Berkeley College International Economics Quiz 1 Student name: Class & Session (Type all your answers in the parenthesis) Multiple Choice Questions (75 points) 1. The person credited with the first systematic expression of the principle of comparative advantage was ( ) A. Alan Greenspan. B. John Maynard Keynes. C. David Ricardo. D. Adam Smith. 2. A regulation that sets the highest price at which it is legal to trade a good is a ( ) A. Production quota B. Price floor C. Price ceiling D. Tax ceiling 3. In Country J, it takes one hour to knit a pair of socks, and five hours to brew a gallon of cider. In Country K, it takes three hours to knit a pair of socks, and six hours to brew a gallon of cider. If trade were to open between the two countries, Ricardo would predict that ( ) A. Country J will export cider and Country K will export socks. B. Country J will export socks and Country K will export cider. C. Country J will export both socks and cider. D. Country K will export both socks and cider. 4. If Nation A can produce either 3x or 3y with one hour of labor, while nation B can produce either 1x or 1y with one hour of labor, and if labor is the only input, then ( ) A. Nation A has an absolute advantage in both goods. B. Nation B has an absolute advantage in both goods. C. Nation A has a comparative disadvantage in both goods. D. Nation A has a comparative advantage in both goods. 5. Mutually beneficial trade A. Allows both countries to consume a larger bundle of goods than before trade occurred.( ) B. Allows only the more productive country to consume a larger bundle of goods than before trade occurred. C. Allows only the less productive country to consume a larger bundle of goods than before trade occurred. D. Causes changes only in production, not consumption. 6. In the absence of trade, the consumption points available to a nation ( ) A. Are above the production possibility curve. B. Are on or inside the production possibility curve. C. Lie on the production possibility curve. D. Cannot be identified. 7. For Heckscher-Ohlin, the most important cause of the differences in relative commodity prices is the difference between countries in ( ) A. Factor endowments. B. National income. C. Technology. D. Tastes. 8. Country J has 1 million machines and 1 million workers, while country K has 2 million machines and 3 million workers. If computers are produced mostly by capital and beer is produced mostly by labor, the H-O model predicts that ( ) A. Country K will export computers in exchange for beer. B. Country J will export computers in exchange for beer. C. Country J is too small to be of economic interest to Country K. D. Computers and beer don’t mix, so trade cannot increase either country’s well-being. 9. Mexico is an unskilled labor abundant country, while the United States is a skilled labor abundant country. With the opening of trade, you would expect that, in the long run, wages for unskilled workers ( ) A. Decline in both countries. B. Decline in the United States and rise in Mexico. C. Rise in the United States and decline in Mexico. D. Rise in both countries 10. According to trade theory, if a nation has a comparative advantage in a capital-intensively produced good, and the rate of growth of capital is greater than the rate of growth of other inputs (e.g., labor), the pattern of growth which results will be ( ) A. Import replacing. B. Neutral as between capital intensive and other products. C. Export expanding. D. None of the above. 11. Arguments in favor of having developing countries focus on exporting manufactured goods include ( ) A. Strong support in industrialized countries for free trade in manufactured goods. B. Very low tariffs on manufactured textiles, apparel, and footwear in industrialized countries. C. Political preference for VERs among importing countries. D. A downward trend in the prices of primary products. 12. Which group definitely loses from international migration of labor? ( ) A. The migrants. B. The migrants’ new employers in the receiving country. C. The migrants’ old employers in the sending country. D. The migrants’ fellow workers who did not emigrate. 13. As technology advances, ( ) A. All opportunity cost decreases B. The PPF shift outward C. A country moves toward the midpoint along its PPF D. The PPF shift inward because unemployment occurs 14. If a country is operating at a point of production efficiency ( ) A. It enjoys growth when increasing production B. It produces on its production possibility frontier curve C. It must specialize in the production of a good D. It operates on its trade line 15. A cartel is ( ) A. Another name for a firm in an oligopoly B. A collusive agreement among a number of firms C. A government body that regulates an industry D. An antitrust law (Type and show your work) Practicum Question (25 points) Two countries, Haiti and the Dominican Republic, produce fruits and timber. Each island has a labor force of 1200 and the monthly productivity of each worker is as follow Basket of fruit Board feet of timber Haiti 10 5 Dominican Republic 30 10 a. Which county has an absolute advantage in the production of fruit? Timber? b. Which country has a comparative advantage in the production of fruit? Timber? c. Sketch the production possibility frontier (PPF) of both countries d. Both countries want to produce an equal amount of baskets of fruit and feet of timber. How should they allocate their workers to the two sectors? e. How can free trade move both countries beyond their respective PPF Extra credits (10 points) The demand and supply curves of the market for DVD at the local (US) market are as follow: P = 30 – Qd/2 and P= -1.5 + Qs/4 a. Find the equilibrium price and the equilibrium quantity when there is no international trade ( hint: solve for Qd and Qs And then make Qd=Qs to solve for Price and quantities) b. What are the equilibrium quantities when the nations trade freely at price of $15? Explain your rationale. c. How many units are exported? d. What is the resulting national gain? e. Do consumers and producers gain or lose from the free trade?

