12. Which of the following statements is CORRECT? a. The income of certain small corporations that qualify under the Tax Code is completely exempt from corporate income taxes. Thus, the federal government receives no tax revenue from these businesses, even though they report high accounting profits. b. All businesses, regardless of their legal form of organization, are taxed under the Business Tax Provisions of the Internal Revenue Code. c. Small corporations that qualify under the Tax Code can elect not to pay corporate taxes, but then each stockholder must report his or her pro rata shares of the firm’s income as personal income and pay taxes on that income. d. Congress recently changed the tax laws to make dividend income received by individuals exempt from income taxes. Prior to the enactment of that law, corporate income was subject to double taxation, where the firm was first taxed on the corporation’s income and stockholders were taxed again on this income when it was paid to them as dividends. e. All corporations other than non-profits are subject to corporate income taxes, which are 15% for the lowest amounts of income and 38% for the highest amounts.

12. Which of the following statements is CORRECT? a. The income of certain small corporations that qualify under the Tax Code is completely exempt from corporate income taxes. Thus, the federal government receives no tax revenue from these businesses, even though they report high accounting profits. b. All businesses, regardless of their legal form of organization, are taxed under the Business Tax Provisions of the Internal Revenue Code. c. Small corporations that qualify under the Tax Code can elect not to pay corporate taxes, but then each stockholder must report his or her pro rata shares of the firm’s income as personal income and pay taxes on that income. d. Congress recently changed the tax laws to make dividend income received by individuals exempt from income taxes. Prior to the enactment of that law, corporate income was subject to double taxation, where the firm was first taxed on the corporation’s income and stockholders were taxed again on this income when it was paid to them as dividends. e. All corporations other than non-profits are subject to corporate income taxes, which are 15% for the lowest amounts of income and 38% for the highest amounts.

Answer: c 12.    Which of the following statements is CORRECT?  … Read More...
Fall Semester 2015 NMSU Econ 252, Instructor: Dr. Larry Blank Writing Assignment and Critical Thinking Problems: This assignment is worth 100 points toward your overall course average. The criteria used to grade this assignment includes the professional appearance of the document you submit, your ability to use the principles of supply and demand to critically assess the impacts, and your ability to explain your conclusions in writing. Each part can be answered in one page or less. Assigned: October 5, 2015 Deadline: Friday, October 16, 2015 You will email your assignment in Canvas. Before you email your assignment, make sure your name is on your paper AND your full name is included in the electronic file name. For example, filename: Jose Sanchez_Econ252_paper.doc I will not read your work if your name is not in the electronic filename. Assignment: Answers to all parts shall be completed in a Microsoft Word document. Begin by copying the Scenario below and then, for each part, copy the problem before completing your answer. You may want to draw your diagrams in Microsoft PowerPoint or other software and then copy and paste the diagram into the Word document as a “Picture (Enhanced Metafile)” using the “Paste Special” feature in Word. The document you turn in should be six (6) pages long. For the first page include a short title for this assignment, the course name and number, your name, and then copy and paste everything below beginning with “Scenario” onto your first page. The 2nd page of your document should include the description of Part 1 and then your diagram and answer. Do the same for Parts 2-5, with each part on a separate page. Scenario: The Federal Government implemented a policy some years ago to subsidize the production of ethanol fuel at 46 cents per gallon. See news article here: http://usnews.nbcnews.com/_news/2011/12/29/9804028-6-billion-a-year-ethanol-subsidy-dies-but-wait-theres-more?lite Ethanol is an alternative fuel (a substitute for regular gasoline) that can be used in some models of automobiles designed to burn any mix of gasoline up to 85% ethanol (fuel is known as E85, and auto manufacturers label these vehicles as “FlexFuel” and similar names). A primary input in the production of ethanol is corn. For the purposes of this assignment, assume that all relevant markets are perfectly competitive. Part 1: Show geometrically using the supply and demand curves the impact the subsidy had in the ethanol market (hint: the result has been a reduction in the market price of ethanol). Fully explain the impact of the production subsidy in terms of the behavior of producers (sellers) in the market and customers (buyers) in the market and what has happened to equilibrium price and quantity in the market for ethanol. Part 2: Show geometrically using the supply and demand curves what impact the reduction in market price for ethanol had in the market for regular gasoline. Fully explain the impact this reduced ethanol price had on the customer demand for regular gasoline. Part 3: Show geometrically using the supply and demand curves the impact due to the change in the equilibrium quantity in the market for ethanol had in the market for corn. Fully explain the impact and the resulting equilibrium price and quantity for corn. Part 4: Show geometrically using the supply and demand curves what impact the change in the market price of corn had in the market for manufactured corn tortillas (assume that the market for corn tortillas is perfectly competitive). Corn tortillas are a staple food item in the diets of millions of families across the U.S.. Fully explain the impact of change in the market price of corn in terms of the behavior of producers (sellers) in the market and customers (buyers) in the corn tortilla market. Part 5: Show geometrically using the supply and demand curves the impact in the ethanol market when the ethanol subsidy ended on Jan. 1, 2012. Give one possible explanation why I can no longer find E85 fuel at gas stations. Hint: When the subsidy still existed, the market price of E85 was about 30 cents a gallon less than regular gasoline. E85 is not a perfect substitute for regular gasoline because the performance is less and gas mileage drops by 5-7 miles per gallon.

