tag:blogger.com,1999:blog-886929269555470122024-03-14T02:09:38.528-07:00Econowaugh APEconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.comBlogger456125tag:blogger.com,1999:blog-88692926955547012.post-7204686468238026902023-09-23T20:48:00.001-07:002023-09-23T20:48:10.672-07:002023 AP Macroeconomics FRQ Set 2 #1<p style="text-align: center;"><b><span style="font-size: large;"> 2023 AP Macroeconomics FRQ Set 2 #1</span></b></p><p style="text-align: center;"><b></b></p><div class="separator" style="clear: both; text-align: center;"><b><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj8NQYJdrmBibdwJwbxERXNfT0Kgl3z-myrhLHSBmMGBUvigMk04CSidxZQQWZfIuq3FI8ruGY5Uv2ZI6oaYekUv0dnI2KJSRBx7tvOQaNC8Gq0d2WQJ-9d7iBRYJ20Taqx1_O2YiZCfLVOuCHTSwkfcDzaqgFABSbT7aZ3CPMTSimUVaXufUIEPBDHYcVS/s680/Screenshot%202023-09-21%20at%207.42.25%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="680" data-original-width="410" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj8NQYJdrmBibdwJwbxERXNfT0Kgl3z-myrhLHSBmMGBUvigMk04CSidxZQQWZfIuq3FI8ruGY5Uv2ZI6oaYekUv0dnI2KJSRBx7tvOQaNC8Gq0d2WQJ-9d7iBRYJ20Taqx1_O2YiZCfLVOuCHTSwkfcDzaqgFABSbT7aZ3CPMTSimUVaXufUIEPBDHYcVS/s320/Screenshot%202023-09-21%20at%207.42.25%20PM.png" width="193" /></a></b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRwKmuPtOE1dZ-KfoiW8d7xSphWETatixVzzspolXj0s9S5vcp1R2Uk515tgWrWpV0GbaswovS0iTmi66fJcZa0IIWVrmxalnKaWr6nwmcRuuxPNTWx0yW0eHyAU3cyX2RJPJxbBkVBrJFeaaghpfmYQnkr6sIf7CmflQW60GOpyVU33JIjOv6SHDQGm4H/s2042/Screenshot%202023-09-24%20at%2011.40.01%20AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1300" data-original-width="2042" height="408" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRwKmuPtOE1dZ-KfoiW8d7xSphWETatixVzzspolXj0s9S5vcp1R2Uk515tgWrWpV0GbaswovS0iTmi66fJcZa0IIWVrmxalnKaWr6nwmcRuuxPNTWx0yW0eHyAU3cyX2RJPJxbBkVBrJFeaaghpfmYQnkr6sIf7CmflQW60GOpyVU33JIjOv6SHDQGm4H/w640-h408/Screenshot%202023-09-24%20at%2011.40.01%20AM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>A) Using the relevant numerical values given, draw a correctly labeled graph of the short-run & long-run Phillips curves. Label the current short-run equilibrium point as X. Plot the relevant numerical values provided on the graph.<o:p></o:p></b></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfY899hh5OtNHZ3DwwSv778hVvDce9lhBKVUP170bmMhq_bAsDbPDVsIYl2cKk1r-_ucMxqdUmajIYFVI6Hj5nCeye-N6u4O3IBKL-a9YwO2-maZ-9Q2K_tGBdi9K2lcVTk12WcJzMCikGPwvH0L31gSSuPspuhhkynMdQOBA4q5xsMBYqhOe9xOAVabQK/s756/Screenshot%202023-09-21%20at%206.47.17%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="756" data-original-width="750" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfY899hh5OtNHZ3DwwSv778hVvDce9lhBKVUP170bmMhq_bAsDbPDVsIYl2cKk1r-_ucMxqdUmajIYFVI6Hj5nCeye-N6u4O3IBKL-a9YwO2-maZ-9Q2K_tGBdi9K2lcVTk12WcJzMCikGPwvH0L31gSSuPspuhhkynMdQOBA4q5xsMBYqhOe9xOAVabQK/s320/Screenshot%202023-09-21%20at%206.47.17%20PM.png" width="317" /></a></div><div class="separator" style="clear: both; text-align: center;"><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">The NRU is 5% and the actual rate of unemployment is 7%<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">The economy is in a recession as the <o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Actual Rate of Unemployment > Natural Rate of Unemployment = Recession<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: left;"><o:p><b><span style="font-size: 12pt;">B) Is the expected inflation rate greater than, less than, or equal to 1%? Explain.</span></b><span style="font-family: -webkit-standard;"></span></o:p></p></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiqO4hfL0IikmEGB9CKzZk_230l8gimqXLCuEO3QujR9wD91KIYnV9f7YajhenM7jzrRGEQuVgXFj7bNDDKL2i7Dnzgux_AKNqZDirymg9VpcMddpUohfTLv0yJ7d0EzXub0LoHQ0MHXn7-KN67FdiMJjen4OjeUH4SEghM63LXrg-8Jx2XpCLXPERSygdL/s894/Screenshot%202023-09-21%20at%207.19.06%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="820" data-original-width="894" height="294" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiqO4hfL0IikmEGB9CKzZk_230l8gimqXLCuEO3QujR9wD91KIYnV9f7YajhenM7jzrRGEQuVgXFj7bNDDKL2i7Dnzgux_AKNqZDirymg9VpcMddpUohfTLv0yJ7d0EzXub0LoHQ0MHXn7-KN67FdiMJjen4OjeUH4SEghM63LXrg-8Jx2XpCLXPERSygdL/s320/Screenshot%202023-09-21%20at%207.19.06%20PM.png" width="320" /></a></div><div class="separator" style="clear: both; text-align: center;"><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">Expected rate is where the SRPC & LRPC intersect<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">As the economy is in a recession<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">The actual rate of inflation must be lower than the expected rate<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">As recessions are high unemployment and low-price levels (inflation)<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b>C) Assume the marginal propensity to consume is 0.9.<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b>(i) if the government decreases income taxes by 20 billion, calculate the maximum change in aggregate demand. <u>Show your work.<o:p></o:p></u></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b>(ii) If instead the government increases spending by 20 billion, calculate the maximum change in<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b>Aggregate demand. <u>Show your work.<o:p></o:p></u></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b><u><o:p> </o:p></u></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"> The formula for finding the spending multiplier is 1/MPS (Marginal Propensity to Spend)<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">Or<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">1/1-MPC (Marginal Propensity to Consume)<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">I’m simple like a child,,, so I’m always going to use the 1/MPS<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">The MPC + MPS = 1 (as there are only two things to do with a dollar, spend it or save it.)<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">If the MPC is 0.9 then the MPS must be 0.1 as 0.9 + 0.1 = 1 (Use your calculator, now usable on the exam)<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">So, 1/MPS = 1/.1 = 10, the spending multiplier is 10 (AGAIN, use your calculator)<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b>Let’s start with (ii) first, <o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"> If the spending multiplier is 10 and the government increases spending by 20b<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">Then the 20b is multiplied by the multiplier and that gives you the increase in GDP<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><u>GS = 20B x 10 (spending multiplier) = 200b increase in aggregate demand.<o:p></o:p></u></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b>Now, (i)<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b> </b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">The Tax Multiplier’s (yes there are two multipliers you need to know) formula is MPC/MPS.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">MPC = 0.9<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">MPS = 0.1<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">0.9/0.1 = 9 (The taxing multiplier is 9) Hint: The tax Multiplier is always 1 less than the spending multiplier<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">Don’t believe me,,, use you calculator again.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">If the government cuts taxes (expansionary fiscal policy) by 20b and the Tax Multiplier is 9<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><u>20b x 9 = 180b increase in aggregate demand.<o:p></o:p></u></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><br /></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b>D) On your graph in part (a), show a possible new short-run equilibrium point labeled Z that would result if the government increases spending and there is no change in inflationary expectations.<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b> </b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">That last part is a worded a bit funny (strange). Teachers sometimes inadvertently skip over the phrase inflationary expectations.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">Inflationary Expectations occurs anytime your SRAS (Short-run aggregate supply) curve shifts left or right.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">Government spending only shifts the aggregate demand curve so there is no inflationary expectation changes,, <o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">Tricky, tricky, college board.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_ABcEwYnn8p24-CUrkNpWEzspcWLcxUFQkPnKMjBNbAH9YvvP5OA-DWtYumRGCmoA7tQDiVZe3fF9NbBBodq8c-2lsif-duvyqg_c48HgIMfvb2fjxsfy2inW6-85euq5CWwYQWxWmKZSmPG76keqZFseX6MkdJ4QBUjueyHRkTxY4Hx--rtHIBzacxqp/s892/Screenshot%202023-09-21%20at%207.22.48%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="792" data-original-width="892" height="355" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_ABcEwYnn8p24-CUrkNpWEzspcWLcxUFQkPnKMjBNbAH9YvvP5OA-DWtYumRGCmoA7tQDiVZe3fF9NbBBodq8c-2lsif-duvyqg_c48HgIMfvb2fjxsfy2inW6-85euq5CWwYQWxWmKZSmPG76keqZFseX6MkdJ4QBUjueyHRkTxY4Hx--rtHIBzacxqp/w400-h355/Screenshot%202023-09-21%20at%207.22.48%20PM.png" width="400" /></a></div><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><br /></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">The economy is in a recession.<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"> If the government is spending it will push aggregate demand to the right<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">This is a movement sliding up the SRPC (Short-run Phillips curve)<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Back toward full employment on the LRPC (Long-run Phillips curve)<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><br /></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b>E) How would an increase in unemployment compensation affect aggregate demand in the short-run?<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b>Explain.<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b> </b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">If unemployment compensation is increased citizens who are unemployed are going to have more money given to them from the government (tax payers). They will spend this money and consumption will increase in the economy as a whole shifting aggregate demand rightward in the short run.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEia538gMuX1agtNhE0dHj7zzGwLPdRBUNU_V9RDuu7ZqrhYK4B_gMnzaz5fQ7LflKGpcZHx-x6dEcYnaMwCAoo9ETlTiJ8wto1921sLURmHlsiR0XW71LlyYDM2EfiCevkvM5gWZ2bf367dbTZ_bV8tRCYxmLyAa2wZykL6Al_rgDhgIl8BKjpFFsIKwpji/s784/Screenshot%202023-09-21%20at%207.47.53%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="750" data-original-width="784" height="306" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEia538gMuX1agtNhE0dHj7zzGwLPdRBUNU_V9RDuu7ZqrhYK4B_gMnzaz5fQ7LflKGpcZHx-x6dEcYnaMwCAoo9ETlTiJ8wto1921sLURmHlsiR0XW71LlyYDM2EfiCevkvM5gWZ2bf367dbTZ_bV8tRCYxmLyAa2wZykL6Al_rgDhgIl8BKjpFFsIKwpji/s320/Screenshot%202023-09-21%20at%207.47.53%20PM.png" width="320" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;"><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>F) Assume instead the government takes none of the preceding policy actions. (Northland is still in a recession) What will happen to each of the following.<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b> </b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>(i) The SRAS curve. Explain.<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>(ii) The short run Phillips curve<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>(iii) The actual unemployment rate.<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsvz0LinrliUjHQqQQ-NnXPNbScC301TL_0g4j_t-eEWehcZFEE6BIbrV2l9QLvfQIabPjgsPNtwtJtiXHX__gwLYPwAU0qrZzxr3kJ6BdwXKGLzV9EDtxSKGJSDww8wXVQ4SfzHh86x98zKBNrmmOvKVmmS8PU1B7gFiSZ-hfv9eAryB374MaIvdGcNIo/s1494/Screenshot%202023-09-21%20at%207.30.44%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="330" data-original-width="1494" height="142" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsvz0LinrliUjHQqQQ-NnXPNbScC301TL_0g4j_t-eEWehcZFEE6BIbrV2l9QLvfQIabPjgsPNtwtJtiXHX__gwLYPwAU0qrZzxr3kJ6BdwXKGLzV9EDtxSKGJSDww8wXVQ4SfzHh86x98zKBNrmmOvKVmmS8PU1B7gFiSZ-hfv9eAryB374MaIvdGcNIo/w640-h142/Screenshot%202023-09-21%20at%207.30.44%20PM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b> </b></p><div class="separator" style="clear: both;"><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>(i) The SRAS curve will shift to the right as during a recession the PL is low and people will accept lower wages to go back to work.<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b> </b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>Lower PL and Lower wages are lower costs to businesses and therefore the SRAS curve shifts right.<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>You could also have said that inflationary expectations are thought to be decreasing also shifts the SRAS rightward.<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b> </b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>(ii) The SRPC will shift leftward (Recognize that the SRAS & SRPC always do the opposite of each other)<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>Rightward shift of the SRAS is a leftward shift of the SRPC<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b> </b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>(iii) The actual unemployment rate will decrease as people go back to work in the long run.<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b> </b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>You must think on this Padiwan.<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b><br /></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj_yuvaxMnVCWQnFZRHTidGSj8bB218nL3-ZY5TO5UBvXjKXgI3Mj-PGjSwv6bS3PCroTmI3qKsiF5P54wrerS3krBNt6_rJ-h8NXYhD24Bua6GqcNAxmhYuIqpg-A5Ooqv_4sW1qW-l89iCW2Bb9zbbCpBYRJc73Ug1gWhwGIXI7YpzyKg6W6lLxVOYYRX/s916/Screenshot%202023-09-21%20at%207.39.54%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="678" data-original-width="916" height="237" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj_yuvaxMnVCWQnFZRHTidGSj8bB218nL3-ZY5TO5UBvXjKXgI3Mj-PGjSwv6bS3PCroTmI3qKsiF5P54wrerS3krBNt6_rJ-h8NXYhD24Bua6GqcNAxmhYuIqpg-A5Ooqv_4sW1qW-l89iCW2Bb9zbbCpBYRJc73Ug1gWhwGIXI7YpzyKg6W6lLxVOYYRX/s320/Screenshot%202023-09-21%20at%207.39.54%20PM.png" width="320" /></a></div><br /><b><br /></b><p></p></div><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><br /><b><br /></b></p></div><br /><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><br /></p></div><br /><p style="text-align: center;"><br /></p><div class="separator" style="clear: both; text-align: left;"></div>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-49759805268631097372023-09-17T03:47:00.006-07:002023-09-17T04:10:54.695-07:002023 AP Microeconomics FRQ Set 2 #3 (Natural Monopoly)<p style="text-align: center;"><b><span style="font-size: large;"> 2023 AP Microeconomics FRQ Set 2 #3 (Natural Monopoly)</span></b></p><p style="text-align: center;"><b></b></p><div class="separator" style="clear: both; text-align: center;"><b><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMqPr0ocl3kqro2Q-RpDzbzSOe-A4N-PzavkZOr-T0BKtCamBo9Dsz_XL1E8z6Y9FhOhIRUmZHQj41VAUXjmyzG-Ymg4pZJCay_0Pc8T67_vtjOddxkzq8JYBlpJg4WgZfZHNZ5vW90wMtnzhz2_jbkrS1AK9aox2UXGEcw-Qi9gthoEMwy3bSwioGg41b/s1164/Screenshot%202023-09-17%20at%206.57.10%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="896" data-original-width="1164" height="492" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMqPr0ocl3kqro2Q-RpDzbzSOe-A4N-PzavkZOr-T0BKtCamBo9Dsz_XL1E8z6Y9FhOhIRUmZHQj41VAUXjmyzG-Ymg4pZJCay_0Pc8T67_vtjOddxkzq8JYBlpJg4WgZfZHNZ5vW90wMtnzhz2_jbkrS1AK9aox2UXGEcw-Qi9gthoEMwy3bSwioGg41b/w640-h492/Screenshot%202023-09-17%20at%206.57.10%20PM.png" width="640" /></a></b></div><p></p><p style="text-align: center;"><b></b></p><div class="separator" style="clear: both; text-align: center;"><b><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhh2Lg3kYZnvhSGbFr12ewwDuEo46vDHi1cxSERybcrSlBjaKDoQHqTxvR7yB7VuiNq8-8dF5fQEmMhdF4c3gcwGMLASqteSGF4n7CfiYObOW4KfXzM1edectpcmP7DL-hNcRNFmrUvRGfjq4_bdI9PdT51kNB_mpSpA1iMauboYKxQ1y820b1tCDpb2-l7/s980/Screenshot%202023-09-17%20at%205.41.12%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="770" data-original-width="980" height="502" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhh2Lg3kYZnvhSGbFr12ewwDuEo46vDHi1cxSERybcrSlBjaKDoQHqTxvR7yB7VuiNq8-8dF5fQEmMhdF4c3gcwGMLASqteSGF4n7CfiYObOW4KfXzM1edectpcmP7DL-hNcRNFmrUvRGfjq4_bdI9PdT51kNB_mpSpA1iMauboYKxQ1y820b1tCDpb2-l7/w640-h502/Screenshot%202023-09-17%20at%205.41.12%20PM.png" width="640" /></a></b></div><div class="separator" style="clear: both; text-align: center;"><b><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg6hrKFHpIUuCUdhl04fTZsZrFs8AxyrRj0vdGuV15IhCX-sCmabUdCRjSwfQ1rjxqjRnk85KV1yHoNt8ZRyEMtJ3fyh03Y0YOcPWFKQvslXtuKd7vIEBmrAXExgsx0T6iZAI-WsUi-75OIrnBpE5kB9QK0or8s-8LflP8C58K3VwykrJhnVKtPG1YlX_f6/s1266/Screenshot%202023-09-17%20at%205.41.20%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="444" data-original-width="1266" height="224" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg6hrKFHpIUuCUdhl04fTZsZrFs8AxyrRj0vdGuV15IhCX-sCmabUdCRjSwfQ1rjxqjRnk85KV1yHoNt8ZRyEMtJ3fyh03Y0YOcPWFKQvslXtuKd7vIEBmrAXExgsx0T6iZAI-WsUi-75OIrnBpE5kB9QK0or8s-8LflP8C58K3VwykrJhnVKtPG1YlX_f6/w640-h224/Screenshot%202023-09-17%20at%205.41.20%20PM.png" width="640" /></a></b></div><div class="separator" style="clear: both; text-align: left;"><b><br /></b></div><p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>A) Is the firm shown in this graph a natural monopoly? Explain.