Berkeley College International Economics Quiz 1 Student name: Class & Session (Type all your answers in the parenthesis) Multiple Choice Questions (75 points) 1. The person credited with the first systematic expression of the principle of comparative advantage was ( ) A. Alan Greenspan. B. John Maynard Keynes. C. David Ricardo. D. Adam Smith. 2. A regulation that sets the highest price at which it is legal to trade a good is a ( ) A. Production quota B. Price floor C. Price ceiling D. Tax ceiling 3. In Country J, it takes one hour to knit a pair of socks, and five hours to brew a gallon of cider. In Country K, it takes three hours to knit a pair of socks, and six hours to brew a gallon of cider. If trade were to open between the two countries, Ricardo would predict that ( ) A. Country J will export cider and Country K will export socks. B. Country J will export socks and Country K will export cider. C. Country J will export both socks and cider. D. Country K will export both socks and cider. 4. If Nation A can produce either 3x or 3y with one hour of labor, while nation B can produce either 1x or 1y with one hour of labor, and if labor is the only input, then ( ) A. Nation A has an absolute advantage in both goods. B. Nation B has an absolute advantage in both goods. C. Nation A has a comparative disadvantage in both goods. D. Nation A has a comparative advantage in both goods. 5. Mutually beneficial trade A. Allows both countries to consume a larger bundle of goods than before trade occurred.( ) B. Allows only the more productive country to consume a larger bundle of goods than before trade occurred. C. Allows only the less productive country to consume a larger bundle of goods than before trade occurred. D. Causes changes only in production, not consumption. 6. In the absence of trade, the consumption points available to a nation ( ) A. Are above the production possibility curve. B. Are on or inside the production possibility curve. C. Lie on the production possibility curve. D. Cannot be identified. 7. For Heckscher-Ohlin, the most important cause of the differences in relative commodity prices is the difference between countries in ( ) A. Factor endowments. B. National income. C. Technology. D. Tastes. 8. Country J has 1 million machines and 1 million workers, while country K has 2 million machines and 3 million workers. If computers are produced mostly by capital and beer is produced mostly by labor, the H-O model predicts that ( ) A. Country K will export computers in exchange for beer. B. Country J will export computers in exchange for beer. C. Country J is too small to be of economic interest to Country K. D. Computers and beer don’t mix, so trade cannot increase either country’s well-being. 9. Mexico is an unskilled labor abundant country, while the United States is a skilled labor abundant country. With the opening of trade, you would expect that, in the long run, wages for unskilled workers ( ) A. Decline in both countries. B. Decline in the United States and rise in Mexico. C. Rise in the United States and decline in Mexico. D. Rise in both countries 10. According to trade theory, if a nation has a comparative advantage in a capital-intensively produced good, and the rate of growth of capital is greater than the rate of growth of other inputs (e.g., labor), the pattern of growth which results will be ( ) A. Import replacing. B. Neutral as between capital intensive and other products. C. Export expanding. D. None of the above. 11. Arguments in favor of having developing countries focus on exporting manufactured goods include ( ) A. Strong support in industrialized countries for free trade in manufactured goods. B. Very low tariffs on manufactured textiles, apparel, and footwear in industrialized countries. C. Political preference for VERs among importing countries. D. A downward trend in the prices of primary products. 12. Which group definitely loses from international migration of labor? ( ) A. The migrants. B. The migrants’ new employers in the receiving country. C. The migrants’ old employers in the sending country. D. The migrants’ fellow workers who did not emigrate. 13. As technology advances, ( ) A. All opportunity cost decreases B. The PPF shift outward C. A country moves toward the midpoint along its PPF D. The PPF shift inward because unemployment occurs 14. If a country is operating at a point of production efficiency ( ) A. It enjoys growth when increasing production B. It produces on its production possibility frontier curve C. It must specialize in the production of a good D. It operates on its trade line 15. A cartel is ( ) A. Another name for a firm in an oligopoly B. A collusive agreement among a number of firms C. A government body that regulates an industry D. An antitrust law (Type and show your work) Practicum Question (25 points) Two countries, Haiti and the Dominican Republic, produce fruits and timber. Each island has a labor force of 1200 and the monthly productivity of each worker is as follow Basket of fruit Board feet of timber Haiti 10 5 Dominican Republic 30 10 a. Which county has an absolute advantage in the production of fruit? Timber? b. Which country has a comparative advantage in the production of fruit? Timber? c. Sketch the production possibility frontier (PPF) of both countries d. Both countries want to produce an equal amount of baskets of fruit and feet of timber. How should they allocate their workers to the two sectors? e. How can free trade move both countries beyond their respective PPF Extra credits (10 points) The demand and supply curves of the market for DVD at the local (US) market are as follow: P = 30 – Qd/2 and P= -1.5 + Qs/4 a. Find the equilibrium price and the equilibrium quantity when there is no international trade ( hint: solve for Qd and Qs And then make Qd=Qs to solve for Price and quantities) b. What are the equilibrium quantities when the nations trade freely at price of $15? Explain your rationale. c. How many units are exported? d. What is the resulting national gain? e. Do consumers and producers gain or lose from the free trade?

