest rate in the short run in Japan. Explain. 
2. (Private domestic investment in plant and equipment in Japan 

1. Draw a correctly labeled graph of the foreign exchange market for the euro, and show the effect of the change in the real interest rate in Japan from part (a)(i) on each of the following. 

1. Supply of euros. Explain. 
2. Yen price of the euro 

1. To reverse the change in the yen price of the euro identified in part (b)(ii), should the European Central Bank buy or sell euros in the foreign exchange market?