<o:p></o:p></b></p><div class="separator" style="clear: both;"><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Yes! The firm is a natural monopoly in that the firm’s ATC curve is downward sloping throughout the range of the demand curve.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>B) Using the labeling from the graph, identify the area representing the deadweight loss for this profit-maximizing monopoly.<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><b> </b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><b>First, Find the Profit Maximizing Price & Quantity<o:p></o:p></b></p></div><p style="text-align: center;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmOc8yWnbZ5moQ2XTqLQHb9R_StC6KnM-VMZcZwDVMQB5Tlx2Off3jU9q_Y31E0q7_xXoK1T98NtKuOVHxzUsLEoC1D9ffA5h3q84-pca3_ZtQsMNRoL6qsY2CCL-KKIYYKN5_FJzJ4-kp0ZKcgXEL7pDIdOwnD_RQRj7Gw980RUW2lNFXuLzSOi88eoRC/s1100/Screenshot%202023-09-17%20at%205.50.07%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="942" data-original-width="1100" height="514" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmOc8yWnbZ5moQ2XTqLQHb9R_StC6KnM-VMZcZwDVMQB5Tlx2Off3jU9q_Y31E0q7_xXoK1T98NtKuOVHxzUsLEoC1D9ffA5h3q84-pca3_ZtQsMNRoL6qsY2CCL-KKIYYKN5_FJzJ4-kp0ZKcgXEL7pDIdOwnD_RQRj7Gw980RUW2lNFXuLzSOi88eoRC/w599-h514/Screenshot%202023-09-17%20at%205.50.07%20PM.png" width="599" /></a></div><p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><b>Second, Find the Socially Optimal Quantity<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiYxCNa3UknlzRFyWO9su8TOdUs29tbCTOhhEFct8pb1yjsh01XizDrQM3GiAc2TEUXD4kx4Taz7U1vX8ErvWLx_-d-h4bqQqjPT4TkfY6PgKBB0IAMF4XfU6NK_BxPGpXy7bBZ1R3XLPwwP5lygU1mssrRSsrkQXORAzpTdLS9VGCXJXvO0tHwPqEhmZJa/s1184/Screenshot%202023-09-17%20at%206.03.46%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="942" data-original-width="1184" height="509" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiYxCNa3UknlzRFyWO9su8TOdUs29tbCTOhhEFct8pb1yjsh01XizDrQM3GiAc2TEUXD4kx4Taz7U1vX8ErvWLx_-d-h4bqQqjPT4TkfY6PgKBB0IAMF4XfU6NK_BxPGpXy7bBZ1R3XLPwwP5lygU1mssrRSsrkQXORAzpTdLS9VGCXJXvO0tHwPqEhmZJa/w640-h509/Screenshot%202023-09-17%20at%206.03.46%20PM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;">Area of DWL is equal to (bfg)</div><p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>C) In order to improve resource allocation, the government sets a price that results in the firm earning zero economic profit.<o:p></o:p></b></p><div class="separator" style="clear: both;"><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>(i) Using labeling from the graph, identify the price and resulting quantity the firm would produce.<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b> </b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">The firm would earn zero economic profit when it produces where the <o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">P = ATC<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">P = P3 & Quantity = Q3<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>(ii) Will this government policy eliminate the deadweight loss? Explain using labeling from the graph.<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">When the firm is producing at break-even (P=ATC) <b>(Q3)</b><o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">It still isn’t producing at the socially optimal quantity (P = MC)<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">There is no DWL at the Socially Optimal Quantity (Q4)<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">There will still be DWL<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">And is equal to the triangle (cjg)<o:p></o:p></p></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjdaz5olmH3CeDdwZ6HyIExdqOFY9SkkUEKLcUzu1eBtGbxhfzkBjLf9K9hGH8s2eXsneLQk14-LvcMPY09KrTjALOB1NWKxASBh4mQ60FLWZjA6nsI22hYqzqTa95eiQbwywbg7tpXMgK-6mW-bddewZtiQl5fVSMh1EwWYXmguroa02RqcB9VoHthUhuT/s1104/Screenshot%202023-09-17%20at%206.17.38%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="900" data-original-width="1104" height="522" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjdaz5olmH3CeDdwZ6HyIExdqOFY9SkkUEKLcUzu1eBtGbxhfzkBjLf9K9hGH8s2eXsneLQk14-LvcMPY09KrTjALOB1NWKxASBh4mQ60FLWZjA6nsI22hYqzqTa95eiQbwywbg7tpXMgK-6mW-bddewZtiQl5fVSMh1EwWYXmguroa02RqcB9VoHthUhuT/w640-h522/Screenshot%202023-09-17%20at%206.17.38%20PM.png" width="640" /></a></div><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>D) Instead, the government decides to set a price that results in the socially optimal quantity of output. Will the firm earn a positive, negative or zero economic profit? Explain using the labeling from the graph.<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEilM2GVhmnf7ZA38slo1rr2D13qQw2NB7AvnzVUna8JbiMf5PSwlSqhrPzYIWz2U0ENkNxs5b_iptAFxlixTFOxH0Z1rkQzvUG5iQ4mpGZi08hgBelQzurz7Ud7lyT-iNwVQtYjwmihrQEDlai__3VvDLvG9MVd_UQR3lFEP75owy61DYGB63gUnucUCu7_/s1112/Screenshot%202023-09-17%20at%206.33.58%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="958" data-original-width="1112" height="552" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEilM2GVhmnf7ZA38slo1rr2D13qQw2NB7AvnzVUna8JbiMf5PSwlSqhrPzYIWz2U0ENkNxs5b_iptAFxlixTFOxH0Z1rkQzvUG5iQ4mpGZi08hgBelQzurz7Ud7lyT-iNwVQtYjwmihrQEDlai__3VvDLvG9MVd_UQR3lFEP75owy61DYGB63gUnucUCu7_/w640-h552/Screenshot%202023-09-17%20at%206.33.58%20PM.png" width="640" /></a></div><p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">The firm is making a negative economic profit (loss) as the <o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">Price is less than the ATC at the socially optimal quantity (Q4)<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">Area of economic loss is (P2 - P1) x Q4</p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><b><br /></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><br /><b><br /></b></p><div class="separator" style="clear: both; text-align: center;"></div><p style="text-align: center;"><br /><b><br /></b></p><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><b><br /><span style="font-size: large;"><br /></span></b><p></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com1tag:blogger.com,1999:blog-88692926955547012.post-35471883934354822532023-09-08T16:55:00.004-07:002023-09-08T16:58:49.835-07:002023 AP Micro FRQ Set 1 #3<p style="text-align: center;"><b><span style="font-size: x-large;"> <span style="font-family: Calibri, sans-serif; text-align: left;">2023 AP Micro FRQ Set 1 #3</span></span></b></p><p style="text-align: center;"><b><span style="font-size: x-large;"></span></b></p><div class="separator" style="clear: both; text-align: center;"><b><span style="font-size: x-large;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgpmCKARkTsAjymYrkmThTC9R2awF2SJ1rPnQyhTpz2ATVYCNhYIL7HndW6rrXiS4frpeK66fa2HaJDZ4jsP_PR9uNmUD82oV9Jj1FBN93x__p7nyAgcuUxpxqlk3TepSCL5zfjIdTYfFTXvmq4OsNDh6iiQ5-gUUUaNR7gEeP-G8Cy0XwoXzPVlXxjb35T/s1274/Screenshot%202023-09-09%20at%207.34.16%20AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1028" data-original-width="1274" height="516" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgpmCKARkTsAjymYrkmThTC9R2awF2SJ1rPnQyhTpz2ATVYCNhYIL7HndW6rrXiS4frpeK66fa2HaJDZ4jsP_PR9uNmUD82oV9Jj1FBN93x__p7nyAgcuUxpxqlk3TepSCL5zfjIdTYfFTXvmq4OsNDh6iiQ5-gUUUaNR7gEeP-G8Cy0XwoXzPVlXxjb35T/w640-h516/Screenshot%202023-09-09%20at%207.34.16%20AM.png" width="640" /></a></span></b></div><b><span style="font-size: x-large;"><br /></span></b><p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>A) Calculate Hansel Hangout’s total fixed cost. <u>Show your work.<o:p></o:p></u></b></p><div class="separator" style="clear: both;"><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Hansel is a profit maximizing firm, which means they produce where MC = MR.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><o:p> </o:p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiygvFUDPS0APYtysLiSeOI-h07lo_FL1pHvqmjDfQVGeghl8utYHmctXWUZSgeQCWdvC5d-YtTTrbldYpRdQDcuIUB7EunIDaooG-PtRhLKlqDOnxJy8PKaND6X7vhw1ewGvzecc2qGOBcQwLVI3Z540IZRawHIVNy22yz3NBevpYD0cpkCo6ifj_RJzn1/s896/Screenshot%202023-09-08%20at%204.38.39%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="628" data-original-width="896" height="224" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiygvFUDPS0APYtysLiSeOI-h07lo_FL1pHvqmjDfQVGeghl8utYHmctXWUZSgeQCWdvC5d-YtTTrbldYpRdQDcuIUB7EunIDaooG-PtRhLKlqDOnxJy8PKaND6X7vhw1ewGvzecc2qGOBcQwLVI3Z540IZRawHIVNy22yz3NBevpYD0cpkCo6ifj_RJzn1/s320/Screenshot%202023-09-08%20at%204.38.39%20PM.png" width="320" /></a></div><p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">We should know that ATC = AVC + AFC<o:p></o:p></p><div class="separator" style="clear: both;"><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Average Total Costs = Average Variable Costs + Average Fixed Costs<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Or <o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">We could rearrange it and recognize that ATC – AVC = AFC<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">So, at 6 units of output/production the ATC = $21 & the AVC = $9<o:p></o:p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhXIYczLaoF0H5YiC3dVYFPKzRZJYJH6yyXNps6EQ5I_SXuZq9nAYk0jwan-0GEYty7LgDInLqJ2972Z4HcbHxqDQiiz3HlWMaqXPmIf1v0MBRRavh4ufYFyDcPhNDiXQaB53UFGXdXUOgJvvG7x_e_vISZj-MKtSebzXqcVI6orAyygPBbxluQ89Gyqn96/s754/Screenshot%202023-09-08%20at%204.51.58%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="600" data-original-width="754" height="255" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhXIYczLaoF0H5YiC3dVYFPKzRZJYJH6yyXNps6EQ5I_SXuZq9nAYk0jwan-0GEYty7LgDInLqJ2972Z4HcbHxqDQiiz3HlWMaqXPmIf1v0MBRRavh4ufYFyDcPhNDiXQaB53UFGXdXUOgJvvG7x_e_vISZj-MKtSebzXqcVI6orAyygPBbxluQ89Gyqn96/s320/Screenshot%202023-09-08%20at%204.51.58%20PM.png" width="320" /></a></div><div class="separator" style="clear: both; text-align: left;"><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">How to find the ATC & AVC? <o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Go to the output of production (6 units) and go straight up.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">We hit the AVC curve at $9 and if we keep going up, we hit the ATC at $21.<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">ATC = $21<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in 0in 0in 2.5in; text-indent: 0.5in;"><u>AVC = $9<o:p></o:p></u></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">So, the AFC = $12<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Now you are scratching your head and saying, “Charles how does that help me find TFC”?<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">You should know that to go from AFC to TFC, we take AFC and multiply it by the output.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Or to say it differently<o:p></o:p></p></div><div class="separator" style="clear: both;"><br /></div><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">AFC x Quantity = Total Fixed Cost <o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">ATC x Quantity/output = Total Cost<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">AVC x Quantity/output = Total Variable Cost<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Recognize that Total Fixed Cost & Fixed Cost are the same thing. :0<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">AFC x Quantity = Total Fixed Cost <o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>Answer A) $12 x 6 units produced = TFC of $72<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b> </b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>B) Identify the price and quantity for Hansel’s at Profit max.<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">I believe we already did it, <o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Profit Maximization for Hansel’s Hangout for Good X is where MC = MR<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>Answer B) </b>Price $14 Quantity $6<o:p></o:p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhF7PzNkK4Ujbwk1gjmrKqEFcPwHYL3tz0_dB0vTuspc1NMzVzgknOSWfUUbPL1NOqFvS1ihqICkiyeevdFbY7Pn-1L3y_uzTTLsBoh-8APYHAzHppqR7HAzSUlDi5B8heJKWNxrEQAHLz1AT3duztJX_0TZbUFPV04ZID9vgm9H6WVad5qw24M5Y0gkICf/s896/Screenshot%202023-09-08%20at%204.38.39%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="628" data-original-width="896" height="224" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhF7PzNkK4Ujbwk1gjmrKqEFcPwHYL3tz0_dB0vTuspc1NMzVzgknOSWfUUbPL1NOqFvS1ihqICkiyeevdFbY7Pn-1L3y_uzTTLsBoh-8APYHAzHppqR7HAzSUlDi5B8heJKWNxrEQAHLz1AT3duztJX_0TZbUFPV04ZID9vgm9H6WVad5qw24M5Y0gkICf/s320/Screenshot%202023-09-08%20at%204.38.39%20PM.png" width="320" /></a></div><div class="separator" style="clear: both; text-align: left;"><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>C) Calculate the economic profit at the quantity identified in part (b). <u>Show your work.<o:p></o:p></u></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b><u><o:p> </o:p></u></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Economic profit = Total Revenue – Total Costs<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">6 quantity/outputs/units sold x $14 = Total Revenue of $84<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">To find Total Costs we find average total costs x quantity produced<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Or<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">ATC x Quantity = TC<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">The firm at profit max (MR=MC) produces 6 units <o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">and at 6 units the ATC is $21 (we found it earlier)<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">$21 x 6 = a TC of $126<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><br /></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Hansel isn’t doing very well.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Total Revenue = $84<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Total Costs $126<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Remember Profit = TR – TC<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">$84 - $126 = -$42<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>Answer C) </b>Hansel has a Negative economic profit of $42<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">Or we could say<b> Hansel has a loss of $42</b></p><div class="separator" style="clear: both; text-align: center;"><b><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhGItTvvu5vzMZWfhiRMiOa7dYSaiVtqVJESkC9AJ3-ZkkzkbQPf-AQZdHxfd6I8abdGXleVPBXNHIvDjeaAs1pd7c2YBuJniGlgI6uPcW76ICYnhnmIkHxzuX5z5MRjW3mXAZc66QZckbtUbnKQsIAsMRcX6635zYpN2fEp-08st3P8A6h4ydMtmmkqssE/s1136/Screenshot%202023-09-08%20at%205.24.19%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="666" data-original-width="1136" height="376" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhGItTvvu5vzMZWfhiRMiOa7dYSaiVtqVJESkC9AJ3-ZkkzkbQPf-AQZdHxfd6I8abdGXleVPBXNHIvDjeaAs1pd7c2YBuJniGlgI6uPcW76ICYnhnmIkHxzuX5z5MRjW3mXAZc66QZckbtUbnKQsIAsMRcX6635zYpN2fEp-08st3P8A6h4ydMtmmkqssE/w640-h376/Screenshot%202023-09-08%20at%205.24.19%20PM.png" width="640" /></a></b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>D) As the market for Good X adjusts to the long-run equilibrium, what will happen to the price of Good X? Explain.<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b><br /></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwE3-8qBqZWAwJRtAz4lC48b_HUwfEw9ZXu69DGn7cJldSLmMhdRfssT6GqjwhX7NYSmhbodj9U6JdtAHDGqksS9V8d_f9a986xU5K1PLCEzrrJ7QmxjcT60sx5jdbP0AiyVJ061z3N1gAzofTIOFYy76CIs2ytr_-oIVmRDWkQaLstVpviR2aKZt0c534/s1914/Screenshot%202023-09-08%20at%205.28.34%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="808" data-original-width="1914" height="270" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwE3-8qBqZWAwJRtAz4lC48b_HUwfEw9ZXu69DGn7cJldSLmMhdRfssT6GqjwhX7NYSmhbodj9U6JdtAHDGqksS9V8d_f9a986xU5K1PLCEzrrJ7QmxjcT60sx5jdbP0AiyVJ061z3N1gAzofTIOFYy76CIs2ytr_-oIVmRDWkQaLstVpviR2aKZt0c534/w640-h270/Screenshot%202023-09-08%20at%205.28.34%20PM.png" width="640" /></a></div><p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><b>From the 2023 Cheat Sheet for Perfect Competition.<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><b><br /></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">How do we know that firm is a perfectly competitive firm = The MRDARP curve is horizontal<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">The price is constant which is a characteristic of perfectly competitive firms.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Losses in an industry cause some firms to Exit/go broke and the supply of the Good X decreases/shifts left as those firms quit producing Good X.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>Answer D) The price increases as supply shifts left.<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b> </b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>E) Assume the cross-price elasticity of demand between Good X and Good C is positive. Given the change in the long-run price of Good X in part (d), will the quantity demanded of Good C increase, decrease, or remain the same? Explain.<o:p></o:p></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b> </b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">You should know that if the cross-price elasticity is positive that means the two goods are substitutes.