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Book review The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public by Lynn Stout Provide 1) a 900 word review of this book (word range 900-1,200) and 2) a 350 word reflection where you force yourself to relate the message of the book . As per the format of the review, I like the ones done by the folks of the WSJ. This is an example: http://forums.delphiforums.com/diversecity/messages?msg=17531.1264 or http://www.wsj.com/articles/book-review-how-adam-smith-can-change-your-life-by-russ-roberts-1413846808?KEYWORDS=book+reviews

Book review The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public by Lynn Stout Provide 1) a 900 word review of this book (word range 900-1,200) and 2) a 350 word reflection where you force yourself to relate the message of the book . As per the format of the review, I like the ones done by the folks of the WSJ. This is an example: http://forums.delphiforums.com/diversecity/messages?msg=17531.1264 or http://www.wsj.com/articles/book-review-how-adam-smith-can-change-your-life-by-russ-roberts-1413846808?KEYWORDS=book+reviews

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4. Using your knowledge of the Stevenson’s career management model identify and briefly describe one activity that should be included in an organization’s career management program. Identify which element of the model the activity you identified fits within.

4. Using your knowledge of the Stevenson’s career management model identify and briefly describe one activity that should be included in an organization’s career management program. Identify which element of the model the activity you identified fits within.

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Overview The human body can regulate its function responding to the change of its environment. Temperature is one of the factors which can modulate the body function. Refer to the related lectures and other resources; answer the followed questions (question 1-5 need at least 400 words together): Q1 In case of cold weather how does human body detect the coldness? Explain the signal detection, delivery, processing and involved cells, tissues and organs.

Overview The human body can regulate its function responding to the change of its environment. Temperature is one of the factors which can modulate the body function. Refer to the related lectures and other resources; answer the followed questions (question 1-5 need at least 400 words together): Q1 In case of cold weather how does human body detect the coldness? Explain the signal detection, delivery, processing and involved cells, tissues and organs.

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2. Look up three standards from your discipline and from your country (Saudi Arabia), and write 2-5 objectives for each.

2. Look up three standards from your discipline and from your country (Saudi Arabia), and write 2-5 objectives for each.

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Design a regulated power supply able to supply a maximum load current of 25 mA. Your design specifications are: DC Output: 12 V Load Variation: 0.5 – 2 kilo Ohms Ripple factor < 0.1% for 1 kilo ohm load Load Regulation: Better than 1mV/mA Line Regulation: Better than 2mV/V In your design use diodes 1N4001 and Zener 1N4742. In your design you must mention the values of the resistors, capacitors, transformer turns ratio. Typed report must contain the following in the same order: • Final design with all component values • SPICE simulation results supporting the validity of your design satisfying the specifications. • Discuss your approach to satisfy the specifications. Explain which specifications you met and which you did not meet. Provide discussion and conclusions and comments.

Design a regulated power supply able to supply a maximum load current of 25 mA. Your design specifications are: DC Output: 12 V Load Variation: 0.5 – 2 kilo Ohms Ripple factor < 0.1% for 1 kilo ohm load Load Regulation: Better than 1mV/mA Line Regulation: Better than 2mV/V In your design use diodes 1N4001 and Zener 1N4742. In your design you must mention the values of the resistors, capacitors, transformer turns ratio. Typed report must contain the following in the same order: • Final design with all component values • SPICE simulation results supporting the validity of your design satisfying the specifications. • Discuss your approach to satisfy the specifications. Explain which specifications you met and which you did not meet. Provide discussion and conclusions and comments.