Fall Semester 2015 NMSU Econ 252, Instructor: Dr. Larry Blank Writing Assignment and Critical Thinking Problems: This assignment is worth 100 points toward your overall course average. The criteria used to grade this assignment includes the professional appearance of the document you submit, your ability to use the principles of supply and demand to critically assess the impacts, and your ability to explain your conclusions in writing. Each part can be answered in one page or less. Assigned: October 5, 2015 Deadline: Friday, October 16, 2015 You will email your assignment in Canvas. Before you email your assignment, make sure your name is on your paper AND your full name is included in the electronic file name. For example, filename: Jose Sanchez_Econ252_paper.doc I will not read your work if your name is not in the electronic filename. Assignment: Answers to all parts shall be completed in a Microsoft Word document. Begin by copying the Scenario below and then, for each part, copy the problem before completing your answer. You may want to draw your diagrams in Microsoft PowerPoint or other software and then copy and paste the diagram into the Word document as a “Picture (Enhanced Metafile)” using the “Paste Special” feature in Word. The document you turn in should be six (6) pages long. For the first page include a short title for this assignment, the course name and number, your name, and then copy and paste everything below beginning with “Scenario” onto your first page. The 2nd page of your document should include the description of Part 1 and then your diagram and answer. Do the same for Parts 2-5, with each part on a separate page. Scenario: The Federal Government implemented a policy some years ago to subsidize the production of ethanol fuel at 46 cents per gallon. See news article here: http://usnews.nbcnews.com/_news/2011/12/29/9804028-6-billion-a-year-ethanol-subsidy-dies-but-wait-theres-more?lite Ethanol is an alternative fuel (a substitute for regular gasoline) that can be used in some models of automobiles designed to burn any mix of gasoline up to 85% ethanol (fuel is known as E85, and auto manufacturers label these vehicles as “FlexFuel” and similar names). A primary input in the production of ethanol is corn. For the purposes of this assignment, assume that all relevant markets are perfectly competitive. Part 1: Show geometrically using the supply and demand curves the impact the subsidy had in the ethanol market (hint: the result has been a reduction in the market price of ethanol). Fully explain the impact of the production subsidy in terms of the behavior of producers (sellers) in the market and customers (buyers) in the market and what has happened to equilibrium price and quantity in the market for ethanol. Part 2: Show geometrically using the supply and demand curves what impact the reduction in market price for ethanol had in the market for regular gasoline. Fully explain the impact this reduced ethanol price had on the customer demand for regular gasoline. Part 3: Show geometrically using the supply and demand curves the impact due to the change in the equilibrium quantity in the market for ethanol had in the market for corn. Fully explain the impact and the resulting equilibrium price and quantity for corn. Part 4: Show geometrically using the supply and demand curves what impact the change in the market price of corn had in the market for manufactured corn tortillas (assume that the market for corn tortillas is perfectly competitive). Corn tortillas are a staple food item in the diets of millions of families across the U.S.. Fully explain the impact of change in the market price of corn in terms of the behavior of producers (sellers) in the market and customers (buyers) in the corn tortilla market. Part 5: Show geometrically using the supply and demand curves the impact in the ethanol market when the ethanol subsidy ended on Jan. 1, 2012. Give one possible explanation why I can no longer find E85 fuel at gas stations. Hint: When the subsidy still existed, the market price of E85 was about 30 cents a gallon less than regular gasoline. E85 is not a perfect substitute for regular gasoline because the performance is less and gas mileage drops by 5-7 miles per gallon.

One reason that research on Type A Personality was so popular for so long may be because research on it was funded by ________. the government the alcohol industry the pharmaceutical industry the tobacco industry

One reason that research on Type A Personality was so popular for so long may be because research on it was funded by ________. the government the alcohol industry the pharmaceutical industry the tobacco industry

One reason that research on Type A Personality was so … Read More...
To purchase a computer for the Student Activities office, the freshman class decides to raise 1/4 of the money, and sophomore class decides to raise 2/3 of the money. The Student Government Association agrees to contribute the rest, which amounted to $200. What was the cost of the computer?

To purchase a computer for the Student Activities office, the freshman class decides to raise 1/4 of the money, and sophomore class decides to raise 2/3 of the money. The Student Government Association agrees to contribute the rest, which amounted to $200. What was the cost of the computer?

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Prepare a five page (minimum) paper along with a cover page, a summary (as noted below) and reference page, on a Landmark Supreme Court Case that dealt with Aboriginal rights in Canada within the past 25 years (e.g. choose from those covered in Oct. 22rd class or another one if you find one that was not addressed but fits the criteria of a Supreme Court case that dealt with Aboriginal rights in Canada within the past 25 years). You can complete the assignment as a written paper (1.5 space/12 point font Times New Roman x 4 pages) or you can use points. In either method, provide a detailed response to each of the questions listed below. In addition to the paper that you will submit for grading, prepare a one page summary/cover page that you will present in class on November 12th and share with the other ANIS3006 students (handout, there are 18 students registered in the course). Frame your paper within the context of the following quotes: “Even when we win we lose.” (Chief Dean Sayers, Batchewana First Nation, commenting on Anishinabe experience in Canadian courts). “For the master’s tools will never dismantle the master’s house. They may allow us to temporarily beat him at his own game, but they will never enable us to bring about genuine change. Racism and homophobia are real conditions of all our lives in this place and time. I urge each one of us here to reach down into that deep place of knowledge inside herself [himself] and touch that terror and loathing of any difference that lives here. See whose face it wears. Then the personal as the political can begin to illuminate all our choices.” (Audre Lorde, feminist) In your paper, answer this broader question: How has the case you’ve selected served to advance Anishinabe rights in Canada? Describe what was gained and consider at what cost (“Even when we win, we lose.”) Address the following, and add anything that you find significant about the case, its process, its outcome and subsequent impact: • What was the basis of the court case? • What happened (e.g. Anishinabe people charged, by who, what charge)? • Who took the issue to court (who was the claimant, against who)? • What was the basis of the claim (be specific)? How was the issue framed/presented? • Who supported the court case (locally, regionally, nationally)? How did they support it? What was the impact of their support (e.g. political, financial, public awareness, protests, etc.)? • How long did it take from initiating the claim to decision (specific dates, chronology)? • What happened? What was the lower court’s decision? How did the case move through to the Supreme Court? What was the final Supreme Court decisions? • What did the Supreme Court’s decision mean in terms of Aboriginal rights in Canada? (What was gained, what was lost)? • Anything else of note relating to the case, its process or outcome. • Answer if and how the Supreme Court decision formed the basis for changes in Canadian government policies or practice concerning Aboriginal Peoples in Canada. In other words, what has the outcome of the Supreme Court decision been to date?