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Also, substitutes are positively related in price. <o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Example: As the price of Coke increase people switch to Pepsi, increasing the demand for Pepsi.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>Answer E)</b> Increasing demand which will increase the quantity demanded for the good.<o:p></o:p></p><div class="separator" style="clear: both; text-align: center;"></div><p class="MsoNormal" style="margin: 0in;"></p><div style="text-align: center;"><span style="font-family: Calibri, sans-serif;"><br /></span></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhITMVA5twm28RYh6x97WC1y8Nze3c0fJ_vAszWeap4FqnEaUfWc4beSXJFk-HAahPJ6Kz6jfJJa0_vq2UVO0zM7urqf28XZQ4RTxOJIPqhuDWWtmSv_Np29azeq1DLNoVkpt_3u-7mwfIjd6W1ThT8PLXKkjpAYcn3GIPXpQcc1GJuKX-q3LSZmFV1fIb3/s524/Screenshot%202023-09-09%20at%207.53.11%20AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="504" data-original-width="524" height="385" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhITMVA5twm28RYh6x97WC1y8Nze3c0fJ_vAszWeap4FqnEaUfWc4beSXJFk-HAahPJ6Kz6jfJJa0_vq2UVO0zM7urqf28XZQ4RTxOJIPqhuDWWtmSv_Np29azeq1DLNoVkpt_3u-7mwfIjd6W1ThT8PLXKkjpAYcn3GIPXpQcc1GJuKX-q3LSZmFV1fIb3/w400-h385/Screenshot%202023-09-09%20at%207.53.11%20AM.png" width="400" /></a></div><br /><div style="font-family: Calibri, sans-serif; font-weight: 700; text-align: center;"><br /></div><p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><b><br /></b><o:p></o:p></p><div class="separator" style="clear: both; text-align: left;"></div></div><br /><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><br /></p></div><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><o:p><br /></o:p></p></div><p style="text-align: center;"><b><span style="font-size: x-large;"><br /><span style="font-family: Calibri, sans-serif; text-align: left;"><br /></span></span></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p></o:p></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-56448687386151574482023-08-26T19:34:00.006-07:002023-09-08T17:00:05.186-07:002023 AP Macroeconomics FRQ Set 2 #3 (Unemployment)<p style="text-align: center;"><span style="font-size: large;"><b> 2023 AP Macroeconomics FRQ Set 2 #3 (Unemployment)</b></span></p><p style="text-align: center;"><span style="font-size: large;"></span></p><div class="separator" style="clear: both; text-align: center;"><span style="font-size: large;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgpKAdAvkYlVCF0R24gWuE5zvhcIQenThNG9VuOfgb8E-rHyACQyeQIDa0VUeIF6Z3HbXWAwfQc3ZEH_olWjilxs_pNTdfM8D0KU9N2kuy5__Rx-m8aii25zFVYM5yi2g1UHmRRwmUCwEaPm4uh1DVrNViXUkKUNklaaq782Ddav4yaZ-5nrTDZAanfHK0y/s984/Screenshot%202023-08-27%20at%2010.26.02%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="966" data-original-width="984" height="393" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgpKAdAvkYlVCF0R24gWuE5zvhcIQenThNG9VuOfgb8E-rHyACQyeQIDa0VUeIF6Z3HbXWAwfQc3ZEH_olWjilxs_pNTdfM8D0KU9N2kuy5__Rx-m8aii25zFVYM5yi2g1UHmRRwmUCwEaPm4uh1DVrNViXUkKUNklaaq782Ddav4yaZ-5nrTDZAanfHK0y/w400-h393/Screenshot%202023-08-27%20at%2010.26.02%20AM.png" width="400" /></a></span></div><p></p><p style="text-align: center;"><span style="font-size: large;"></span></p><div class="separator" style="clear: both; text-align: center;"><span style="font-size: large;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQTaURODxWYNxug7NMnH_vhTQ31PBKIQ3D3agv9h76IOyAmNhdDsm5qxsrl8BBuuoNJpSZH2Nt949touFSkxI23tEtu2KglaykUDVm47NdTPzbgN5LgQU8PBe6QzN2kcmsirYFOEMUq4vorIW-RUK3mrlU0kyad1vN5zJoOt5ZCQZZnpf1RbCdTZgGFici/s1286/Screenshot%202023-08-27%20at%2010.14.16%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="538" data-original-width="1286" height="269" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQTaURODxWYNxug7NMnH_vhTQ31PBKIQ3D3agv9h76IOyAmNhdDsm5qxsrl8BBuuoNJpSZH2Nt949touFSkxI23tEtu2KglaykUDVm47NdTPzbgN5LgQU8PBe6QzN2kcmsirYFOEMUq4vorIW-RUK3mrlU0kyad1vN5zJoOt5ZCQZZnpf1RbCdTZgGFici/w640-h269/Screenshot%202023-08-27%20at%2010.14.16%20AM.png" width="640" /></a></span></div><div class="separator" style="clear: both; text-align: left;"><span style="font-size: large;"><br /></span></div><p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>3. Assume that in the country of Zeta, the civilian noninstitutional population aged 16 and over is 1,000,000. The labor force participation rate is 70%, the unemployment rate is 9%, and the natural rate if unemployment is 5%.<o:p></o:p></b></p><div class="separator" style="clear: both;"><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b> </b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b><u>A) Calculate the number of people in Zeta that are unemployed. Show your work.<o:p></o:p></u></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">The unemployment rate is the unemployed/ labor force<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Or<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Unemployment / employed + unemployed<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">The labor force is the unemployed + employed<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">1,000,000 x .7 = 700,000 is the labor force<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">The unemployment rate is 9% and 9% of 700,000 = 63,000 (unemployment number)<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">The employed would be 91% = 700,000 x .91 = 637,000 (employed number)<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">(a) 700,000 x 9% = 63,000<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><br /></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b><u>B) Is the economy of Zeta currently experiencing a recessionary gap, an inflationary gap or no output gap? Explain.<o:p></o:p></u></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b><u><o:p> </o:p></u></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">The natural rate of unemployment (also called the full employment level of unemployment)<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"> is 5% (as said in the question) but the actual rate of unemployment is 9%.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">There is a higher level of unemployment than the natural rate of unemployment therefore there is a recessionary gap.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b><u>C) Consumer goods and capital goods are produced in the country of Zeta. Draw a correctly labeled graph of the production possibilities curve for Zeta. Indicate a point labeled A, that represents the current state of Zeta’s economy.<o:p></o:p></u></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><b></b></p><div class="separator" style="clear: both; text-align: center;"><b><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgWVzagR0xhjakaWJHLga8ci4VOZjqKorbRKXZHEKrDFy_JA0wLth0xh0tKHf4GN8wofDSz2VquTqyRnII6PU3_3q_JU9G9RXGifq2Yh6tZcHPhGX74YJaj1WVXfo0n8bXtGmjZDu088XOCYmwl44zcX8GxqJYex262G48gApg6LMUjLSNcvssXHQ_WC9J9/s622/Screenshot%202023-08-27%20at%209.55.41%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="434" data-original-width="622" height="223" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgWVzagR0xhjakaWJHLga8ci4VOZjqKorbRKXZHEKrDFy_JA0wLth0xh0tKHf4GN8wofDSz2VquTqyRnII6PU3_3q_JU9G9RXGifq2Yh6tZcHPhGX74YJaj1WVXfo0n8bXtGmjZDu088XOCYmwl44zcX8GxqJYex262G48gApg6LMUjLSNcvssXHQ_WC9J9/s320/Screenshot%202023-08-27%20at%209.55.41%20AM.png" width="320" /></a></b></div><p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b><u>D) If some individuals that are counted as unemployed in Zeta stop looking for work, what will happen to each of the following:<o:p></o:p></u></b></p><div class="separator" style="clear: both;"><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b><u><o:p> </o:p></u></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b><u>(i) The labor force participation rate. Explain.</u></b><o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">If some unemployed stop looking for work, they become discouraged workers. Discouraged workers are not considered part of the labor force as they aren’t unemployed or employed.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">So, the labor force participation rate will decrease<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b><u><o:p> </o:p></u></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b><u>(ii) The unemployment rate.<o:p></o:p></u></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b><u><o:p> </o:p></u></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">If people who were unemployed then choose to stop looking for work they get kicked off the unemployment rolls (list) becoming discouraged workers, therefore the unemployment rate has to decrease.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><br /></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><br /></p></div><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhYM9gtFDCp4jYi8EN_yym650_2wTOWnnRn8IqIbOIl-mdcke76mX1v1kgUSKqVwaRm2WNE-fFPq-QcDZKtwCGTOOAGiijtHS7CAjcma5wem2S0FVubreCKFmUupCuloxJZuIXdqTu1nYi_frVgBy-XKYvSaP6DDUwRZaJkwkiTT4srA3AdMYj0iatONqxs/s796/Screenshot%202023-08-27%20at%2010.32.55%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="796" data-original-width="670" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhYM9gtFDCp4jYi8EN_yym650_2wTOWnnRn8IqIbOIl-mdcke76mX1v1kgUSKqVwaRm2WNE-fFPq-QcDZKtwCGTOOAGiijtHS7CAjcma5wem2S0FVubreCKFmUupCuloxJZuIXdqTu1nYi_frVgBy-XKYvSaP6DDUwRZaJkwkiTT4srA3AdMYj0iatONqxs/s320/Screenshot%202023-08-27%20at%2010.32.55%20AM.png" width="269" /></a></div><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><b><br /><u><br /></u></b></p></div><p style="text-align: center;"><span style="font-size: large;"><br /><b><br /></b></span></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-72990857835363337512023-08-20T18:37:00.003-07:002023-09-08T17:00:52.444-07:002023 AP Macroeconomics FRQ Set 1 #2 (Phillips Curve, Ample Reserves, FOREX)<p style="text-align: center;"><span style="font-size: large;"><b> 2023 AP Macroeconomics FRQ Set 1 #2</b></span></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-G_Jj-7otfBKaeMtgoL-5finbn6_eUJ2Xz9TWsUMNaakbMZtotrMZDjfVFh7JVpkiCyw9DglVm8XUwCI8vrD3U9l154OlOVICICHqHd-EcoUXnA_oQ-F52lqy1M-LeRV08BPmNdg96lh-Y1DLIArdiJ6lAO47m12J_IZnvpA8089JG4wdal-scqdDafRX/s1202/Screenshot%202023-08-21%20at%209.27.17%20AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1202" data-original-width="908" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-G_Jj-7otfBKaeMtgoL-5finbn6_eUJ2Xz9TWsUMNaakbMZtotrMZDjfVFh7JVpkiCyw9DglVm8XUwCI8vrD3U9l154OlOVICICHqHd-EcoUXnA_oQ-F52lqy1M-LeRV08BPmNdg96lh-Y1DLIArdiJ6lAO47m12J_IZnvpA8089JG4wdal-scqdDafRX/w483-h640/Screenshot%202023-08-21%20at%209.27.17%20AM.png" width="483" /></a></div><div class="separator" style="clear: both; text-align: center;"><b>(From the Ample Reserves Cheat Sheet)</b></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgDu3SlonYL8z8107QmtQ2E7SSZapib_WkJvixbF1XWvJU_-CEmgUAJA4dR7Fitub_Q56e-tpi-Oxhg1ucg7QBICd2MqrYUUeMVg5JOeE5-GUt0Fb7dr0RUlR0rPaUBtbgdp1vqV1o-F3qn4S2coVxW-tEypt6YEr0PV9gjvs3VXCYcbdnBCREdCbf3Imrn/s1532/Screenshot%202023-08-21%20at%208.42.52%20AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="714" data-original-width="1532" height="298" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgDu3SlonYL8z8107QmtQ2E7SSZapib_WkJvixbF1XWvJU_-CEmgUAJA4dR7Fitub_Q56e-tpi-Oxhg1ucg7QBICd2MqrYUUeMVg5JOeE5-GUt0Fb7dr0RUlR0rPaUBtbgdp1vqV1o-F3qn4S2coVxW-tEypt6YEr0PV9gjvs3VXCYcbdnBCREdCbf3Imrn/w640-h298/Screenshot%202023-08-21%20at%208.42.52%20AM.png" width="640" /></a></div><div><br /></div>2. The economy of Norlandia is in short-run equilibrium with an actual inflation rate that is currently higher than the expected inflation rate.<div><br /></div><div><div style="text-align: center;">This implies that the economy is in an inflationary gap.</div><div style="text-align: center;">Look at this graph from the Phillips curve cheat sheet.</div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghR6aFxd1M9Znxmqtira3NQ99SPcDOcSykn95xpX2-Apv8P-PgJ4B1P7MpMfPt_Al6grJO6_M-xjt-K_9Z_evMYwAHgY_6wG0c3Z7QYaykPrhCbqsk0NSTinfLmkseQEXghVRjwMlgVUsBgtq-5PvqEAvgJ6R5UQZIOFEHBuqd3WApYhoWZxnbV1oADUyJ/s832/Screenshot%202023-08-21%20at%208.45.38%20AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="404" data-original-width="832" height="194" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghR6aFxd1M9Znxmqtira3NQ99SPcDOcSykn95xpX2-Apv8P-PgJ4B1P7MpMfPt_Al6grJO6_M-xjt-K_9Z_evMYwAHgY_6wG0c3Z7QYaykPrhCbqsk0NSTinfLmkseQEXghVRjwMlgVUsBgtq-5PvqEAvgJ6R5UQZIOFEHBuqd3WApYhoWZxnbV1oADUyJ/w400-h194/Screenshot%202023-08-21%20at%208.45.38%20AM.png" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;">Notice that expected inflation is the same as full employment</div><div class="separator" style="clear: both; text-align: center;">If the inflation rate is greater than expected inflation we must have an inflationary gap.</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;"><b><u>A) Draw a correctly labeled graph (CLG) of the short run and long run Phillips curve. Label the current short run equilibrium point as X.</u></b></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjlCSvn-LBW46dFlgCVrqsAMJuys3agtVwHfOCY6WOGYHPHUjfDDDAR7p3rMhrx6hZfkAz6EguwGeJ7Bx1gEDmLxZIk-4xvTy_djS-126f1ShJOvI3ma6cw3Fddu_uQcrIXgvMGQDT_aPt2U40aVAg57WJJ5eXpnLYs2UYQ7JSBlr6_LXSIENmdE4vTj7Os/s524/Screenshot%202023-08-21%20at%208.50.57%20AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="446" data-original-width="524" height="272" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjlCSvn-LBW46dFlgCVrqsAMJuys3agtVwHfOCY6WOGYHPHUjfDDDAR7p3rMhrx6hZfkAz6EguwGeJ7Bx1gEDmLxZIk-4xvTy_djS-126f1ShJOvI3ma6cw3Fddu_uQcrIXgvMGQDT_aPt2U40aVAg57WJJ5eXpnLYs2UYQ7JSBlr6_LXSIENmdE4vTj7Os/s320/Screenshot%202023-08-21%20at%208.50.57%20AM.png" width="320" /></a></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"><b><u>B) The banking system in Norlandia has ample reserves. Identify a specific monetary policy action that the central bank of Norlandia would take to bring the inflation rate closer to the expected rate of inflation.</u></b></div>Ample Reserves used to decrease the Price Level (PL) Inflation</div><div class="separator" style="clear: both; text-align: center;">would need to be contractionary.</div><div class="separator" style="clear: both; text-align: center;">Contractionary Monetary Policy with Ample Reserves is </div><div class="separator" style="clear: both; text-align: center;">Increasing the Administered Interest Rate (AIR)</div><div class="separator" style="clear: both; text-align: center;">or</div><div class="separator" style="clear: both; text-align: center;">Increasing the Interest on Reserve Balances (IORB)</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">A specific monetary policy to lower inflation toward the expected inflation rate </div><div class="separator" style="clear: both; text-align: center;">is to increase the (AIR) Administered Interest Rate</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div style="text-align: left;"><b><u>C) Based solely on the effect of the monetary policy action identified in part (b) on interest rates in Norlandia, will there be an increase, decrease or no change in the flow of international capital into Norlandia? Explain.</u></b></div><u style="font-weight: bold;"><br /></u></div><div class="separator" style="clear: both; text-align: center;">We should understand that foreign capital (money) is always looking for higher rates of return.</div><div class="separator" style="clear: both; text-align: center;">Higher interest rates in Norlandia will attract more/increase foreign capital as these investors want to put their money into Norlandia to make higher profits on the higher interest rates paid in Norlandia banks.</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><b>(we are speaking about people putting their money into Norlandia banks </b></div><div class="separator" style="clear: both; text-align: center;"><b>and earning a higher interest rate on their savings/capital)</b></div><div class="separator" style="clear: both; text-align: center;"><b><u><br /></u></b></div><div class="separator" style="clear: both; text-align: left;"><b><u>D) Based on the answer in part (c), what will happen to international value of Norlandia's currency? Explain.</u></b></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">For foreign capital to flow into Norlandia's banks and get the higher interest rates it first must be converted into Norlandia dollars as Norlandia banks only accept Norlandian currency.</div><div class="separator" style="clear: both; text-align: center;">If people are buying more Norlandian currency </div><div class="separator" style="clear: both; text-align: center;">then the supply of Norlandian currency in the FOREX is decreasing/shifting leftward</div><div class="separator" style="clear: both; text-align: center;">this will cause the value of Norlandian currency to appreciate.