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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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Problem 2.6 A 1000 VA 230 V / 115 V transformer has been tested to determine its equivalent circuit. The results of the tests are shown below. a. Find the equivalent circuit for this transformer refered to the low voltage side of the transformer. b. Find the transformer’s voltage regulation at rated conditions and at (1) 0.8 pf lag, (2) 1.0 pf, and (3) 0.8 pf lead.

Problem 2.6 A 1000 VA 230 V / 115 V transformer has been tested to determine its equivalent circuit. The results of the tests are shown below. a. Find the equivalent circuit for this transformer refered to the low voltage side of the transformer. b. Find the transformer’s voltage regulation at rated conditions and at (1) 0.8 pf lag, (2) 1.0 pf, and (3) 0.8 pf lead.

Read the Wall Street Journal, The Economist, or any other major newspaper or weekly publication and select a single article or articles that (1) either report on interesting economic news that can be analyzed by the concepts or models taught in this course and/or (2) discusses one or more economic issues related to the concepts or models taught in this course. It is OK to use an online economics news article. Please cite your source. Useful Link: http://www.smc.edu/AcademicAffairs/Library/Pages/Citation-Style-Guidelines.aspx Write a FIVE TO SIX page essay analyzing the topic or critique the article from economic perspectives. Essay must be typed and double-spaced, (Times New Roman, font 12). The questions that you may address in this essay may include, but are not limited, to the following:
 What is the main economic issue? How is the economic issue related to the concepts or models that you have learned from this course? What sorts of arguments/opinions have been discussed? Do you agree or disagree with the analyses/opinions? Why? What argument would you, as an economist, make? The following is a suggested list of topics. This list is not exhaustive. INDUSTRY STUDY. For a specific industry, choose a current issue such as deregulation, foreign competition, and the impact of new technologies, mergers/takeovers, changing methods of competition, labor problems, or financial changes. COMPANY STUDY. Study the recent growth or decline of a particular company or its current position. This topic might include such points as the market structure within which the company grew and now operates, the elasticity of demand for its products, the degree of unionization, the cost structure (degree of fixed cost, economies of scale), the role of advertising, the degree of international competition, etc. INTERNATIONAL ISSUES. Possible topics are: current economic problems of a particular country, OPEC, the European Union, the U. S. trade deficit, protectionism, U. S. trade relations with Japan or other countries, economic development of a particular country, the World Trade Organization, etc. GOVERNMENT REGULATION. Analyze some particular government regulation or antitrust policy relative to a specific industry or company or analyze a current regulatory issue (environmental protection, OSHA, the FDA, etc.).

Read the Wall Street Journal, The Economist, or any other major newspaper or weekly publication and select a single article or articles that (1) either report on interesting economic news that can be analyzed by the concepts or models taught in this course and/or (2) discusses one or more economic issues related to the concepts or models taught in this course. It is OK to use an online economics news article. Please cite your source. Useful Link: http://www.smc.edu/AcademicAffairs/Library/Pages/Citation-Style-Guidelines.aspx Write a FIVE TO SIX page essay analyzing the topic or critique the article from economic perspectives. Essay must be typed and double-spaced, (Times New Roman, font 12). The questions that you may address in this essay may include, but are not limited, to the following:
 What is the main economic issue? How is the economic issue related to the concepts or models that you have learned from this course? What sorts of arguments/opinions have been discussed? Do you agree or disagree with the analyses/opinions? Why? What argument would you, as an economist, make? The following is a suggested list of topics. This list is not exhaustive. INDUSTRY STUDY. For a specific industry, choose a current issue such as deregulation, foreign competition, and the impact of new technologies, mergers/takeovers, changing methods of competition, labor problems, or financial changes. COMPANY STUDY. Study the recent growth or decline of a particular company or its current position. This topic might include such points as the market structure within which the company grew and now operates, the elasticity of demand for its products, the degree of unionization, the cost structure (degree of fixed cost, economies of scale), the role of advertising, the degree of international competition, etc. INTERNATIONAL ISSUES. Possible topics are: current economic problems of a particular country, OPEC, the European Union, the U. S. trade deficit, protectionism, U. S. trade relations with Japan or other countries, economic development of a particular country, the World Trade Organization, etc. GOVERNMENT REGULATION. Analyze some particular government regulation or antitrust policy relative to a specific industry or company or analyze a current regulatory issue (environmental protection, OSHA, the FDA, etc.).

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