Prepare a five page (minimum) paper along with a cover page, a summary (as noted below) and reference page, on a Landmark Supreme Court Case that dealt with Aboriginal rights in Canada within the past 25 years (e.g. choose from those covered in Oct. 22rd class or another one if you find one that was not addressed but fits the criteria of a Supreme Court case that dealt with Aboriginal rights in Canada within the past 25 years). You can complete the assignment as a written paper (1.5 space/12 point font Times New Roman x 4 pages) or you can use points. In either method, provide a detailed response to each of the questions listed below. In addition to the paper that you will submit for grading, prepare a one page summary/cover page that you will present in class on November 12th and share with the other ANIS3006 students (handout, there are 18 students registered in the course). Frame your paper within the context of the following quotes: “Even when we win we lose.” (Chief Dean Sayers, Batchewana First Nation, commenting on Anishinabe experience in Canadian courts). “For the master’s tools will never dismantle the master’s house. They may allow us to temporarily beat him at his own game, but they will never enable us to bring about genuine change. Racism and homophobia are real conditions of all our lives in this place and time. I urge each one of us here to reach down into that deep place of knowledge inside herself [himself] and touch that terror and loathing of any difference that lives here. See whose face it wears. Then the personal as the political can begin to illuminate all our choices.” (Audre Lorde, feminist) In your paper, answer this broader question: How has the case you’ve selected served to advance Anishinabe rights in Canada? Describe what was gained and consider at what cost (“Even when we win, we lose.”) Address the following, and add anything that you find significant about the case, its process, its outcome and subsequent impact: • What was the basis of the court case? • What happened (e.g. Anishinabe people charged, by who, what charge)? • Who took the issue to court (who was the claimant, against who)? • What was the basis of the claim (be specific)? How was the issue framed/presented? • Who supported the court case (locally, regionally, nationally)? How did they support it? What was the impact of their support (e.g. political, financial, public awareness, protests, etc.)? • How long did it take from initiating the claim to decision (specific dates, chronology)? • What happened? What was the lower court’s decision? How did the case move through to the Supreme Court? What was the final Supreme Court decisions? • What did the Supreme Court’s decision mean in terms of Aboriginal rights in Canada? (What was gained, what was lost)? • Anything else of note relating to the case, its process or outcome. • Answer if and how the Supreme Court decision formed the basis for changes in Canadian government policies or practice concerning Aboriginal Peoples in Canada. In other words, what has the outcome of the Supreme Court decision been to date?