</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjwibrMaXZRKrBstpqWuSfWqcSSAnpyJEaOfE7nm0W8VSvYAcF_nj507CCIhmzuDTWjv75KQqx7Jvk7QShlKEx5YB-7Z0VsQP20OkdprASuD0i6lRFilNz9hFNCV0vEkFMAQimB-WXRazmCd_oPRzMN7JHU5oPQbAVE2VaDQ1tj-jQnVEH0Yt7LGs40IRXD/s1156/Screenshot%202023-08-21%20at%209.36.12%20AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="656" data-original-width="1156" height="364" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjwibrMaXZRKrBstpqWuSfWqcSSAnpyJEaOfE7nm0W8VSvYAcF_nj507CCIhmzuDTWjv75KQqx7Jvk7QShlKEx5YB-7Z0VsQP20OkdprASuD0i6lRFilNz9hFNCV0vEkFMAQimB-WXRazmCd_oPRzMN7JHU5oPQbAVE2VaDQ1tj-jQnVEH0Yt7LGs40IRXD/w640-h364/Screenshot%202023-08-21%20at%209.36.12%20AM.png" width="640" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><div style="text-align: center;"><br /></div><p style="text-align: center;"><br /></p></div>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-25351070595345573042023-08-20T17:16:00.005-07:002023-09-08T17:01:20.303-07:002023 AP Microeconomics FRQ Set 2 #2 (Comparative Advantage & Terms of Trade)<p style="text-align: center;"><span style="font-size: medium;"><b> 2023 AP Microeconomics FRQ Set 2 #2 (Comparative Advantage & Terms of Trade)</b></span></p><p style="text-align: center;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgU4rgQTjmCt78hzEVGW-ejuwMSC-W-xpcHb4gsBOuL_XvtuecilJTljwsjyTxUzAAx0T8FDDa--uLL89cEKvFy4eW04fb6rt4d5tV63mCQyChwMSF_mGQat_hlqKWXz995zPq7CjXrMM-jHt60KdLdsGu8er4lJLWilg11Cc2SE05LXmVGXUU5KHFzHOGv/s970/Screenshot%202023-08-20%20at%204.55.54%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="970" data-original-width="948" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgU4rgQTjmCt78hzEVGW-ejuwMSC-W-xpcHb4gsBOuL_XvtuecilJTljwsjyTxUzAAx0T8FDDa--uLL89cEKvFy4eW04fb6rt4d5tV63mCQyChwMSF_mGQat_hlqKWXz995zPq7CjXrMM-jHt60KdLdsGu8er4lJLWilg11Cc2SE05LXmVGXUU5KHFzHOGv/s320/Screenshot%202023-08-20%20at%204.55.54%20PM.png" width="313" /></a></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjS6F0DxlVXJwPeHnuJd-uranYTr_du3-hiBL2yN7OMDlmUEqISaw6XXtU-pfRyncPmJGDtaZrSw16Tan0I0koVi4Ii6NBb0gAI464wTMZ5roiIt7zxr95irjR7WPfKq2dhYttg9z-xdyxBuMUO-JfoRvbD2WS-cKWyisZWY9MXfWMTjUm8YCW1C2RNdOOH/s1546/Screenshot%202023-08-20%20at%208.35.12%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1230" data-original-width="1546" height="510" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjS6F0DxlVXJwPeHnuJd-uranYTr_du3-hiBL2yN7OMDlmUEqISaw6XXtU-pfRyncPmJGDtaZrSw16Tan0I0koVi4Ii6NBb0gAI464wTMZ5roiIt7zxr95irjR7WPfKq2dhYttg9z-xdyxBuMUO-JfoRvbD2WS-cKWyisZWY9MXfWMTjUm8YCW1C2RNdOOH/w640-h510/Screenshot%202023-08-20%20at%208.35.12%20AM.png" width="640" /></a></div><p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><b>First think about the steps of comparative advantage questions</b><o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><br /></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>1. Is it an output or input problem?<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">The PPC’s of each country show the amount of each good that can be produced.<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">Production of goods = <b>output problem</b><o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><b><br /></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>2. Identify absolute advantage<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">Absolute advantage for an output problem is which country can produce the most<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">They both can produce 100 wheat – so no one has an absolute advantage for wheat<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">South can produce 50 cloth while North can produce 300 cloth</p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><b>North has absolute advantage in cloth as it can produce more.<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><b><br /></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">3. <b>Comparative Advantage: Draw a table – do the math.<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">Answered Below<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><br /></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>4. Check answer using quick method<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;">Answered Below<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><br /></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b><u>A) Which country has a comparative advantage in producing wheat? Explain using numbers.<o:p></o:p></u></b></p><div class="separator" style="clear: both; text-align: center;"><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>Set up your table Step #3<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">I like countries or people on the left and goods on the top<o:p></o:p></p></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhYqWZcAw0quNj1mw3lIQ_YI_4-w_CZp1nR-MOkgCt1rfuY4WJ8vP4Nrwd6irOfBIELncbaBlhMkZI1_8fav0Zbv_A1Q4B8AIa-OOXNgfCHe--2pEl4WBYyFokSWrAwCvzeT01ya_GrldAy2BUmsr6HuHeZr1s9lOTrfnGUjB9qNSEigdUAfrzsm4rSSnR7/s1288/Screenshot%202023-08-21%20at%207.55.13%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="136" data-original-width="1288" height="68" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhYqWZcAw0quNj1mw3lIQ_YI_4-w_CZp1nR-MOkgCt1rfuY4WJ8vP4Nrwd6irOfBIELncbaBlhMkZI1_8fav0Zbv_A1Q4B8AIa-OOXNgfCHe--2pEl4WBYyFokSWrAwCvzeT01ya_GrldAy2BUmsr6HuHeZr1s9lOTrfnGUjB9qNSEigdUAfrzsm4rSSnR7/w640-h68/Screenshot%202023-08-21%20at%207.55.13%20AM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><br /></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">An output problem so the math is over<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>Output = Over<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Look at Southland first, the 50 goes <b>over </b>the 100 & the 100 goes <b>over</b> the 50<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Then do<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Northland, the 300 goes <b>over</b> the 100 and the 100 goes <b>over </b>the 300<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Your table should look like this, but better :0<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEivBSVkLAWYM9efnAzGFoI1dD2V41ikUtPGrg34_1KqbaiLgo2fT7s1xQ9AQJvw13PbYfUxpowmcmu9BB0L6axSdJOLwZPanUmaqPdGMcvg2zIUMk6hURxcKJlxEAz_nenobMJtMYYac9b4cc6szaw6bPyUoEWXjNWZRNMCr-wzO5nS9VRSNZUgsJ7RLv2A/s1248/Screenshot%202023-08-21%20at%207.56.22%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="126" data-original-width="1248" height="64" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEivBSVkLAWYM9efnAzGFoI1dD2V41ikUtPGrg34_1KqbaiLgo2fT7s1xQ9AQJvw13PbYfUxpowmcmu9BB0L6axSdJOLwZPanUmaqPdGMcvg2zIUMk6hURxcKJlxEAz_nenobMJtMYYac9b4cc6szaw6bPyUoEWXjNWZRNMCr-wzO5nS9VRSNZUgsJ7RLv2A/w640-h64/Screenshot%202023-08-21%20at%207.56.22%20AM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Do the math & explain <o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Southland<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Southland 50/100 = .5<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">The .5 is the opportunity cost of producing 1 bushel of wheat for Southland<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Let’s say it a bit differently – <b>for every 1 bushel of wheat produced </b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>Southland gives up .5 cloth</b><o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Let’s look on the cloth side for Southland<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Southland 100/50 = 2<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">The 2 is the opportunity cost of producing 1 cloth for Southland<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>For every 1 cloth produced Southland gives up 2 bushels of wheat<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">To find comparative advantage we need to do the math for both countries and compare<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Northland<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Northland 300/100 = 3<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Know how to read the table correctly – </p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>For every 1 bushel of wheat produced Northland gives up 3 cloth</b><o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Northland 100/300 = .33<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>For every 1 cloth produced Northland gives up .33 bushels of wheat<o:p></o:p></b></p></div><br /><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>We then want to compare the opportunity costs in the columns for Wheat</b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg8oG9saeOwIL75hQsTVxmFPedbg6DjAiiKWXbuPrrpsWIgEikSFpgLZO2n9pXDSpKfzytC3LKHF2UMNwkL8Z8XhineqeH4di6trH2wjL_bn9OzE6DWatsPPl31yCo5C2sI9yh64l3OEH5Xx62ueE2b6mQeb1jApbJ8X5NHSxXWOJPMXfNcb5s_qZLiwlHx/s1268/Screenshot%202023-08-21%20at%207.57.36%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="322" data-original-width="1268" height="162" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg8oG9saeOwIL75hQsTVxmFPedbg6DjAiiKWXbuPrrpsWIgEikSFpgLZO2n9pXDSpKfzytC3LKHF2UMNwkL8Z8XhineqeH4di6trH2wjL_bn9OzE6DWatsPPl31yCo5C2sI9yh64l3OEH5Xx62ueE2b6mQeb1jApbJ8X5NHSxXWOJPMXfNcb5s_qZLiwlHx/w640-h162/Screenshot%202023-08-21%20at%207.57.36%20AM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">The country with the lowest opportunity cost for wheat should produce wheat.<o:p></o:p></p><div class="separator" style="clear: both;"><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">For every 1 wheat produced Southland gives up .5 cloth<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">For every 1 wheat produced Northland gives up 3 cloth<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>.5 is the lowest opportunity cost for wheat so Southland should produce/export wheat<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>Let’s look in the column for Cloth and compare</b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhA9t5nBu1zXiHvrT-wWfPgtS_C2dViCHynwX4Wzg-VqcatTyHC4FeC-xe0LDBAhBduOOFiJ8QQMF9v5TdonEfrqOHaWiXe7WqaUN6Si3b5gD_CdFkqlAye3D54lNV6wvUE1Sl6SjpPlVIjQlGlSOU3wslWO8M-oD07P8YalRiCb1d7MjcqECuuSxaOmnJe/s1272/Screenshot%202023-08-21%20at%207.58.54%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="334" data-original-width="1272" height="168" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhA9t5nBu1zXiHvrT-wWfPgtS_C2dViCHynwX4Wzg-VqcatTyHC4FeC-xe0LDBAhBduOOFiJ8QQMF9v5TdonEfrqOHaWiXe7WqaUN6Si3b5gD_CdFkqlAye3D54lNV6wvUE1Sl6SjpPlVIjQlGlSOU3wslWO8M-oD07P8YalRiCb1d7MjcqECuuSxaOmnJe/w640-h168/Screenshot%202023-08-21%20at%207.58.54%20AM.png" width="640" /></a></div><p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">The country with the lowest opportunity cost for cloth should produce cloth.<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">For every 1 cloth produced Southland gives up 2 wheat<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">For every 1 cloth produced Northland gives up .33 wheat<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>.33 is the lowest opportunity cost for cloth so Northland should produce/export cloth<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>With comparative advantage each country should produce one of the goods<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>You will never have a situation where 1 country will produce both goods<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b><br /></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>That was a lot of work<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>Let’s say it again & explain using Numbers<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Southland has a comparative advantage in wheat as it has the lowest opportunity cost.<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Southland gives up .5 cloth for 1 wheat while Northland gives up 3 cloth for 1 wheat.<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Southland should produce/export wheat as it has the lowest opportunity cost.<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Northland has a comparative advantage in cloth as it has the lowest opportunity cost<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Northland gives up .33 wheat for 1 cloth and Southland gives up 2 wheat for 1 cloth<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Northland should produce/export cloth as it has the lowest opportunity cost.<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b> </b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>((Southland should produce wheat & Northland should produce cloth))<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b> </b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b>Step 4. Check answers using quick method.<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>First cross multiply<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b><br /></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioNim08EebW6rYApGXE6e0M22d_5VniS4L5VPeBCCPqXLSs4KwWqB-gCDWBunMUXnTPyVxgbWj0cAN60lbsHxQBtTSsxkURP42KLZBlgDX2f_E8UWB5NAbX4aBMT7gPjpD9WDeOldIf4WneFGQkhNyrN8EOVjJvpvgJkoFqmy9hdEyV35eoq5K8RqElSTQ/s1282/Screenshot%202023-08-21%20at%208.00.11%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="516" data-original-width="1282" height="258" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioNim08EebW6rYApGXE6e0M22d_5VniS4L5VPeBCCPqXLSs4KwWqB-gCDWBunMUXnTPyVxgbWj0cAN60lbsHxQBtTSsxkURP42KLZBlgDX2f_E8UWB5NAbX4aBMT7gPjpD9WDeOldIf4WneFGQkhNyrN8EOVjJvpvgJkoFqmy9hdEyV35eoq5K8RqElSTQ/w640-h258/Screenshot%202023-08-21%20at%208.00.11%20AM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b> </b>As 100 x 300 = 30,000 The 30,000 is larger than 5,000</p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">We use the two numbers that gave us the 30,000 </p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">and those two numbers show who should produce.</p><div class="separator" style="clear: both;"><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>((Southland should produce wheat & Northland should produce cloth))<o:p></o:p></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b><br /></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">We have done something right as the slow and the fast method both gave us the same answers<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b><u>B) Identify a specific number of yards of cloth that could be traded for 10 bushels of wheat and would be beneficial to North & South.<o:p></o:p></u></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><br /></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">First let’s find the mutually beneficial terms of trade for 1 wheat,<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbsa-wgRGA4vdvZB_9tg6nUU9FoDfPgPprLfXFOtYHPW0ZZnYBTI7SZQSVIhKYEVo3l6KAAo3ONLlT35tjKeczSq0_7xVYf1ldIiD-eIntAICvvLrI-FLGxtgI6BVDYRWurwq37YZh5PNt4jqHnc1KSr7gnauXTz9PYZ9IBCVW7OQ08vOK4KojCqjqmXhB/s1316/Screenshot%202023-08-21%20at%208.01.04%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="672" data-original-width="1316" height="326" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbsa-wgRGA4vdvZB_9tg6nUU9FoDfPgPprLfXFOtYHPW0ZZnYBTI7SZQSVIhKYEVo3l6KAAo3ONLlT35tjKeczSq0_7xVYf1ldIiD-eIntAICvvLrI-FLGxtgI6BVDYRWurwq37YZh5PNt4jqHnc1KSr7gnauXTz9PYZ9IBCVW7OQ08vOK4KojCqjqmXhB/w640-h326/Screenshot%202023-08-21%20at%208.01.04%20AM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">If we are looking for what would be could be traded for 10 wheat, we just need to multiply the opportunity costs by 10 and then pick a number between the two opportunity costs.<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEglOWs98j7XBb7NY5rTUQr1JhqEq50F-WBcbsS8Jpdy2FQB-u-KjcgHo7M97ro657UDErTKrViQBV2yJu4lYbbzQshqbVXj7zPhDpx0qYeCVr5d5GRB90PPHUhNl6gfopmJONZfb6WSnztK4xYBILp5K1EAGccEge5INVC0P63i-C-6cMUx7FF_Y-tME5Hi/s1278/Screenshot%202023-08-21%20at%208.01.59%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="142" data-original-width="1278" height="72" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEglOWs98j7XBb7NY5rTUQr1JhqEq50F-WBcbsS8Jpdy2FQB-u-KjcgHo7M97ro657UDErTKrViQBV2yJu4lYbbzQshqbVXj7zPhDpx0qYeCVr5d5GRB90PPHUhNl6gfopmJONZfb6WSnztK4xYBILp5K1EAGccEge5INVC0P63i-C-6cMUx7FF_Y-tME5Hi/w640-h72/Screenshot%202023-08-21%20at%208.01.59%20AM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">.5 x 10 = 5<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">&<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">3 x 10 = 30<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Mutually beneficial terms of trade is a number between 5 & 30<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">10 wheat for 15 cloth would work<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Or <o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">10 wheat for 20 cloth would work<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>For 10 wheat Southland (the producer of wheat) needs to get more than 5 and Northland (the consumer of wheat) needs to give up less than 30</b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>For 10 wheat a number of cloth between 5 & 30 would be mutually beneficial</b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b> </b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b><u>C) Southland’s maximum possible output of wheat from 100 bushels to 75 bushels. Assuming no other changes, will Southland have a comparative advantage in producing cloth? Explain using numbers.</u></b><o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b><u><br /></u></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><b></b></p><div class="separator" style="clear: both; text-align: center;"><b><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgZuaA0MzEj96Pni0a1qqopLjaaDzB3XW5XfsyyQMbpYneCT7LkiurdEP1RDuVk6WMy-SpmHWNqhwiUJfVmx6U_TPF6Ee-CtWSKQMupBkuqm_VTEGizVtljWGfvlUWgnvEgHR7YpT5EGWEUpY6kA8Qar3bM40rLhvAWf2TMKX4L3KeedLgY5_vAtHlzfuFg/s1284/Screenshot%202023-08-21%20at%208.02.55%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="142" data-original-width="1284" height="70" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgZuaA0MzEj96Pni0a1qqopLjaaDzB3XW5XfsyyQMbpYneCT7LkiurdEP1RDuVk6WMy-SpmHWNqhwiUJfVmx6U_TPF6Ee-CtWSKQMupBkuqm_VTEGizVtljWGfvlUWgnvEgHR7YpT5EGWEUpY6kA8Qar3bM40rLhvAWf2TMKX4L3KeedLgY5_vAtHlzfuFg/w640-h70/Screenshot%202023-08-21%20at%208.02.55%20AM.png" width="640" /></a></b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Southland’s production of wheat falls to 75 bushels.