1.Economic data has shown a relationship between Inflation and Unemployment rates.
What is this relationship called? What are some determining factors of the relationship?
How has government fiscal/monetary policy been utilized to attempt to manage this
relationship?
2. International trade issues continue to permeate the news media.
Why is International trade an important issue? What is the primary rationale behind trade
between parties? How does currency market management by governments (fixed
exchange rates versus floating exchange rates) affect trading between countries?
3. “Corporate America has been accused of spending the last 30 years seeking out ways to
reduce, or increase the efficiencies of its, labor force resource requirements”.
Is this statement an accurate reflection of Corporate America’s ‘modus operandi’? If so, is
this behavior a natural consequence of technological advancement and structural
unemployment? If not, is Corporate America operating under the principle of “Profit
Maximization”?
4. You win a lottery and are offered the lump sum payment of $380,000.00 or the right to
receive $100,000 per year for five years.
What is the lottery payment plan implied rate of time preference (approximation is ok)?
What is your implied rate of time preference, if you decide to take the lump sum versus the
annuity? How would your expectations of future inflation affect your decision process on
choosing lump sum versus annuity? Show all calculations?
5. In a simple closed economy with an annual GDP of 2000 goods in year 1 and a static
money supply of 2000 units.
What would you expect to happen to the price level of goods in this closed economy over
time? Explain your answer and show calculations?
6. The annual (Year 1) GDP of a simple closed economy is 1000 units with annual savings of
100 units and a 15% Tax Rate and a 5% Transfer Payment rate.
Show and explain the changes on annual GDP, Consumption, Savings and Net Taxes of…