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Assignment One Suggested Due Date: July 17th In this assignment you will read three articles You will answer questions about Hayek, Lucas, and Mankiw et. al. which consider just those particular articles. Then at the end of the assignment there is a cluster of questions that deal with both Lucas and Mankiw et al where you will have an opportunity to compare and contrast those two articles. When you have completed the assignment, place it in the appropriate drop box in WTClass. Hayek: The Use of Knowledge in Society http://www.econlib.org/library/Essays/hykKnw1.html Adapted from Michael K. Salemi “The Use of Knowledge in Society” F. A. Hayek Discussion Questions 1.1. “The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess (H.3)” a. What does Hayek mean by a “rational economic order”? b. What does Hayek mean by “dispersed bits of incomplete and frequently contradictory knowledge”? c. Why is Hayek critical of the common assumptions in economic analysis that buyers, sellers, producers and the economist all know every relevant thing about the economy? d. What, in summary, does Hayek mean by the quoted statement? 1.2. What, according to Hayek, is the information needed to operate effectively in a complex market economy? a. What does Hayek mean by “planning”? b. What is the minimum information needed by economic planners and individuals? c. Does the minimum differ for planners and for individuals? How? Why? d. What happens when some individuals possess more information than other individuals? e. What does Hayek mean when he says (H.16) “…the sort of knowledge with which I have been concerned is knowledge of the kind which by its nature cannot enter into statistics and therefore cannot be conveyed to any central authority in statistical form”? f. Why, according to Hayek, can the “information problem” be solved by “the price system”? 1.3. Why, according to Hayek, is the true function of the price system the communication of information? a. Why does Hayek use the term ‘marvel’ in his discussion of the economy of knowledge? b. What does Hayek mean when he says (H.26) “…man has been able to develop that division of labor on which our civilization is based because he happened to stumble upon a method which made it possible”? Read Robert Lucas’ “Some Macroeconomics for the 21st Century” in the Journal of Economic Perspectives. (Skip the appendix.) All four of these links go to the same article. Some of the links might not be accessible to you, but I think that at least one of them should work for all of you. https://www.aeaweb.org/articles.php?doi=10.1257/jep.14.1.159 http://www.jstor.org/stable/2647059 http://www.econ.psu.edu/~aur10/Econ%20570%20Fall%202009/Lucas%20JEP%202000.pdf http://faculty.georgetown.edu/mh5/class/econ102/readings/Macro_21st_Century.pdf 1. According to Lucas, why has the world’s economy grown so much since 1960? 2. According to Lucas, why do some nations grow faster than others? 3. According to Lucas, why will growth and inequality decrease in the next 100 years? 4. Is Lucas’ model in this paper “economics?” Read Greg Mankiw, Romer and Wiel’s article in The Quarterly Journal of Economics. http://www.econ.nyu.edu/user/debraj/Courses/Readings/MankiwRomerWeil.pdf 1. Many economists think the Solow Growth Model is of limited use. (One of my professors at OU stated that it took economists 50 years to figure out that their growth model has nothing to do with growth.) But does the Solow model give “…the right answer to the questions it is designed to address?” 2. Why is human capital important when testing the Solow model against the data? 3. Explain how the authors conclude that the incomes of the world’s nations are converging? Now that you’ve answered questions about Lucas and Mankiw et al separately, consider this question: Both of these papers develop the notion that the economies of the world’s nations will tend to “converge” over time. Compare and contrast the way(s) in which the papers advance the idea of convergence. Assignment Two Due Date July 24th This assignment is very straight forward. You’ll read two papers and answer questions about each of them. Read Krugman’s paper on unemployment http://www.kc.frb.org/PUBLICAT/ECONREV/EconRevArchive/1994/4Q94KRUG.pdf 1. What is the difference between structural and cyclical unemployment? In this context, what is the difference between Europe and the US? What is the evidence that Krugman uses to back his opinion? 2. What is the natural rate of unemployment? Why is it higher/rising in Europe? Again, what is the evidence? 3. What is the relationship between the rising unemployment in Europe and the rise in inequality in the US. (What does Krugman mean by inequality?) 4. What is NOT to blame for either the rise in unemployment or inequality? 5. What policies, if any, can be put into place to combat rising inequality/unemployment? 6. Are you convinced by Krugman’s argument which rules out globalization as the likely cause for high European unemployment and high US wage inequality? 7. Consider Table 2 in Krugman. Why does Krugman include Table 2 in his paper? In other words, what point is strengthened by the data in Table 2 and why is it crucial to Krugman’s larger thesis? NOW, recreate the data for Table 2 for either the UK or US for the latest year possible. Has anything changed as a result of the Great Recession? Read Thomas Sargent’s paper about the credibility of “Reaganonomics.” http://minneapolisfed.contentdm.oclc.org/cdm/ref/collection/p15334coll1/id/366 http://minneapolisfed.contentdm.oclc.org/cdm/singleitem/collection/p15334coll1/id/366/rec/1 You might like this: http://www.ispot.tv/ad/7Lj9/ally-bank-predictions-featuring-thomas-sargent 1. What is a dynamic game? 2. Why should we think of monetary and fiscal policy as dynamic game? Who are the players and what are the strategies? 3. When are government budgets inflationary? (Again, think in terms of a game.) 4. What are the consequences if the monetary authority does not coordinate with fiscal policy agents? 5. Has Sargent done of good job characterizing the interplay between policymakers in the government, the central bank, and the public? 6. What is the connection between policy coordination and credibility? 7. Why, according to Sargent, were Reagan’s fiscal and monetary policy regimes “incredible?” Explain carefully. Assignment Three Due Date July 31 Read Taylor, Miskin, Obstfeld and Rogoff. Answer the questions for each article, then answer the final cluster that requires you to consider Miskin, Obstfeld and Rogoff. Suggested due date: January 2nd. Read John Taylor’s article about monetary transmission mechanisms. http://web.econ.unito.it/bagliano/ecmon_readings/taylor_jep95.pdf Also, to understand traditional monetary policy, listen to this: http://www.econtalk.org/archives/2008/08/john_taylor_on.html These questions refer to the article, not the podcast. 1. How does monetary policy (or changes in monetary policy) affect output and inflation? In other words, what is the monetary policy transmission mechanism? 2. What is the importance of financial market prices in Taylor’s view? 3. What is the importance of rational expectations and rigidities in the prices of labor and goods? 4. What is a reaction function? Why is a reaction function important? 5. What is an “optimal monetary policy rule?” 6. Has the monetary transmission mechanism changed? How? 7. What are the criticisms of Taylor’s views? How does he respond? What do you think? Read Mishkin’s article about global financial instability. http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.13.4.3 1. What is a financial crisis? 