<o:p></o:p></p><div class="separator" style="clear: both;"><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">It is still an output problem and the math is over<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">50/75 = .66<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">75/50 = 1.5<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">We look in the columns and notice that Southland should still produce wheat as it has the lowest opportunity cost and Northland should produce cloth<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><o:p> </o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>Explain using the numbers for cloth</b>.<o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Northland should produce cloth as for every 1 cloth produced Southland gives up 1.5 wheat <o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">And Northland for every 1 cloth produced gives up .33 wheat, as Northland gives up the least wheat “has the lowest opportunity cost” it should produce cloth.<o:p></o:p></p></div><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><b><br /></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b><u>D) Turnips are produced in a perfectly competitive market in Alderia, a third country, which does not engage in international trade. Runoff from turnip fields pollutes Alderia’s rivers hurting its citizens.<o:p></o:p></u></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b><u><o:p> </o:p></u></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b><u>(i) Does the turnip market equilibrium result in an efficient allocation of resources? Explain using marginal analysis</u></b>.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">Pollution implies our analysis should be graphed using the production of turnips <o:p></o:p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;">as a negative production externality.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxuBTGXlLqo3g-rfZRmrioT-q3z8HfhKrH_oyYu5fGdxrqghxyj9U21ltigPmNCiBEncocwEWQK9zS1A2jyMpRv9QIaJ7wnGt6lBJDcFseZuURDttXY8laug6hBf58Wl0sVjq6-khVdXhkc9IwJwSS1saE-fnxLLVKtyLDW-QGt8d8IDdQYvfpzwRmZZEw/s1254/Screenshot%202023-08-21%20at%208.03.52%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1022" data-original-width="1254" height="326" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxuBTGXlLqo3g-rfZRmrioT-q3z8HfhKrH_oyYu5fGdxrqghxyj9U21ltigPmNCiBEncocwEWQK9zS1A2jyMpRv9QIaJ7wnGt6lBJDcFseZuURDttXY8laug6hBf58Wl0sVjq6-khVdXhkc9IwJwSS1saE-fnxLLVKtyLDW-QGt8d8IDdQYvfpzwRmZZEw/w400-h326/Screenshot%202023-08-21%20at%208.03.52%20AM.png" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><p></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b>Explain using marginal analysis.<o:p></o:p></b></p><div class="separator" style="clear: both;"><span face="Calibri, sans-serif" style="font-size: 12pt; text-align: start;">There is a negative production externality as the marginal social cost of producing turnips is greater than the marginal personal cost causing harm to citizens due to the runoff pollution. The allocatively efficient quantity of production should be where the marginal social benefit of consumption of turnips equals the marginal social cost of producing turnips. There is market failure as the market is not producing at the allocatively efficient quantity.</span><span style="text-align: start;"></span></div><div class="separator" style="clear: both;"><span face="Calibri, sans-serif" style="font-size: 12pt; text-align: start;"><br /></span></div><div class="separator" style="clear: both;"><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b><u>(ii) In an effort to reduce pollution Alderia’s government imposes a lump-sum tax on turnip production. What will be the impact on the turnip market equilibrium price and quantity in the short-run?<o:p></o:p></u></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><b><u><o:p> </o:p></u></b></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">Lump sum taxes do not affect the marginal cost of the companies and therefore do not change the price or the quantity of production in the short-run.<o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;"><o:p> </o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: start;">If the government had wanted to reduce the production of turnips, they should have imposed a per-unit tax. As per-unit tax is treated like variable costs in that they shift the marginal cost curve leftward reducing the amount of the good produced.<o:p></o:p></p></div><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><br /><o:p></o:p></p><p class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in; text-align: center;"><b><u><br /></u></b></p></div><br /><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><br /></p></div><br /><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><br /></p></div><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><br /><b><br /></b></p><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><b><br /></b></p></div><p align="center" class="MsoNormal" style="font-family: Calibri, sans-serif; margin: 0in;"><br /><b><br /></b></p></div><br /><p style="text-align: center;"><br /><span style="font-size: medium;"><br /></span></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-58779426230362136272023-08-18T17:58:00.007-07:002023-08-20T01:58:11.785-07:002023 AP Macroeconomics Set 1 #1 FRQ <p></p><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgu5CLffzKXt3KF5WaDJN1e8zvuXjCTeEVsKC7jdOCponrLqeEoII_Kl2vqXW9SsVQIZnYvHANfu9gyZnDYW0O4fj1FsV7rMKR3C4SNZ-2b6qNVdpNAhACb4P7pcL72cvvwhHmsdpLx-THuh34lYzLCAmqtMXjaOuVCB8rB6Mme4Cg18TMkq6y8fpZhJJH0" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="56" data-original-width="772" height="46" src="https://blogger.googleusercontent.com/img/a/AVvXsEgu5CLffzKXt3KF5WaDJN1e8zvuXjCTeEVsKC7jdOCponrLqeEoII_Kl2vqXW9SsVQIZnYvHANfu9gyZnDYW0O4fj1FsV7rMKR3C4SNZ-2b6qNVdpNAhACb4P7pcL72cvvwhHmsdpLx-THuh34lYzLCAmqtMXjaOuVCB8rB6Mme4Cg18TMkq6y8fpZhJJH0=w640-h46" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjoTTHlqdsJJeDDCnsQXgmdnPETVbs5j2MyXRSaJiCvjMn4xgPVVtk61078dOY2t78QoQ8FAyHSkq-NqeLnR7Fbs4fRnS7bsPNL25U24c6dc41x4JM14Z2lDiwq1_1LFiCUzU24ULbhth8ao93sfUeRP5XuJFylzxNmW3vojtRfGGp8i9HEd0dUruMncpYJ" style="margin-left: 1em; margin-right: 1em;"><img data-original-height="854" data-original-width="1164" height="294" src="https://blogger.googleusercontent.com/img/a/AVvXsEjoTTHlqdsJJeDDCnsQXgmdnPETVbs5j2MyXRSaJiCvjMn4xgPVVtk61078dOY2t78QoQ8FAyHSkq-NqeLnR7Fbs4fRnS7bsPNL25U24c6dc41x4JM14Z2lDiwq1_1LFiCUzU24ULbhth8ao93sfUeRP5XuJFylzxNmW3vojtRfGGp8i9HEd0dUruMncpYJ=w400-h294" width="400" /></a></div></div></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEh4mjmdJKajF8aiq0y5ELOWrrqzksB5nJ5sfjiPscjXShsV_IyEH4lKPd1Q_wdO1Wi739-v7UmLndZV_Q4DAVXxnAzXEWnPw4l-Z4iQFZsT77AijT94bl1Z2vZve_4SxIexaaP8jagl9fgvhau19teKdw8hpyVYAggCkQpD7uZFjR8nTIUt43aYWHbZ1aZA" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="1092" data-original-width="1536" height="456" src="https://blogger.googleusercontent.com/img/a/AVvXsEh4mjmdJKajF8aiq0y5ELOWrrqzksB5nJ5sfjiPscjXShsV_IyEH4lKPd1Q_wdO1Wi739-v7UmLndZV_Q4DAVXxnAzXEWnPw4l-Z4iQFZsT77AijT94bl1Z2vZve_4SxIexaaP8jagl9fgvhau19teKdw8hpyVYAggCkQpD7uZFjR8nTIUt43aYWHbZ1aZA=w640-h456" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;">1. The economy of Vanderlandia is in short-run equilibrium with a real GDP of $500m. The full-employment level of RGDP is $550m.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">A) Draw a correctly label graph (CLG) of the aggregate demand, SRAS and LRAS curves showing, </div><div class="separator" style="clear: both; text-align: left;"><span> <span> (i) The current equilibrium real output (RGDP - Y1) and Price level (PL1).</span></span><br /></div><div class="separator" style="clear: both; text-align: left;"><span><span><span> <span> (ii) The full employment output, labeled Yf.</span></span><br /></span></span></div><br /><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEj42qbPy3d8NcOTdXSt1HaiQY0RcpHhpTdQckHsRnD3Tid0sakat6OItvrcE4Q7_Z8LyRzwvHb5bIbbvRxT136ZPM5nTEZ_WeXwdyfFXaP1k0QARhPQ3sV24jfZBs1_ahIqJ8jm_naEce-VEBg5r_HrjCwirm1Y-Dj4wNkBJwL40yoEnkQX5o11TyXpzfBi" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="564" data-original-width="602" height="240" src="https://blogger.googleusercontent.com/img/a/AVvXsEj42qbPy3d8NcOTdXSt1HaiQY0RcpHhpTdQckHsRnD3Tid0sakat6OItvrcE4Q7_Z8LyRzwvHb5bIbbvRxT136ZPM5nTEZ_WeXwdyfFXaP1k0QARhPQ3sV24jfZBs1_ahIqJ8jm_naEce-VEBg5r_HrjCwirm1Y-Dj4wNkBJwL40yoEnkQX5o11TyXpzfBi" width="256" /></a></div></div><div style="text-align: center;"><b>(The economy is in a recession gap as the current equilibrium (Y1 - $500m) </b></div><div style="text-align: center;"><b>has less output than </b><b>the full employment equilibrium at (Yf - $550m)</b></div><div style="text-align: center;"><b><br /></b></div><div style="text-align: left;">B) Assume no policy action is taken to restore to full employment.</div><div style="text-align: left;"><span> <span> (i) Explain how the economy will adjust in the long-run.</span></span><br /></div><div style="text-align: left;"><span><span><span> <span> (ii) Following the long-run adjustment process, will the price level in Vanderlandia be greater than, <span> <span> <span> <span> </span></span></span></span>less </span></span>than, or equal to PL1, shown in part (a).</span></span></div><div style="text-align: center;"><span><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjL9lW5sxc6zuz6CSxE4JaB-5Kpso4aRlA-hKIiBzutLK0iWybErg2TlkYiZ_YJ6qIDZuflpqmmJyQK-FBI-3jJj69wsY20jnZQxDUU9p85osIFr56vcgVw89GpMeOVuX3j6AUPWjaP3I8mW7m3wbAj7A7f1ZNeBvzaFo4bC4P7GARqpkaHLGliKygGHAkq" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="486" data-original-width="690" height="225" src="https://blogger.googleusercontent.com/img/a/AVvXsEjL9lW5sxc6zuz6CSxE4JaB-5Kpso4aRlA-hKIiBzutLK0iWybErg2TlkYiZ_YJ6qIDZuflpqmmJyQK-FBI-3jJj69wsY20jnZQxDUU9p85osIFr56vcgVw89GpMeOVuX3j6AUPWjaP3I8mW7m3wbAj7A7f1ZNeBvzaFo4bC4P7GARqpkaHLGliKygGHAkq" width="320" /></a></div><div class="separator" style="clear: both; text-align: center;"><b>This is a Classical View question. How do we know? </b></div><div class="separator" style="clear: both; text-align: center;"><b>It says that there are No Policy Actions - which implies there is no fiscal or monetary policies </b></div><div class="separator" style="clear: both; text-align: center;"><b>The economy must fix itself in the long-run </b></div><div class="separator" style="clear: both; text-align: center;"><b>"and we answer it the same way every time."</b></div><div class="separator" style="clear: both; text-align: center;"><b>If we are in a recessionary gap this implies that many people are out of work and will take lower wages to go back to work and input prices are falling due to a recession.</b></div><div class="separator" style="clear: both; text-align: center;"><b> Lower wages and lower input costs for business will shift their SRAS curve to the right.</b></div><div class="separator" style="clear: both; text-align: center;"><b>This lowers the price level (PL) and increases output back to the full employment level at a lower PL</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b>Let's explain it tightly.</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: left;"><b>(i) In a recessionary gap people will accept lower wages and input prices are falling. Lower wages and lower input prices will shift the SRAS curve rightward until full employment is achieved at a lower price level in the long-run.</b></div><div class="separator" style="clear: both; text-align: left;"><b>(ii) The PL will be less than PL1 in the long run. (No explanation needed)</b></div><div class="separator" style="clear: both; text-align: left;"><b><br /></b></div><div class="separator" style="clear: both; text-align: left;">C) Assume instead that policy makers in Vanderlandia are considering changing government spending to restore full employment in the short run and the marginal propensity to save is 0.2.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">(i) Calculate the minimum change and state the direction of change in government spending required to completely close the output gap in the short-run. <u>(Show your work)</u></div><div class="separator" style="clear: both; text-align: left;">(ii) On your graph in part (a), show the short-run effect of the change in government spending </div><div class="separator" style="clear: both; text-align: left;">in part (c)(i), labeling the new equilibrium price level PL2.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"><b>(i) If the MPS is 0.2 we find the spending multiplier with the formula 1/MPS and 1/MPS = 5</b></div><div class="separator" style="clear: both; text-align: left;"><b><br /></b></div><div class="separator" style="clear: both; text-align: left;"><b>When government spending increases it will increase the RGDP/Outputs by a multiple of 5</b></div><div class="separator" style="clear: both; text-align: left;"><b><br /></b></div><div class="separator" style="clear: both; text-align: left;"><b>If we remember we needed 50million to close the output gap back to full employment, so if the government spends 10million the money will multiply through the economy and give us the needed 50million increase in RGDP/output</b></div><div class="separator" style="clear: both; text-align: left;"><b><br /></b></div><div class="separator" style="clear: both; text-align: left;"><b>10m x 5 = 50m</b></div><div class="separator" style="clear: both; text-align: left;"><b>GS increase x Multiplier = increase in RGDP</b></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEhzcwfslTz47hMXCszPnOMtXVdSX5Tt3OPSN8b_Jj1DhRw2pC8VVQau5S_AFj4jgh4S9YtvXjmWUF0Uco3b0VZgPZXlcf8jXWHlI5CSnpu0C3aXh3FoKUzGClWa0wSvfMSAqZVjUb92vARppET1yycZO2w-JyOeYl2WTXTVb5rs7akA_4cMY9rQIOm8s2dk" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="494" data-original-width="608" height="240" src="https://blogger.googleusercontent.com/img/a/AVvXsEhzcwfslTz47hMXCszPnOMtXVdSX5Tt3OPSN8b_Jj1DhRw2pC8VVQau5S_AFj4jgh4S9YtvXjmWUF0Uco3b0VZgPZXlcf8jXWHlI5CSnpu0C3aXh3FoKUzGClWa0wSvfMSAqZVjUb92vARppET1yycZO2w-JyOeYl2WTXTVb5rs7akA_4cMY9rQIOm8s2dk" width="295" /></a></div></div></div></div><div class="separator" style="clear: both; text-align: center;"><b>(ii) If in a recessionary gap and the government starts spending it pushes the AD curve to the right toward full employment. Output increases to full employment (Yf) </b></div><div class="separator" style="clear: both; text-align: center;"><b>the PL increases a higher level at PL2.</b></div></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">D) Draw a correctly labeled graph of the loanable funds market, and show the effect of the change in government spending in part (c)(i) on the equilibrium real interest rate.</div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEiTQki4T5J4G68t3Fa8XnoqNhpxfnnBo-oW7NX7o8CRGJ18zH30atygRv-Ti0bnBXgrOqLhRAYEARZ30PLJmhme1J0XukODD8k63S78X6ncmnwBrUS8Xq1zANxTPGKDzyv2qpRwMi0t6R58BPKCNh0K-04FjqA636kwLGC5nQgWXR6vDpAsKr86rU-aKwgm" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="532" data-original-width="538" height="240" src="https://blogger.googleusercontent.com/img/a/AVvXsEiTQki4T5J4G68t3Fa8XnoqNhpxfnnBo-oW7NX7o8CRGJ18zH30atygRv-Ti0bnBXgrOqLhRAYEARZ30PLJmhme1J0XukODD8k63S78X6ncmnwBrUS8Xq1zANxTPGKDzyv2qpRwMi0t6R58BPKCNh0K-04FjqA636kwLGC5nQgWXR6vDpAsKr86rU-aKwgm" width="243" /></a></div><b>Understand that this is the Crowding-Out Effect</b></div><div class="separator" style="clear: both; text-align: center;"><b>When government spends it has to borrow from the loanable funds market</b></div><div class="separator" style="clear: both; text-align: center;"><b>it takes money out of the banks & this reduces the supply of loanable funds</b></div><div class="separator" style="clear: both; text-align: center;"><b>RIR's increase </b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><div style="text-align: left;">E) Based on the change in the real interest rate (RIR), what will happen to each of the following.</div><div style="text-align: left;"><br /></div><div style="text-align: left;">(i) The price of previously issued bonds</div><div style="text-align: left;"><br /></div><div style="text-align: center;"><b>Understand that interest rates and previously issued bond's prices are inversely related</b></div><div style="text-align: center;"><b>RIR increases and bond prices decrease</b></div><div style="text-align: center;"><b><br /></b></div><div style="text-align: left;">(ii) The rate of economic growth in the long-run. Explain.</div><div style="text-align: left;"><br /></div><div style="text-align: center;"><b>We answer these questions the same every time.