2. How did adverse selection and moral hazard contribute to the financial crisis in Mexico and East Asia in the 1990s? What are adverse selection and moral hazard? 3. Did irresponsible monetary and fiscal policy contribute to the crisis in the 90s? Why or why not? 4. How is it possible for the IMF to help in a crisis when a domestic central bank might not be able to help. 5. What should the US learn (or have learned??) from the crisis in the 90s? Read Rogoff’s article about global financial instability. http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.13.4.21 http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.13.4.21 Answer the questions and place the answers in the appropriate drop box in WTClass. 1. According to Rogoff, is the status quo in international lending viable or not? Explain. 2. Can the IMF handle international financial crises? Why or why not? 3. Rogoff gives six solutions to save the global financial system (deep pockets lender of last resort, an international financial crisis manager, an international bankruptcy court, an international regulator, international deposit insurance corporation, and a world monetary authority.) What is wrong with all of these? 4. Can developing economies cope with speculative capital flows without help? Explain. 5. What will be (should be) the role that equity financing play in developing country projects? Read Obstfeld on Global Capital Markets: http://www.nber.org/papers/w6559.pdf 1. Look at table 1 and figure 1. How does Obstfeld use the data in that table to suggest that 1) markets became less open then more open in the 20th century. 2. What is the “openness trilemma?” What are the economic and/or policy trade-offs with having a global, open and integrated financial system? 3. How does economic integration impact a nation’s ability to tax capital? Can you think of some high profile cases in the news lately that illustrate this fact? (Hint: you should be able to.) 4. What is the international diversification puzzle? What market failures have arisen (if any) have arisen due to more integration and openness? Comparing Obstfeld, Miskin, and Rogoff 1. Would the authors’ advice about policies to reduce the costs of financial integration be the same? Why or why not? 2. Would the authors’ agree that we need an international regulatory body to stave off international financial crises? Why or why not? 3. What is your opinion? Is it good to have a global financial market? Why or why not? Assignment Four Due Date August 7 Straight forward assignment: Read and answer the questions. Read Arnold Kling’s history of the policies that created the great recession http://mercatus.org/publication/not-what-they-had-mind-history-policies-produced-financial-crisis-2008 1. Using only the executive summary, what does Kling think caused the Financial Crisis of 2008? (Use only one sentence.) 2. One page 5, what is “the fact?” and what does this “fact” mean to you? 3. Briefly summarize the four components of the Financial Crisis? 4. On page 10, Kling states, “These property bubbles (in the U.K. and Spain) cannot be blamed on U.S. policy.” How confident are you on that point? Is Kling wrong? 5. Kling’s matrix of causes, gives almost all weight to what two factors? What three factors are almost completely not responsible? 6. Many have blamed designer financial (my term) like CDS and CDO and the shadow banking system for the collapse. How do these fit into Kling’s narrative? 7. Outline the progression of policy that caused/responded to economic conditions in the 30s, 70s and 80s and 00s. 8. What role did the mortgage interest deduction have on housing market? 9. What institution invented and allowed the expansion of mortgage-backed securities? 10. What is regulatory arbitrage? 11. Why did the Basel agreement create an advantage for mortgage securitization? 12. Did the Federal Reserve (and presumably other regulatory agencies know and even encourage regulatory capital arbitrage? What author does Kling cite to establish this? 13. What did the 2002 modification of the Basel Rules do to capital requirements? (See figure 4) 14. Summarize the Shadow Regulatory Committee’s statement 160. 15. Did non market institutions, such as the IMF and Bernanke, think, in 2006, that financial innovation had make the banking sector more or less fragile? 16. What is time inconsistency? (You can look this up elsewhere.) 17. How might “barriers to entry” by related to “safety and soundness?” 18. A Curmudgeon is an old man who is easily annoyed and angered. He also complains a lot. (I had to look it up.) I think I’ll change my xbox gamertag to this word, but I’ll bet it is taken. 19. How did credit scoring and credit default swaps enlarge the mortgage securities market? 20. Why, up until 2007, did we think that monetary expansion was all that was needed to mitigate the impact of financial crises? 21. Suppose that financial markets are inherently unstable. What does this mean are two goals of regulation and regulators? 22. Why are type two errors so problematic? (Two reasons.) 23. How could we make the banking sector easy to fix? Assignment Five Due August 13 Read the linked lectures and answer the questions. Lecture 1 http://econlog.econlib.org/archives/2008/11/lectures_in_mac.html 1.1 Why do you think macroeconomic realities must be reconciled with microeconomic analysis? (This is not a rhetorical question, but it will be hard for you to answer. There is no “wrong” answer you could give. Just think about it for a few minutes.) Lecture 2 http://econlog.econlib.org/archives/2008/11/lectures_in_mac_1.html 2.1 Consider this article after you have read Hayek. How do prices and wages perform the function of “central planning?” 2.2 Kling makes that claim that, because most workers do not do manual labor anymore, the economy is different that it was in 1930. Assuming he is correct, do you think central planning would be harder today or easier? Why? Lecture 3 http://econlog.econlib.org/archives/2008/11/lectures_on_mac.html 3.1 Give a one sentence definition of structural unemployment, of frictional unemployment and of cyclical unemployment. Lecture 4 http://econlog.econlib.org/archives/2008/11/lectures_on_mac_1.html 4.1 So, why does the economy adjust employment rather than wages? Lecture 5 http://econlog.econlib.org/archives/2008/11/lectures_on_mac_2.html 5.1 Kling gives 5 reasons the DotCom recession was worse than the previous two recessions (at least in duration). Which reason do you think is the most compelling? Lecture 6 http://econlog.econlib.org/archives/2008/11/lectures_on_mac_3.html 6.1 Why are Keynesian remedies (blunt fiscal and monetary policy measures) less appropriate in a post industrial economy, according to Kling? Lecture 7 http://econlog.econlib.org/archives/2008/11/lectures_on_mac_4.html 7.1 Why is it so hard to separate finance and government, according to Kling? Lecture 8 http://econlog.econlib.org/archives/2008/11/lectures_on_mac_5.html 8.1 Why is American Express Travelers Checks so interesting? Do credit cards work in a similar way? (I really don’t know the answer to this one. I just know that credit cards have made travelers checks obsolete.) Lecture 9. http://econlog.econlib.org/archives/2008/12/lectures_on_mac_6.html 9.1 According to this article, why do we have banks (financial sector or financial intermediation?) Lecture 10 http://econlog.econlib.org/archives/2008/12/lectures_on_mac_7.html 10.1 Why are banks better than barter, according to this leture? 10.2 Politics tends to favor bailouts of failed firms. Why is this exactly wrong?