</b></div><div style="text-align: center;"><b>As RIR's increase there will be less investment & less capital formation </b></div><div style="text-align: center;"><b>and therefore less LR Growth</b></div><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><br /></span></div><div style="text-align: left;"><span><span><br /></span></span></div><div style="text-align: center;"><b><br /></b></div><div style="text-align: left;"><b><br /></b></div><br /> <p></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-40428281624358980112022-11-05T08:26:00.001-07:002022-11-05T08:27:31.197-07:00Quick - LImited Reserves. Monetary Policy<p style="text-align: center;"><b><span style="font-size: large;">Quick - Limited Reserves - Monetary Policy</span></b></p><p style="text-align: center;"><b></b></p><div class="separator" style="clear: both; text-align: center;"><b><iframe allowfullscreen="" class="BLOG_video_class" height="349" src="https://www.youtube.com/embed/gbeK_UP_CaQ" width="421" youtube-src-id="gbeK_UP_CaQ"></iframe></b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><p></p><div class="separator" style="background-color: #fff9ee; clear: both; color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px; text-align: center;"><b>This is a quick explanation of the Limited Reserves</b></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="background-color: #fff9ee; clear: both; color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px;"><b>framework for answering the AP College Board</b></div><div class="separator" style="background-color: #fff9ee; clear: both; color: #222222; font-family: Georgia, Utopia, "Palatino Linotype", Palatino, serif; font-size: 15.4px;"><b>MCQ's</b></div></div><p style="text-align: center;"><b><br /><span style="font-size: large;"></span></b></p><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><b><span style="font-size: large;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEizFWGONvWrw_k7H-SkNU3DC_yYync3TZvqam8h_J2n1GMXZFo-rpJPk5sQcmpzw3IhCvk-qyyvjCTmoEsxz7ARrfcfjGYK4QoKS-bjf7mRHxYMasPzlt5_KnROTTmpoPVF6S9qTscCyQtjoTZy-NZdgdfF7MXn0Y-DibFIKv1wHmjknftP1OC4kDRXkw" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="548" data-original-width="1013" height="346" src="https://blogger.googleusercontent.com/img/a/AVvXsEizFWGONvWrw_k7H-SkNU3DC_yYync3TZvqam8h_J2n1GMXZFo-rpJPk5sQcmpzw3IhCvk-qyyvjCTmoEsxz7ARrfcfjGYK4QoKS-bjf7mRHxYMasPzlt5_KnROTTmpoPVF6S9qTscCyQtjoTZy-NZdgdfF7MXn0Y-DibFIKv1wHmjknftP1OC4kDRXkw=w640-h346" width="640" /></a></span></b></div><b><span style="font-size: large;"><br /><br /></span></b></div><b><span style="font-size: large;"><br /><br /></span></b><p></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-85626080700440460062022-11-05T07:57:00.002-07:002022-11-05T08:27:09.743-07:00Quick - Ample Reserves - MOnetary POlicy<p style="text-align: center;"><b><span style="font-size: large;"> Quick - Ample Reserves - MOnetary POlicy</span></b></p><p style="text-align: center;"><b></b></p><div class="separator" style="clear: both; text-align: center;"><b><iframe allowfullscreen="" class="BLOG_video_class" height="266" src="https://www.youtube.com/embed/Jlb8E5t4tSc" width="320" youtube-src-id="Jlb8E5t4tSc"></iframe></b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b>This is a quick explanation of the new ample reserves</b></div><div class="separator" style="clear: both; text-align: center;"><b>framework for answering the AP College Board</b></div><div class="separator" style="clear: both; text-align: center;"><b>MCQ's</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEg2hJD0A68OVZt75Cl6ECkMSiPmbPRXneHXO1zBT6jSbhNea9DXZTLRKx7N17ndUHWj41X6voT16jjFrlRJLZtFXKTw7UD3eKMLtASUT5OCYzcYZfYko0n3HlFJBgU1K8a7H-btbktAuQzTXOZBwJ_CRCpIcuarXR5gxI8eg1FuJkOIbyBsryYd2W2w9A" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="491" data-original-width="995" height="316" src="https://blogger.googleusercontent.com/img/a/AVvXsEg2hJD0A68OVZt75Cl6ECkMSiPmbPRXneHXO1zBT6jSbhNea9DXZTLRKx7N17ndUHWj41X6voT16jjFrlRJLZtFXKTw7UD3eKMLtASUT5OCYzcYZfYko0n3HlFJBgU1K8a7H-btbktAuQzTXOZBwJ_CRCpIcuarXR5gxI8eg1FuJkOIbyBsryYd2W2w9A=w640-h316" width="640" /></a></div><br /><br /></div><b><br /><br /></b></div><b><br /><span style="font-size: large;"><br /></span></b><p></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-13953000990398371832022-10-31T13:49:00.004-07:002022-11-01T11:07:09.092-07:00IB 2022 Economics Higher Level Paper 3<p style="text-align: center;"><b><span style="font-size: x-large;"> IB Economics Higher Level Paper 3</span></b></p><p style="text-align: center;"></p><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEiuVDaMAsbxJofV8C4bKo4l4MUSuohKC2Uzk2UmfAQHAaDwNB6ztONMl4UAEaAUbJUvTHNCSqqrfiHsECSAtD4UtXZM8oyo69M_00aeQR5OBoqTUvDEzeBed2ci8QU8pBJq4PxIv3fm8zlS-JUPYiaeAvelW9FSQ6RlCBLVc7iRmC0KzSw0Lh1eV60poQ" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="490" data-original-width="627" height="312" src="https://blogger.googleusercontent.com/img/a/AVvXsEiuVDaMAsbxJofV8C4bKo4l4MUSuohKC2Uzk2UmfAQHAaDwNB6ztONMl4UAEaAUbJUvTHNCSqqrfiHsECSAtD4UtXZM8oyo69M_00aeQR5OBoqTUvDEzeBed2ci8QU8pBJq4PxIv3fm8zlS-JUPYiaeAvelW9FSQ6RlCBLVc7iRmC0KzSw0Lh1eV60poQ=w400-h312" width="400" /></a></div><div style="font-size: x-large; text-align: left;"><span style="font-weight: 700;">1. The diagram below shows the demand and cost curves of an imperfectly competitive firm that operates as a profit maximizer.</span></div><div style="font-size: x-large; text-align: left;"><br /></div><div style="text-align: left;">(a) Using the labeling on the graph identify and explain the </div><div style="text-align: left;"><span> </span><span> (i) quantity level of output (1 point)</span><br /></div><div style="text-align: left;"><span><span> </span><span> (ii) price charged by the firm (1 point)</span><br /></span></div><div style="text-align: left;"><span><span><br /></span></span></div><div style="text-align: left;"><span><span><b>(i) Q2 is where marginal revenue = marginal cost</b></span></span></div><div style="text-align: left;"><b>(ii) P5 is the Profit Maximizing Price</b></div><div style="font-size: x-large; text-align: left;"><span><span><b><br /></b></span></span></div><div style="text-align: left;"><div class="separator" style="clear: both; font-size: x-large; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEigIaMujIk4bt1Tql8oiTQf9aS06a_a-L0fPcvDCSCpKMrAkS6jPBRhce3GJdb1eBTssctSsrxwm0beSV7mgHtapjCqCxczljFf8ZHe2FDzU_FLPm4uDVTlgzdJ-ig32VeyaWHPdrBrGg3nfzOhn1Q1oiE7qbm5S8BoNf2FktmsXaRDk0abHjdKtqZr5A/s579/Screen%20Shot%202022-10-31%20at%201.21.28%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="576" data-original-width="579" height="398" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEigIaMujIk4bt1Tql8oiTQf9aS06a_a-L0fPcvDCSCpKMrAkS6jPBRhce3GJdb1eBTssctSsrxwm0beSV7mgHtapjCqCxczljFf8ZHe2FDzU_FLPm4uDVTlgzdJ-ig32VeyaWHPdrBrGg3nfzOhn1Q1oiE7qbm5S8BoNf2FktmsXaRDk0abHjdKtqZr5A/w400-h398/Screen%20Shot%202022-10-31%20at%201.21.28%20PM.png" width="400" /></a></div><div style="font-size: x-large; text-align: left;"><span><span><br /></span></span></div><span style="font-size: medium;">(B) Explain, at the profit maximizing level of output, if the firm achives</span></div><div style="text-align: left;"><span style="font-size: medium;"><span> </span><span> (i) Productive Efficiency</span></span></div><div style="text-align: left;"><span style="font-size: medium;"><span> </span><span> (ii) Allocative Efficiency</span></span></div><div style="text-align: left;"><span style="font-size: medium;"><br /></span></div><div style="text-align: left;"><span style="font-size: medium;"><b>(i) Productive Efficiency is when P = Minimum of the ATC (Costs are lowest)</b></span></div><div style="text-align: left;"><span style="font-size: medium;"><b>(ii) Allocative Efficiency is when P = MC or (MB = MC)</b></span></div><div style="text-align: left;"><span style="font-size: medium;"><b><br /></b></span></div><div style="text-align: left;"><span style="font-size: medium;"><b>Allocative efficiency shows the quantity and price that a perfectly competitive firm would produce if laid over the top of this monopoly. It shows the socially optimal quantity</b></span></div><div style="text-align: left;"><span style="font-size: medium;"><b> (ie) the quantity of the good that society desires.</b></span></div><div style="text-align: left;"><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; font-size: large; font-weight: 700; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEhxvv4QPHkwR51PbouUyl-oriH6gR7GhjQbMN7LTOQvjzwzcbnIffaxe92dXEZNwa2xD_XdVeBaEJ0Vo-gjQziL5oHtcJjkU8KvGdWyUA5VdAmDb2gsVG4fbkTTkQpiXj3gEdl6ZxOchyQtz6Iwf2nMdKyhNQmtubFrjtWAWX3kfahRWax5_DaSMHswaw" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="456" data-original-width="584" height="313" src="https://blogger.googleusercontent.com/img/a/AVvXsEhxvv4QPHkwR51PbouUyl-oriH6gR7GhjQbMN7LTOQvjzwzcbnIffaxe92dXEZNwa2xD_XdVeBaEJ0Vo-gjQziL5oHtcJjkU8KvGdWyUA5VdAmDb2gsVG4fbkTTkQpiXj3gEdl6ZxOchyQtz6Iwf2nMdKyhNQmtubFrjtWAWX3kfahRWax5_DaSMHswaw=w400-h313" width="400" /></a></div><br /><div style="text-align: left;"><span style="font-size: large;">(C) Now suppose the firm seeks to maximize revenues.</span></div><div style="text-align: left;"><span style="font-size: large;"><span> </span><span> </span>(i) The quantity level of output</span></div><div style="text-align: left;"><span style="font-size: large;"><span> </span><span> </span>(ii) The price charged by the firm</span></div><div style="text-align: left;"><span style="font-size: large;"><br /></span></div><div style="text-align: left;"><span style="font-size: large;"><b>Maximizing Revenue is found where MR = Zero</b></span></div><div style="text-align: left;"><span style="font-size: large;"><b>(i) The Revenue Maximizing quantity is Q3</b></span></div><div style="text-align: left;"><span style="font-size: large;"><b>(ii) The Revenue Maximizing price = P3</b></span></div><div style="text-align: left;"><span style="font-size: large;"><b><br /></b></span></div><div style="text-align: left;"><span style="font-size: large;">(D) (i) Define Normal profits</span></div><div style="text-align: left;"><span style="font-size: large;"><span> </span><span> (ii) Identify the price and quantity the firm would charge to earn a normal profit?</span><br /></span></div><div style="text-align: left;"><span style="font-size: large;"><span><br /></span></span></div><div style="text-align: left;"><span style="font-size: large;"><span><b>(i) A Normal Profit (Zero Economic Profit) is when the firm is covering all of its explicit and implicit costs.</b></span></span></div><div style="text-align: left;"><span style="font-size: large;"><span><b>Explicit Costs = Fixed Costs & Variable Costs (anything you spend $ money on)</b></span></span></div><div style="text-align: left;"><span style="font-size: large;"><span><b>Implicit Costs = Opportunity Costs = what you could have been doing, given up</b></span></span></div><div style="text-align: left;"><span style="font-size: large;"><span><b>(ii) P3 & Q3 </b></span></span></div><div style="text-align: left;"><b>(Understand that P3 & Q3 just happen to be where Revenue is Maximized, </b><b>it isn't always)</b></div><div style="text-align: left;"><span style="font-size: medium;"> </span></div><div style="text-align: left;"><span style="font-size: medium;"><b>A firm is breaking even when its</b></span></div><div style="text-align: left;"><span style="font-size: large;"><span><b><br /></b></span></span></div><div style="text-align: left;"><span style="font-size: large;"><span><b>1. Producing where P = ATC sometimes labeled as D = ATC</b></span></span></div><div style="text-align: left;"><span style="font-size: large;"><span><b>2. Called Breaking Even or Fair-Return as (TR = TC)</b></span></span></div><div style="text-align: left;"><span style="font-size: large;"><span><b>3. When a firm is breaking even it is covering all of its explicit and implicit costs, and </b></span></span><b style="font-size: x-large;">if forced to produce at break-even, it will not need a subsidy to continue to produce in the long-run.</b></div><div style="text-align: center;"><span style="font-size: large;"><div class="separator" style="clear: both; font-weight: 700; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEhzEKsaP1GQE2SjBP7N5ugnxWcHRDoN57bhCtwWy_6Dyg_6IavcTUKVAW5-029T3eFZosLuhuFrNTkYKKp4qyhjVHIHtsjbvbzERadPyvtbhFEUK8wxyopYxqkPjULqgs8_f7MW_qBCWGlbpTZoGpDRXsmWYDesQZLLZ0uBejIc4EujSOeyoi_adOXUUw" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="451" data-original-width="563" height="320" src="https://blogger.googleusercontent.com/img/a/AVvXsEhzEKsaP1GQE2SjBP7N5ugnxWcHRDoN57bhCtwWy_6Dyg_6IavcTUKVAW5-029T3eFZosLuhuFrNTkYKKp4qyhjVHIHtsjbvbzERadPyvtbhFEUK8wxyopYxqkPjULqgs8_f7MW_qBCWGlbpTZoGpDRXsmWYDesQZLLZ0uBejIc4EujSOeyoi_adOXUUw=w400-h320" width="400" /></a></div><br /><div style="text-align: left;">
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<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">2. Asepsis Corp. operates in an imperfectly competitive industry producing hand sanitizer </span><span style="font-family: ArialMT; font-size: 11pt;">called Sani-Gel. The company currently produces the profit-maximizing quantity of Sani-Gel
but is operating at a loss. [4]</span></p></div></div></div></div><div class="page" title="Page 6"><div class="section" style="background-color: rgb(100.000000%, 100.000000%, 100.000000%);"><div class="layoutArea"><div class="column">
<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">(a) Draw a correctly labeled graph for Asepsis Corp. and show
</span></p>
<ol style="list-style-type: none;">
<li>
<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">(i) The profit - maximizing output, labeled as Q</span><span style="font-family: 'ArialMT'; font-size: 7.000000pt; vertical-align: -2.000000pt;">M
</span></p>
</li>
<li>
<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">(ii) The profit - maximizing price, Labeled as P</span><span style="font-family: 'ArialMT'; font-size: 7.000000pt; vertical-align: -2.000000pt;">M
</span></p>
</li>
<li>
<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">(iii) The area of loss shaded completely </span></p>
</li>
</ol>
</div>
</div>
</div>
</div></div></span></div><div style="text-align: center;"><span style="font-size: large;"><div class="separator" style="clear: both; font-weight: 700; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEi3ZoDSWQ8UkMqWu5JGwj0fMQRa8DAcPxx7w22_bkxGu8h4BywRRm8fZ1RFKL4ChkVloTWFk94ZIJcGs0tyf6ml1vUgcSf2n-QYuxTLO59yvzMdunJ4GziNCdoE03uDGVOfpnsb61zjWDoYdzI0QwA2DJwxiicVjGsHCqmlPxV-TFTlQ6Nyrp6XjI-JIg" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="126" data-original-width="156" height="185" src="https://blogger.googleusercontent.com/img/a/AVvXsEi3ZoDSWQ8UkMqWu5JGwj0fMQRa8DAcPxx7w22_bkxGu8h4BywRRm8fZ1RFKL4ChkVloTWFk94ZIJcGs0tyf6ml1vUgcSf2n-QYuxTLO59yvzMdunJ4GziNCdoE03uDGVOfpnsb61zjWDoYdzI0QwA2DJwxiicVjGsHCqmlPxV-TFTlQ6Nyrp6XjI-JIg=w229-h185" width="229" /></a></div><div style="text-align: left;"><span style="font-weight: 700;">Imperfectly Competitive = Monopoly</span></div><div style="text-align: left;"><span><b>Losses, so P < ATC</b></span></div></span></div></div>
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<p style="text-align: left;"><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">(b) Assume that Asepsis is operating in the short-run. Amend the diagram from part a)
AND write an explanation in the box below to demonstrate how the firm can remain open in the
short-run while still operating at a loss. </span></p>
</div>
</div>
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</div><div style="text-align: left;"><b>(b) The firm will continue to operate as long as the Price > than the AVC</b></div></div><b>As long as the price is greater than the AVC the firm will continue to operate in the short-run</b></div><div style="text-align: left;"><b><br /></b></div><div style="text-align: left;">
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<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">3. (a) Complete the following table for McLovin’s: </span></p>
</div>
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</div></div><div style="text-align: left;"><b><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEi6fppKC7SXxbxqR9zBjCDubNClBLcDZb9GyftcGCC4tuG0HODI-ghJHGhr5MR3jfp_1RDPyMNBRxyGsKVRVrg3UdN09TdciIDT3Ll8W-QNZOSEiubm4Zahm95emw8Y0lYKkhDS6TrOmMxSLAz9N9-Gg-nC_CH_0gMPz_R6uhlLnXbkIJugpPUKitsevQ" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="178" data-original-width="468" height="232" src="https://blogger.googleusercontent.com/img/a/AVvXsEi6fppKC7SXxbxqR9zBjCDubNClBLcDZb9GyftcGCC4tuG0HODI-ghJHGhr5MR3jfp_1RDPyMNBRxyGsKVRVrg3UdN09TdciIDT3Ll8W-QNZOSEiubm4Zahm95emw8Y0lYKkhDS6TrOmMxSLAz9N9-Gg-nC_CH_0gMPz_R6uhlLnXbkIJugpPUKitsevQ=w606-h232" width="606" /></a></div><br /></b></div><div style="text-align: left;"><b><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEg3dKe2R9eSY331VLkDwohUidt9EMiu7aQD8oH8krHSk29PwxhccWlAB9VsC-uqKqdtvax1LXXPEsdTaCk9dxKM1_cHg3SUvwyzxJ7-D1y7jY6VeN-fZi80OwNKZ0Bc-pccN8KypIqKPkhz3GdL7UGrkehrFY_jHElr6rRlc6RMCzr2UqE3IkVV73b37g" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="178" data-original-width="468" height="244" src="https://blogger.googleusercontent.com/img/a/AVvXsEg3dKe2R9eSY331VLkDwohUidt9EMiu7aQD8oH8krHSk29PwxhccWlAB9VsC-uqKqdtvax1LXXPEsdTaCk9dxKM1_cHg3SUvwyzxJ7-D1y7jY6VeN-fZi80OwNKZ0Bc-pccN8KypIqKPkhz3GdL7UGrkehrFY_jHElr6rRlc6RMCzr2UqE3IkVV73b37g=w640-h244" width="640" /></a></div><br /></b>
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<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">(b) Identify and explain the point at which McLovin’s begins to experience the law of
diminishing returns </span></p>
</div>
</div>
</div>
</div></div><div style="text-align: left;"><b>(b) Diminishing marginal returns occur when the MP start to decrease</b></div><div style="text-align: left;"><b><span> </span><span> DMR first occurs with the hiring of the 5th worker</span><br /></b></div><div style="text-align: left;"><b><br /></b></div><div style="text-align: left;">
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<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">4. The table below shows the total costs of production for STC Inc.
</span></p>
</div>
</div>
<table style="border-collapse: collapse;"><colgroup><col style="width: 49.899396%;"></col><col style="width: 50.100604%;"></col>
</colgroup><tbody><tr>
<td style="border-color: rgb(0, 0, 0); border-style: solid; border-width: 1pt;">
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<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">Output (Lbs)
</span></p>
</div>
</div>
</td>
<td style="border-color: rgb(0, 0, 0); border-style: solid; border-width: 1pt;">
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<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">Total Costs ($)
</span></p>
</div>
</div>
</td>
</tr>
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<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">0
</span></p>
</div>
</div>
</td>
<td style="border-color: rgb(0, 0, 0); border-style: solid; border-width: 1pt;">
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<div class="column">
<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">15,000
</span></p>
</div>
</div>
</td>
</tr>
<tr>
<td style="border-color: rgb(0, 0, 0); border-style: solid; border-width: 1pt;">
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<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">50
</span></p>
</div>
</div>
</td>
<td style="border-color: rgb(0, 0, 0); border-style: solid; border-width: 1pt;">
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<div class="column">
<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">25,000
</span></p>
</div>
</div>
</td>
</tr>
<tr>
<td style="border-color: rgb(0, 0, 0); border-style: solid; border-width: 1pt;">
<div class="layoutArea">
<div class="column">
<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">100
</span></p>
</div>
</div>
</td>
<td style="border-color: rgb(0, 0, 0); border-style: solid; border-width: 1pt;">
<div class="layoutArea">
<div class="column">
<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">33,000
</span></p>
</div>
</div>
</td>
</tr>
<tr>
<td style="border-color: rgb(0, 0, 0); border-style: solid; border-width: 1pt;">
<div class="layoutArea">
<div class="column">
<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">150
</span></p>
</div>
</div>
</td>
<td style="border-color: rgb(0, 0, 0); border-style: solid; border-width: 1pt;">
<div class="layoutArea">
<div class="column">
<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">39,000
</span></p>
</div>
</div>
</td>
</tr>
</tbody></table>
</div>
</div></div><div style="text-align: left;"><b><br /></b></div><div style="text-align: left;">
<div class="page" title="Page 8">
<div class="section" style="background-color: rgb(100.000000%, 100.000000%, 100.000000%);">
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<div class="column">
<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">(a) State the value of STCInc.’s fixed costs.
</span></p><p><span style="font-family: ArialMT;"><span style="font-size: 14.6667px;"><b>(a) If the output is zero and there is a (TC) total cost - then that has to be Fixed Costs</b></span></span></p><p><span style="font-family: ArialMT;"><span style="font-size: 14.6667px;"><b>When output is zero it implies that the Variable Costs is zero but Fixed Costs are 15k.</b></span></span></p>
<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">(b) Calculate the value of STC Inc.’s average variable cost if it produces 100 Lbs of output.
</span></p><p><span style="font-family: ArialMT;"><span style="font-size: 14.6667px;"><b>With an output of 100 lbs the TC is 33K - 15k (FC) = VC = 18k</b></span></span></p>
</div>
</div>
<div class="layoutArea">
<div class="column">
<p><span style="font-family: 'ArialMT'; font-size: 11.000000pt;">(c) With reference to the data in the table, explain why STC Inc. achieves increasing
returns to scale as it increases output from 50 Lbs to 150 Lbs. </span></p>
</div>
</div>
</div>
</div></div><div style="text-align: left;"><b><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEigK5kHfLltULCa_tBa0xUBrnPWTIyxumvKHe_ZSnT4WW5RM13jxgHQRvLFFtF05KQBLgzctJZvx2QYmHZgiTjy21tOsaFAGe6PLNl9OEojapu7xAbcNzE9duge6PiaJNvZik06c4_yZWasZM0c5NHuSox_4RtuB_BLU6BFC9TMUgMDkmfvRuQPaY3kaw" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="91" data-original-width="468" height="124" src="https://blogger.googleusercontent.com/img/a/AVvXsEigK5kHfLltULCa_tBa0xUBrnPWTIyxumvKHe_ZSnT4WW5RM13jxgHQRvLFFtF05KQBLgzctJZvx2QYmHZgiTjy21tOsaFAGe6PLNl9OEojapu7xAbcNzE9duge6PiaJNvZik06c4_yZWasZM0c5NHuSox_4RtuB_BLU6BFC9TMUgMDkmfvRuQPaY3kaw=w640-h124" width="640" /></a></div><br />Recognize that MC = (Change in TC / Change in quantity)</b></div><div style="text-align: left;"><b><br /></b></div><div style="text-align: left;"><b>Marginal Costs are falling which implies that Marginal Product must be increasing</b></div><div style="text-align: left;"><b>Therefore the firm has Increasing Returns to Scale</b></div><div style="text-align: left;"><b><br /></b></div><p></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-38236385866624480012022-09-17T11:08:00.008-07:002022-09-17T11:08:46.820-07:00ALL "Released"Price Floor & Price Ceiling Multiple Choice Questions<p style="text-align: center;"> <b>ALL </b><b>"Released"</b><b>Price Floor & Price Ceiling </b></p><p style="text-align: center;"><b>Multiple Choice Questions</b></p><p style="text-align: center;"><b><br /></b></p><p style="text-align: center;"></p><div class="separator" style="clear: both; text-align: center;"><iframe allowfullscreen="" class="BLOG_video_class" height="266" src="https://www.youtube.com/embed/fnlgjnlxZaM" width="320" youtube-src-id="fnlgjnlxZaM"></iframe></div><br /><b><br /></b><p></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-24729234216706461482022-09-17T11:06:00.003-07:002022-09-17T11:06:55.969-07:00ALL Released Multiple Choice Questions Indirect Tax<p style="text-align: center;"> <b>Released Multiple Choice Questions</b></p><p style="text-align: center;"><b>Indirect Tax</b></p><p style="text-align: center;"><b></b></p><div class="separator" style="clear: both; text-align: center;"><b><iframe allowfullscreen="" class="BLOG_video_class" height="266" src="https://www.youtube.com/embed/HlKLu8K94QQ" width="320" youtube-src-id="HlKLu8K94QQ"></iframe></b></div><b><br />https://www.youtube.com/watch?v=HlKLu8K94QQ</b><p></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-22836134307077193832022-02-19T15:52:00.006-08:002022-02-21T08:35:55.311-08:00FED - T Accounts Multiple Choice Review (Released AP exam questions)<blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px;"><p style="text-align: center;"><b><span style="font-size: large;">Federal Reserve - Central Bank</span></b><span style="text-align: left;"><span style="font-size: large;"><b> - Monetary Policy</b></span></span></p></blockquote></blockquote><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px;"><p style="text-align: center;"><b><span style="font-size: large;">Past</span></b> <b><span style="font-size: large;">AP Exam (Released) Questions </span></b></p></blockquote></blockquote><p style="text-align: center;"><b><span style="font-size: large;">Multiple Choice Review</span><span style="font-size: x-large;"> </span></b></p><p style="text-align: center;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEi_eyQARFk8IWqmh27A8jg7FDX0lSHr_ngekbMBNIMmPK56Xov9kFbYCIv7Rzv30B0zmSgLkyTikBzWKGq5m7Zx0iKI7WAgSZZeZ64dGQVFikgBC7fWS0F7-U1FFHkzb7V7LMt6ffJ-Oi1Mgm4Mgi81FWsUfP4Y379UyliXTgQ44wxyqOaZXEKB6d8xvg" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="619" data-original-width="586" src="https://blogger.googleusercontent.com/img/a/AVvXsEi_eyQARFk8IWqmh27A8jg7FDX0lSHr_ngekbMBNIMmPK56Xov9kFbYCIv7Rzv30B0zmSgLkyTikBzWKGq5m7Zx0iKI7WAgSZZeZ64dGQVFikgBC7fWS0F7-U1FFHkzb7V7LMt6ffJ-Oi1Mgm4Mgi81FWsUfP4Y379UyliXTgQ44wxyqOaZXEKB6d8xvg=s16000" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgbZois_NsWKoDjJlWzsAWTotxgeF94SjAH1A-9ezcH-4FUVHNKEZsZwHTAN2Gsu7GhUCfGpLcTDJ70Fj1JHLP9h_c4GZ2U4WmYt22SctSy7f3u7pY_NDxQZi5oBZFro591Xl5Gc7mLWhaE9ZrUyOczg8rCpjhvC_xI6JRKmzz3tV2PTeMeezEJIBK0lA" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="220" data-original-width="544" src="https://blogger.googleusercontent.com/img/a/AVvXsEgbZois_NsWKoDjJlWzsAWTotxgeF94SjAH1A-9ezcH-4FUVHNKEZsZwHTAN2Gsu7GhUCfGpLcTDJ70Fj1JHLP9h_c4GZ2U4WmYt22SctSy7f3u7pY_NDxQZi5oBZFro591Xl5Gc7mLWhaE9ZrUyOczg8rCpjhvC_xI6JRKmzz3tV2PTeMeezEJIBK0lA=s16000" /></a></div><div class="separator" style="clear: both; text-align: center;"><b>(A) Keep part of their demand deposits as reserves</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEj5LgzbM5nA8JlSQ6cHFEQOOv7Uyfw72pVFp2zxYIfVSIFFvy2y2VmcXkODEOsQmnieP_CZVeVjlQpqw2ApQs_Hm1kQm12L4cMXxSMDqX07jqB-SszrTlJ6h87wYrKxCc5y7um2OqEFd3vk4y3fnqi-PQAzqrSIFuTAFQH8Qro03iugHBjkd3unFwkDPg" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="197" data-original-width="501" src="https://blogger.googleusercontent.com/img/a/AVvXsEj5LgzbM5nA8JlSQ6cHFEQOOv7Uyfw72pVFp2zxYIfVSIFFvy2y2VmcXkODEOsQmnieP_CZVeVjlQpqw2ApQs_Hm1kQm12L4cMXxSMDqX07jqB-SszrTlJ6h87wYrKxCc5y7um2OqEFd3vk4y3fnqi-PQAzqrSIFuTAFQH8Qro03iugHBjkd3unFwkDPg=s16000" /></a></div><div class="separator" style="clear: both; text-align: center;">(E) The Discount Rate - The rate of Interest that the FED charges banks </div><div class="separator" style="clear: both; text-align: center;">when they borrow from the FED</div><div class="separator" style="clear: both; text-align: center;">(FED2Bank Loans)</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjE20jPimFQdmXqa-SDzuWtb-enqd8v6-gErnVmnMs2al-GSfFbZeftvRY1AVPv_VFcqfFwj4UrGXKAsWDfFXhp5WgsVVQyI5xSThx9pPifPAaidgSjmcVFLwsUnwfWpV-2HHDo4RrQ2xisXMHxFNWACepGTOp5HQ9MNdl5UUARvjN3BQXusaOdvZ1D6A" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="256" data-original-width="537" src="https://blogger.googleusercontent.com/img/a/AVvXsEjE20jPimFQdmXqa-SDzuWtb-enqd8v6-gErnVmnMs2al-GSfFbZeftvRY1AVPv_VFcqfFwj4UrGXKAsWDfFXhp5WgsVVQyI5xSThx9pPifPAaidgSjmcVFLwsUnwfWpV-2HHDo4RrQ2xisXMHxFNWACepGTOp5HQ9MNdl5UUARvjN3BQXusaOdvZ1D6A=s16000" /></a></div><div class="separator" style="clear: both; text-align: center;">(D) Business purchase more factories & equip</div><div class="separator" style="clear: both; text-align: center;">RRR decreases-MS increases-Nominal Interest rate decreases-Investment increase</div><div class="separator" style="clear: both; text-align: center;">Investment = More loans taken out to create capital goods - factories, equipment, tools etc</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEiUttKMIbY1dEGodS-_PY8NErhV4DvW3Lj526OB5rhOMcrGjHy_09TvZCkRpmElnhgSq9h2LV12WAXk1gts8QtuKA5RqDFriB2lffjA4kbBCFjhPXbfkmxnYRs09lpPRGTn7bJGd-J_Pe_gVTl_bz5cg3VuXIlntK88glwk3v_Z9EiZc7nMxdlPZ9SeBw" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="260" data-original-width="520" src="https://blogger.googleusercontent.com/img/a/AVvXsEiUttKMIbY1dEGodS-_PY8NErhV4DvW3Lj526OB5rhOMcrGjHy_09TvZCkRpmElnhgSq9h2LV12WAXk1gts8QtuKA5RqDFriB2lffjA4kbBCFjhPXbfkmxnYRs09lpPRGTn7bJGd-J_Pe_gVTl_bz5cg3VuXIlntK88glwk3v_Z9EiZc7nMxdlPZ9SeBw=s16000" /></a></div><div class="separator" style="clear: both; text-align: center;">(E) Banks less able to extend credit</div><div class="separator" style="clear: both; text-align: center;">If people's DM increases then they want more money in their poskets and less money in the banks - If the banks have less money they have less ability to extend loans</div><div class="separator" style="clear: both; text-align: center;">also if there is less money in the banks the NIR will increase and less people will</div><div class="separator" style="clear: both; text-align: center;">take out loans for investment purposes.