Assignment One Suggested Due Date: July 17th In this assignment you will read three articles You will answer questions about Hayek, Lucas, and Mankiw et. al. which consider just those particular articles. Then at the end of the assignment there is a cluster of questions that deal with both Lucas and Mankiw et al where you will have an opportunity to compare and contrast those two articles. When you have completed the assignment, place it in the appropriate drop box in WTClass. Hayek: The Use of Knowledge in Society http://www.econlib.org/library/Essays/hykKnw1.html Adapted from Michael K. Salemi “The Use of Knowledge in Society” F. A. Hayek Discussion Questions 1.1. “The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess (H.3)” a. What does Hayek mean by a “rational economic order”? b. What does Hayek mean by “dispersed bits of incomplete and frequently contradictory knowledge”? c. Why is Hayek critical of the common assumptions in economic analysis that buyers, sellers, producers and the economist all know every relevant thing about the economy? d. What, in summary, does Hayek mean by the quoted statement? 1.2. What, according to Hayek, is the information needed to operate effectively in a complex market economy? a. What does Hayek mean by “planning”? b. What is the minimum information needed by economic planners and individuals? c. Does the minimum differ for planners and for individuals? How? Why? d. What happens when some individuals possess more information than other individuals? e. What does Hayek mean when he says (H.16) “…the sort of knowledge with which I have been concerned is knowledge of the kind which by its nature cannot enter into statistics and therefore cannot be conveyed to any central authority in statistical form”? f. Why, according to Hayek, can the “information problem” be solved by “the price system”? 1.3. Why, according to Hayek, is the true function of the price system the communication of information? a. Why does Hayek use the term ‘marvel’ in his discussion of the economy of knowledge? b. What does Hayek mean when he says (H.26) “…man has been able to develop that division of labor on which our civilization is based because he happened to stumble upon a method which made it possible”? Read Robert Lucas’ “Some Macroeconomics for the 21st Century” in the Journal of Economic Perspectives. (Skip the appendix.) All four of these links go to the same article. Some of the links might not be accessible to you, but I think that at least one of them should work for all of you. https://www.aeaweb.org/articles.php?doi=10.1257/jep.14.1.159 http://www.jstor.org/stable/2647059 http://www.econ.psu.edu/~aur10/Econ%20570%20Fall%202009/Lucas%20JEP%202000.pdf http://faculty.georgetown.edu/mh5/class/econ102/readings/Macro_21st_Century.pdf 1. According to Lucas, why has the world’s economy grown so much since 1960? 2. According to Lucas, why do some nations grow faster than others? 3. According to Lucas, why will growth and inequality decrease in the next 100 years? 4. Is Lucas’ model in this paper “economics?” Read Greg Mankiw, Romer and Wiel’s article in The Quarterly Journal of Economics. http://www.econ.nyu.edu/user/debraj/Courses/Readings/MankiwRomerWeil.pdf 1. Many economists think the Solow Growth Model is of limited use. (One of my professors at OU stated that it took economists 50 years to figure out that their growth model has nothing to do with growth.) But does the Solow model give “…the right answer to the questions it is designed to address?” 2. Why is human capital important when testing the Solow model against the data? 3. Explain how the authors conclude that the incomes of the world’s nations are converging? Now that you’ve answered questions about Lucas and Mankiw et al separately, consider this question: Both of these papers develop the notion that the economies of the world’s nations will tend to “converge” over time. Compare and contrast the way(s) in which the papers advance the idea of convergence. Assignment Two Due Date July 24th This assignment is very straight forward. You’ll read two papers and answer questions about each of them. Read Krugman’s paper on unemployment http://www.kc.frb.org/PUBLICAT/ECONREV/EconRevArchive/1994/4Q94KRUG.pdf 1. What is the difference between structural and cyclical unemployment? In this context, what is the difference between Europe and the US? What is the evidence that Krugman uses to back his opinion? 2. What is the natural rate of unemployment? Why is it higher/rising in Europe? Again, what is the evidence? 3. What is the relationship between the rising unemployment in Europe and the rise in inequality in the US. (What does Krugman mean by inequality?) 4. What is NOT to blame for either the rise in unemployment or inequality? 5. What policies, if any, can be put into place to combat rising inequality/unemployment? 6. Are you convinced by Krugman’s argument which rules out globalization as the likely cause for high European unemployment and high US wage inequality? 7. Consider Table 2 in Krugman. Why does Krugman include Table 2 in his paper? In other words, what point is strengthened by the data in Table 2 and why is it crucial to Krugman’s larger thesis? NOW, recreate the data for Table 2 for either the UK or US for the latest year possible. Has anything changed as a result of the Great Recession? Read Thomas Sargent’s paper about the credibility of “Reaganonomics.” http://minneapolisfed.contentdm.oclc.org/cdm/ref/collection/p15334coll1/id/366 http://minneapolisfed.contentdm.oclc.org/cdm/singleitem/collection/p15334coll1/id/366/rec/1 You might like this: http://www.ispot.tv/ad/7Lj9/ally-bank-predictions-featuring-thomas-sargent 1. What is a dynamic game? 2. Why should we think of monetary and fiscal policy as dynamic game? Who are the players and what are the strategies? 3. When are government budgets inflationary? (Again, think in terms of a game.) 4. What are the consequences if the monetary authority does not coordinate with fiscal policy agents? 5. Has Sargent done of good job characterizing the interplay between policymakers in the government, the central bank, and the public? 6. What is the connection between policy coordination and credibility? 7. Why, according to Sargent, were Reagan’s fiscal and monetary policy regimes “incredible?” Explain carefully. Assignment Three Due Date July 31 Read Taylor, Miskin, Obstfeld and Rogoff. Answer the questions for each article, then answer the final cluster that requires you to consider Miskin, Obstfeld and Rogoff. Suggested due date: January 2nd. Read John Taylor’s article about monetary transmission mechanisms. http://web.econ.unito.it/bagliano/ecmon_readings/taylor_jep95.pdf Also, to understand traditional monetary policy, listen to this: http://www.econtalk.org/archives/2008/08/john_taylor_on.html These questions refer to the article, not the podcast. 1. How does monetary policy (or changes in monetary policy) affect output and inflation? In other words, what is the monetary policy transmission mechanism? 2. What is the importance of financial market prices in Taylor’s view? 3. What is the importance of rational expectations and rigidities in the prices of labor and goods? 4. What is a reaction function? Why is a reaction function important? 5. What is an “optimal monetary policy rule?” 6. Has the monetary transmission mechanism changed? How? 7. What are the criticisms of Taylor’s views? How does he respond? What do you think? Read Mishkin’s article about global financial instability. http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.13.4.3 1. What is a financial crisis? 2. How did adverse selection and moral hazard contribute to the financial crisis in Mexico and East Asia in the 1990s? What are adverse selection and moral hazard? 3. Did irresponsible monetary and fiscal policy contribute to the crisis in the 90s? Why or why not? 4. How is it possible for the IMF to help in a crisis when a domestic central bank might not be able to help. 5. What should the US learn (or have learned??) from the crisis in the 90s? Read Rogoff’s article about global financial instability. http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.13.4.21 http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.13.4.21 Answer the questions and place the answers in the appropriate drop box in WTClass. 1. According to Rogoff, is the status quo in international lending viable or not? Explain. 2. Can the IMF handle international financial crises? Why or why not? 3. Rogoff gives six solutions to save the global financial system (deep pockets lender of last resort, an international financial crisis manager, an international bankruptcy court, an international regulator, international deposit insurance corporation, and a world monetary authority.) What is wrong with all of these? 4. Can developing economies cope with speculative capital flows without help? Explain. 5. What will be (should be) the role that equity financing play in developing country projects? Read Obstfeld on Global Capital Markets: http://www.nber.org/papers/w6559.pdf 1. Look at table 1 and figure 1. How does Obstfeld use the data in that table to suggest that 1) markets became less open then more open in the 20th century. 2. What is the “openness trilemma?” What are the economic and/or policy trade-offs with having a global, open and integrated financial system? 3. How does economic integration impact a nation’s ability to tax capital? Can you think of some high profile cases in the news lately that illustrate this fact? (Hint: you should be able to.) 4. What is the international diversification puzzle? What market failures have arisen (if any) have arisen due to more integration and openness? Comparing Obstfeld, Miskin, and Rogoff 1. Would the authors’ advice about policies to reduce the costs of financial integration be the same? Why or why not? 2. Would the authors’ agree that we need an international regulatory body to stave off international financial crises? Why or why not? 3. What is your opinion? Is it good to have a global financial market? Why or why not? Assignment Four Due Date August 7 Straight forward assignment: Read and answer the questions. Read Arnold Kling’s history of the policies that created the great recession http://mercatus.org/publication/not-what-they-had-mind-history-policies-produced-financial-crisis-2008 1. Using only the executive summary, what does Kling think caused the Financial Crisis of 2008? (Use only one sentence.) 2. One page 5, what is “the fact?” and what does this “fact” mean to you? 3. Briefly summarize the four components of the Financial Crisis? 4. On page 10, Kling states, “These property bubbles (in the U.K. and Spain) cannot be blamed on U.S. policy.” How confident are you on that point? Is Kling wrong? 5. Kling’s matrix of causes, gives almost all weight to what two factors? What three factors are almost completely not responsible? 6. Many have blamed designer financial (my term) like CDS and CDO and the shadow banking system for the collapse. How do these fit into Kling’s narrative? 7. Outline the progression of policy that caused/responded to economic conditions in the 30s, 70s and 80s and 00s. 8. What role did the mortgage interest deduction have on housing market? 9. What institution invented and allowed the expansion of mortgage-backed securities? 10. What is regulatory arbitrage? 11. Why did the Basel agreement create an advantage for mortgage securitization? 12. Did the Federal Reserve (and presumably other regulatory agencies know and even encourage regulatory capital arbitrage? What author does Kling cite to establish this? 13. What did the 2002 modification of the Basel Rules do to capital requirements? (See figure 4) 14. Summarize the Shadow Regulatory Committee’s statement 160. 15. Did non market institutions, such as the IMF and Bernanke, think, in 2006, that financial innovation had make the banking sector more or less fragile? 16. What is time inconsistency? (You can look this up elsewhere.) 17. How might “barriers to entry” by related to “safety and soundness?” 18. A Curmudgeon is an old man who is easily annoyed and angered. He also complains a lot. (I had to look it up.) I think I’ll change my xbox gamertag to this word, but I’ll bet it is taken. 19. How did credit scoring and credit default swaps enlarge the mortgage securities market? 20. Why, up until 2007, did we think that monetary expansion was all that was needed to mitigate the impact of financial crises? 21. Suppose that financial markets are inherently unstable. What does this mean are two goals of regulation and regulators? 22. Why are type two errors so problematic? (Two reasons.) 23. How could we make the banking sector easy to fix? Assignment Five Due August 13 Read the linked lectures and answer the questions. Lecture 1 http://econlog.econlib.org/archives/2008/11/lectures_in_mac.html 1.1 Why do you think macroeconomic realities must be reconciled with microeconomic analysis? (This is not a rhetorical question, but it will be hard for you to answer. There is no “wrong” answer you could give. Just think about it for a few minutes.) Lecture 2 http://econlog.econlib.org/archives/2008/11/lectures_in_mac_1.html 2.1 Consider this article after you have read Hayek. How do prices and wages perform the function of “central planning?” 2.2 Kling makes that claim that, because most workers do not do manual labor anymore, the economy is different that it was in 1930. Assuming he is correct, do you think central planning would be harder today or easier? Why? Lecture 3 http://econlog.econlib.org/archives/2008/11/lectures_on_mac.html 3.1 Give a one sentence definition of structural unemployment, of frictional unemployment and of cyclical unemployment. Lecture 4 http://econlog.econlib.org/archives/2008/11/lectures_on_mac_1.html 4.1 So, why does the economy adjust employment rather than wages? Lecture 5 http://econlog.econlib.org/archives/2008/11/lectures_on_mac_2.html 5.1 Kling gives 5 reasons the DotCom recession was worse than the previous two recessions (at least in duration). Which reason do you think is the most compelling? Lecture 6 http://econlog.econlib.org/archives/2008/11/lectures_on_mac_3.html 6.1 Why are Keynesian remedies (blunt fiscal and monetary policy measures) less appropriate in a post industrial economy, according to Kling? Lecture 7 http://econlog.econlib.org/archives/2008/11/lectures_on_mac_4.html 7.1 Why is it so hard to separate finance and government, according to Kling? Lecture 8 http://econlog.econlib.org/archives/2008/11/lectures_on_mac_5.html 8.1 Why is American Express Travelers Checks so interesting? Do credit cards work in a similar way? (I really don’t know the answer to this one. I just know that credit cards have made travelers checks obsolete.) Lecture 9. http://econlog.econlib.org/archives/2008/12/lectures_on_mac_6.html 9.1 According to this article, why do we have banks (financial sector or financial intermediation?) Lecture 10 http://econlog.econlib.org/archives/2008/12/lectures_on_mac_7.html 10.1 Why are banks better than barter, according to this leture? 10.2 Politics tends to favor bailouts of failed firms. Why is this exactly wrong?

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The Origin of Democracy https://www.youtube.com/watch?v=_rjAmg5lbaQ 1. 1. What was Socrates accused of and what was his punishment? (worth 2 points) 2. 2. What are the 2 things Socrates stated that are needed for… (worth 2 points) 3. 3. Athens had how many Social Groups and how many Tribes? Na… (worth 2 points) 4. 4. What was expected of a Spartan Man/Soldier? Explain in de… (worth 2 points) 5. 5. What are the reasons that the Governments of Athens & Spa… (worth 2 points) 6. 6. In your opinion, did this video provide some basic infor… (worth 2 points) After Democracy https://www.youtube.com/watch?v=7EBFLXCyM0I 1. 1. What does the video suggest about Government and Revoluti… (worth 2 points) 2. 2. According to the video, does Democracy have an Historical… (worth 2 points) 3. 3. Compare and contrast the differences between Western Demo… (worth 2 points)

The Origin of Democracy https://www.youtube.com/watch?v=_rjAmg5lbaQ 1. 1. What was Socrates accused of and what was his punishment? (worth 2 points) 2. 2. What are the 2 things Socrates stated that are needed for… (worth 2 points) 3. 3. Athens had how many Social Groups and how many Tribes? Na… (worth 2 points) 4. 4. What was expected of a Spartan Man/Soldier? Explain in de… (worth 2 points) 5. 5. What are the reasons that the Governments of Athens & Spa… (worth 2 points) 6. 6. In your opinion, did this video provide some basic infor… (worth 2 points) After Democracy https://www.youtube.com/watch?v=7EBFLXCyM0I 1. 1. What does the video suggest about Government and Revoluti… (worth 2 points) 2. 2. According to the video, does Democracy have an Historical… (worth 2 points) 3. 3. Compare and contrast the differences between Western Demo… (worth 2 points)

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If a state worked with a national government agency to solve a problem with large implications, such as a failing energy grid, it could be said that the problem is being solved through _______, 1. public-private partnership, 2. dual federalism, 3. the Dillon rule, 4. cooperative federalism, 5. joint government.

If a state worked with a national government agency to solve a problem with large implications, such as a failing energy grid, it could be said that the problem is being solved through _______, 1. public-private partnership, 2. dual federalism, 3. the Dillon rule, 4. cooperative federalism, 5. joint government.

4.  cooperative federalism