</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgCHIppZza-tEQaxT97L66otv8JmyAu0szmzphR0JXT9-_FZPGWAYeaO12FgSUaOd1Z5K6cO-cTO2nGOGjkQklbm5lT1jb6Di_nHa1aGB_GGimd_u8rF8-iA5WaGvzgOZNiMo9RHPGT9lxOapXZcjFsrIhkNOqje3ljpwJvR-gxk5q_PPeCmHCck_DEGQ" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="268" data-original-width="611" src="https://blogger.googleusercontent.com/img/a/AVvXsEgCHIppZza-tEQaxT97L66otv8JmyAu0szmzphR0JXT9-_FZPGWAYeaO12FgSUaOd1Z5K6cO-cTO2nGOGjkQklbm5lT1jb6Di_nHa1aGB_GGimd_u8rF8-iA5WaGvzgOZNiMo9RHPGT9lxOapXZcjFsrIhkNOqje3ljpwJvR-gxk5q_PPeCmHCck_DEGQ=s16000" /></a></div><div class="separator" style="clear: both; text-align: center;">(Below full employment level of output) = Recession</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">(D) open market purchases of bonds</div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEi01_BPC6zAcr5zeOgRX8jHqFOwR1KQEbhvsvrQXckGhP4ewS9c3QKEkw0h8zA-AjxzQbYqOsc_6QZY-eptzS8EDIdznbDizsXlRww8BUVDJfdVXeQtxPqqANFxfvGXdbvv6Juqdrw2_YlH3ZwfuV-k1d_YDm3ZZif_IXNQ8GWLRZmQPznmDPkjJ46mKA" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="23" data-original-width="512" src="https://blogger.googleusercontent.com/img/a/AVvXsEi01_BPC6zAcr5zeOgRX8jHqFOwR1KQEbhvsvrQXckGhP4ewS9c3QKEkw0h8zA-AjxzQbYqOsc_6QZY-eptzS8EDIdznbDizsXlRww8BUVDJfdVXeQtxPqqANFxfvGXdbvv6Juqdrw2_YlH3ZwfuV-k1d_YDm3ZZif_IXNQ8GWLRZmQPznmDPkjJ46mKA=s16000" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjUlZzlmjd8xbUhBujuIk6rATH7aJy7rSjx-ZHGX-myjmjLDLLnv_-jer6oww2k-2EjbpWPd4SaeElasZPtmsEBwPaqTNn6C49AT0abSDtojXV4-gkw49al0a75Vr2bIgV05m6_rGqYMzOFdcUkjCCPTlIs_yUpbWdpWTY9-ehsTpgCsN0W9Hhj9atuGw" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="283" data-original-width="502" src="https://blogger.googleusercontent.com/img/a/AVvXsEjUlZzlmjd8xbUhBujuIk6rATH7aJy7rSjx-ZHGX-myjmjLDLLnv_-jer6oww2k-2EjbpWPd4SaeElasZPtmsEBwPaqTNn6C49AT0abSDtojXV4-gkw49al0a75Vr2bIgV05m6_rGqYMzOFdcUkjCCPTlIs_yUpbWdpWTY9-ehsTpgCsN0W9Hhj9atuGw=s16000" /></a></div><div class="separator" style="clear: both; text-align: center;">(D) MS increases and market (nominal) Interest Rate decreases)</div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgECivti90C3Hjp0s8-XRefLXbJklG-AAXBKkKcGB06LQEKRnL8SsLENlgzhTiwDW0SX1xRpDRYX7g_gouubBL0GyiEFPzk9Wf0PlNw1E8wr3hORodpWD33_adpK0CvdzBJf35NZQoSKfisWr2NLRGr6VP845lgFnE01cA7yyhi-kceahTBaMIsNuAXMQ" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="39" data-original-width="590" src="https://blogger.googleusercontent.com/img/a/AVvXsEgECivti90C3Hjp0s8-XRefLXbJklG-AAXBKkKcGB06LQEKRnL8SsLENlgzhTiwDW0SX1xRpDRYX7g_gouubBL0GyiEFPzk9Wf0PlNw1E8wr3hORodpWD33_adpK0CvdzBJf35NZQoSKfisWr2NLRGr6VP845lgFnE01cA7yyhi-kceahTBaMIsNuAXMQ=s16000" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjg84ZwLJ4SxwHcefavdgcjsrnqBzG9z93JIou4FceMHi88skj9USUllqJUhXfbry6WE7BWhHMn1BYDM9tkrQRZMoeLhjlVC0hQM3BnKMogHWsBG3eb3GeE105rIa7mUd4j16pLxe9izedRO2oorPh7lGLVALqiepv9OwQE9iLO40KIIqZTYWnY8deGyw" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="227" data-original-width="599" src="https://blogger.googleusercontent.com/img/a/AVvXsEjg84ZwLJ4SxwHcefavdgcjsrnqBzG9z93JIou4FceMHi88skj9USUllqJUhXfbry6WE7BWhHMn1BYDM9tkrQRZMoeLhjlVC0hQM3BnKMogHWsBG3eb3GeE105rIa7mUd4j16pLxe9izedRO2oorPh7lGLVALqiepv9OwQE9iLO40KIIqZTYWnY8deGyw=s16000" /></a></div><div class="separator" style="clear: both; text-align: center;">(B) bank charge one another for short-term loans</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">FED Funds Rate = (Bank2Bank Loans)</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjLIeATEh6-2D1mJt_TTPtIqYg7en_HcJBTYeEbaa2KjCvpvL24_n2UVWuuO3GYAqxjPDuZxsHYMg0c3IZ9TZWbSU0O-1NE4CPWaYMWZBb8Pnty2mCHuKG3mBo6wDKwK3E_ApcXRd_eRNCY_Epx8w34jATLXnmJum4pTehgVBWy54zLo7HQQLJs8kiVVA" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="191" data-original-width="597" src="https://blogger.googleusercontent.com/img/a/AVvXsEjLIeATEh6-2D1mJt_TTPtIqYg7en_HcJBTYeEbaa2KjCvpvL24_n2UVWuuO3GYAqxjPDuZxsHYMg0c3IZ9TZWbSU0O-1NE4CPWaYMWZBb8Pnty2mCHuKG3mBo6wDKwK3E_ApcXRd_eRNCY_Epx8w34jATLXnmJum4pTehgVBWy54zLo7HQQLJs8kiVVA=s16000" /></a></div><div class="separator" style="clear: both; text-align: center;">(E) Fed buys gov't bonds</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">As the Fed Buys Bonds the MS increases and the Nominal Interest rate decreases</div><div class="separator" style="clear: both; text-align: center;">Lower nominal rates = lower rates that banks can charge one another</div><div class="separator" style="clear: both; text-align: center;">therefore lower Federal Funds rates</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgjbpiceY18uq94xT-EktKhd-c2FET7qkXlDlFI-DeHVUeV7t8De02Er6te7CY6qLNlOOECfZp7aKJ5CRndbTlAjwjflejR1uDWSYzBV3Th-gRhiYQmwx7L-mnzsQ8j_as5Xtb3vh2SG9P3ojbfouKR1U_6MVyGDU5rkdFDjqj-PX_YbC0qO9aa0oW4TA" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="211" data-original-width="598" src="https://blogger.googleusercontent.com/img/a/AVvXsEgjbpiceY18uq94xT-EktKhd-c2FET7qkXlDlFI-DeHVUeV7t8De02Er6te7CY6qLNlOOECfZp7aKJ5CRndbTlAjwjflejR1uDWSYzBV3Th-gRhiYQmwx7L-mnzsQ8j_as5Xtb3vh2SG9P3ojbfouKR1U_6MVyGDU5rkdFDjqj-PX_YbC0qO9aa0oW4TA=s16000" /></a></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgZG3lxE-cMbXv4XlWfqnF1flUbLHswK29HpSWOvZXxvLbgYctnyk5hp2LJxSornTjPUNQY4aokmVBO60PfiD09NxBAsXJZjvSDC0FUTge2Emtgg00Ak4cf82QvWWPg-XDxt_4fcMnNUkoPaZ8d8TrclRzjGUotpICpRUxJ1_GBgZ-IFjDv0IUW7UbOXg" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="220" data-original-width="571" height="154" src="https://blogger.googleusercontent.com/img/a/AVvXsEgZG3lxE-cMbXv4XlWfqnF1flUbLHswK29HpSWOvZXxvLbgYctnyk5hp2LJxSornTjPUNQY4aokmVBO60PfiD09NxBAsXJZjvSDC0FUTge2Emtgg00Ak4cf82QvWWPg-XDxt_4fcMnNUkoPaZ8d8TrclRzjGUotpICpRUxJ1_GBgZ-IFjDv0IUW7UbOXg=w400-h154" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">If you only have the categories of </div><div class="separator" style="clear: both; text-align: center;">Required Reserves & Excess Reserves </div><div class="separator" style="clear: both; text-align: center;">Then Req. Res. & Exc. Res. must = Checkable Deposits</div><div class="separator" style="clear: both; text-align: center;">$45 must be in Required Reserves & $45 is 15% of $300</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgiLe7ZcJqi7gyQCR590eQVf7NNDU8L42tp_bTb7qW6sNNz2GIADyAQbS-06F0Ser1Gsvtl6huLE_eBiozMhLMcT_2NCmPcJDakESWicbjyznryljw49QJmikxnxN2w3FhZIo6TSKO-nj-ZFR1V522jfw2k8aWNT_7SeHfdu6jGnk_KJsi6UKgc-wXz_g" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="243" data-original-width="573" src="https://blogger.googleusercontent.com/img/a/AVvXsEgiLe7ZcJqi7gyQCR590eQVf7NNDU8L42tp_bTb7qW6sNNz2GIADyAQbS-06F0Ser1Gsvtl6huLE_eBiozMhLMcT_2NCmPcJDakESWicbjyznryljw49QJmikxnxN2w3FhZIo6TSKO-nj-ZFR1V522jfw2k8aWNT_7SeHfdu6jGnk_KJsi6UKgc-wXz_g=s16000" /></a></div><div class="separator" style="clear: both; text-align: center;">(B) Increase by $200 - Increase by $30</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEj3znP3xk0-WETelTOhczdAd--OlB-X5Mqui9JuH1GA0vc_UZui5zaHNqjXbXE6N0m4LNNzOF9PWkxnm38E7qdkGfsdcRpDthJrelqtpYLEWpsGx2op1SsJqF9R5dySicVXGDTzi6OfP5q68N8ppugx-BZnd4GqnxnRWlo6LN9QG-Po9HQs7O731dcqKg" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="293" data-original-width="746" height="157" src="https://blogger.googleusercontent.com/img/a/AVvXsEj3znP3xk0-WETelTOhczdAd--OlB-X5Mqui9JuH1GA0vc_UZui5zaHNqjXbXE6N0m4LNNzOF9PWkxnm38E7qdkGfsdcRpDthJrelqtpYLEWpsGx2op1SsJqF9R5dySicVXGDTzi6OfP5q68N8ppugx-BZnd4GqnxnRWlo6LN9QG-Po9HQs7O731dcqKg=w400-h157" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">$200 is deposited in Checkable deposits</div><div class="separator" style="clear: both; text-align: center;">the RR is 15%</div><div class="separator" style="clear: both; text-align: center;">15% of the $200 goes into the Req. Res. = $30</div><div class="separator" style="clear: both; text-align: center;">the rest ($170) flows into Exc Res.</div><br /><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEimEBxrIVYwrTN7INIZvhk-VsYtIYOakfUCgqWW3ONIp00cgcQGy-PwH8PtyfuwfL3juqpEuNFpaf9cItu61oDuYM4f1DDZrqH056GCs7TlUDpIMqsA7SAHQ3NEqk3_Rfiq38qwkh_HXArwEB4eXs05MIjYTBdbAlbuP2o2N8s_VRkGWs8NWeCgpMNwRQ" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="211" data-original-width="526" src="https://blogger.googleusercontent.com/img/a/AVvXsEimEBxrIVYwrTN7INIZvhk-VsYtIYOakfUCgqWW3ONIp00cgcQGy-PwH8PtyfuwfL3juqpEuNFpaf9cItu61oDuYM4f1DDZrqH056GCs7TlUDpIMqsA7SAHQ3NEqk3_Rfiq38qwkh_HXArwEB4eXs05MIjYTBdbAlbuP2o2N8s_VRkGWs8NWeCgpMNwRQ=s16000" /></a></div><div class="separator" style="clear: both; text-align: center;">(B) $80</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEhRw-mF4X82oA9L2Bdh1neNKNpQx92UgfZzZq6_IoxXLrUtmg_-YE1MUbrDw-aw2mOzVeHgbLZk2fRlucXbgYaf_Z8rmLb1uQAJR0Bf9wu6eTZO6-R345TqOM87v47unQGTA96lNPqmni3lgF234_lyWrL82axeeZDvZlLD8jCv8uj3uMhaZwPWTuqnvQ" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="271" data-original-width="759" height="143" src="https://blogger.googleusercontent.com/img/a/AVvXsEhRw-mF4X82oA9L2Bdh1neNKNpQx92UgfZzZq6_IoxXLrUtmg_-YE1MUbrDw-aw2mOzVeHgbLZk2fRlucXbgYaf_Z8rmLb1uQAJR0Bf9wu6eTZO6-R345TqOM87v47unQGTA96lNPqmni3lgF234_lyWrL82axeeZDvZlLD8jCv8uj3uMhaZwPWTuqnvQ=w400-h143" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">$100 is deposited into the Banks Checkable deposits/ demand deposits</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">The RRR is 20%</div><div class="separator" style="clear: both; text-align: center;">Therefore 20% of checkable deposits goes to the Req. res. = $20</div><div class="separator" style="clear: both; text-align: center;">the rest $80 flows into excess reserves.</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgNaxX-7wSF7kGUEjoLmYe7sSj32rgcObqv0eH0WKg7YO5QUy886AoS_I6hWtzGSIIbDLHYmD1P-O6WekA4hcKVDQV3y8WSJmKgQwNftEs8i13SlZLH-NS6FFQL9wSif7d4QRl8wY_tqRwgqzxskYyAOBcbgzOmGjEcYwq4pwDaEVXwyF2cdMV38nEzCQ" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="236" data-original-width="553" src="https://blogger.googleusercontent.com/img/a/AVvXsEgNaxX-7wSF7kGUEjoLmYe7sSj32rgcObqv0eH0WKg7YO5QUy886AoS_I6hWtzGSIIbDLHYmD1P-O6WekA4hcKVDQV3y8WSJmKgQwNftEs8i13SlZLH-NS6FFQL9wSif7d4QRl8wY_tqRwgqzxskYyAOBcbgzOmGjEcYwq4pwDaEVXwyF2cdMV38nEzCQ=s16000" /></a></div><div class="separator" style="clear: both; text-align: center;">What is in Excess Reserves can be loaned out</div><div class="separator" style="clear: both; text-align: center;">(B) $8,000</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEhjevxj_kxbgxoT6tFTA18FcP-NW98KnnNF8DVXdrt-6rP6_mpjibaT1I0z_t0cEdaUj9aTeJDu5BsImsXUmKplfMzY9vZxVZQzNJkxpuZ5jrZ9e1XdMMxKRtm95V3qk0_q006nWBA2S_MMeSPH6abxsbsM8pVDpEV-TkwHcB_x9A0xXmR1JyX4q_KTBg" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="262" data-original-width="756" height="139" src="https://blogger.googleusercontent.com/img/a/AVvXsEhjevxj_kxbgxoT6tFTA18FcP-NW98KnnNF8DVXdrt-6rP6_mpjibaT1I0z_t0cEdaUj9aTeJDu5BsImsXUmKplfMzY9vZxVZQzNJkxpuZ5jrZ9e1XdMMxKRtm95V3qk0_q006nWBA2S_MMeSPH6abxsbsM8pVDpEV-TkwHcB_x9A0xXmR1JyX4q_KTBg=w400-h139" width="400" /><div class="separator" style="clear: both; text-align: center;"><br /></div><br /></a></div><div class="separator" style="clear: both; text-align: center;"><span style="color: #0000ee;"><u><br /></u></span></div><div class="separator" style="clear: both; text-align: center;"><span style="color: #0000ee;"><u><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEhepSGy9jHy0wSq3TWoI2fb9M7YH2-z3XrAYWXivc-2YbY3-KSeKYfxrBSwdfPa8fpW7JgOM2bNnklnsSPWh_sq7LitgRaMxvIxhUBVl6DsuXP90nCVOPBEfBHs5ykzW7jx2EB7nODT1D4GhvquuCOHX2EFvJvejEKiRCMTMfxxATNfltRwQ1uWoytjbA" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="297" data-original-width="573" src="https://blogger.googleusercontent.com/img/a/AVvXsEhepSGy9jHy0wSq3TWoI2fb9M7YH2-z3XrAYWXivc-2YbY3-KSeKYfxrBSwdfPa8fpW7JgOM2bNnklnsSPWh_sq7LitgRaMxvIxhUBVl6DsuXP90nCVOPBEfBHs5ykzW7jx2EB7nODT1D4GhvquuCOHX2EFvJvejEKiRCMTMfxxATNfltRwQ1uWoytjbA=s16000" /></a></div></u></span></div></div></div></div></div></div></div></div></div></div></div></div></div></div></b></div></div><p></p><div class="separator" style="clear: both; font-weight: 700; text-align: center;">What is in Excess Reserves can be loaned out</div><div class="separator" style="clear: both; font-weight: 700; text-align: center;">(C) $3,000</div><div class="separator" style="clear: both; font-weight: 700; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: 700; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEin19jzgQEHXxCvgiVnGV6sWiaYhkaUIqoJFwv2_V6-CDV16AurR-4-8nA_KXLnPXH3LziXzE_epJay3pMPK41Vykp4DCWsZyk-nlduSonvyYFlTyi42UPzhCULjuv1c3sHE8z9J9iMuJDj134XLHYrIzpLou4ZssTMxodf2qPo_L85tBaQB2SOTPOsUA" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="418" data-original-width="782" height="214" src="https://blogger.googleusercontent.com/img/a/AVvXsEin19jzgQEHXxCvgiVnGV6sWiaYhkaUIqoJFwv2_V6-CDV16AurR-4-8nA_KXLnPXH3LziXzE_epJay3pMPK41Vykp4DCWsZyk-nlduSonvyYFlTyi42UPzhCULjuv1c3sHE8z9J9iMuJDj134XLHYrIzpLou4ZssTMxodf2qPo_L85tBaQB2SOTPOsUA=w400-h214" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">Anytime the College Board gives you (Total Reserves or Reserves)</div><div class="separator" style="clear: both; text-align: center;">you must figure out the required and the excess</div><div class="separator" style="clear: both; text-align: center;">they are trying to trick you - the jerks!</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEh8wTNLgdXsk_q5zfWFtCZB2y1J26mmbCD0NBUIOFixsXplPvkNuQ7poxP3S5YcxWbHqbW9aNSaOmJZaCJwY3erjehXaMfz3RC5H-idEveTgBKO7GphnM-nptFpCsZpch-VK_y494OKNBTXwqD_xHk1pCbak4QY32e20VX-_x0MnRvysALg8dqbqeYmrg" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="192" data-original-width="509" height="151" src="https://blogger.googleusercontent.com/img/a/AVvXsEh8wTNLgdXsk_q5zfWFtCZB2y1J26mmbCD0NBUIOFixsXplPvkNuQ7poxP3S5YcxWbHqbW9aNSaOmJZaCJwY3erjehXaMfz3RC5H-idEveTgBKO7GphnM-nptFpCsZpch-VK_y494OKNBTXwqD_xHk1pCbak4QY32e20VX-_x0MnRvysALg8dqbqeYmrg=w400-h151" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;">(D) $9,000</div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEiVmzCn4f61CFuIdtOk-55dnqKaZSXNgfyGUiWwSBS_65d-552tDpKEtSKvWS_PQpxSNolTKWPpt_3HaS_FW5OauMq7Dl7g9oIZH-wIzGXd3OE1s6XAn8OmUv9NLubIV2bxJ1iYxAwReYq_4BezS9LQzNsfUAA_yHhj-E85ZEKg2n_4M8jmGuYB7lU7ug" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="258" data-original-width="555" height="186" src="https://blogger.googleusercontent.com/img/a/AVvXsEiVmzCn4f61CFuIdtOk-55dnqKaZSXNgfyGUiWwSBS_65d-552tDpKEtSKvWS_PQpxSNolTKWPpt_3HaS_FW5OauMq7Dl7g9oIZH-wIzGXd3OE1s6XAn8OmUv9NLubIV2bxJ1iYxAwReYq_4BezS9LQzNsfUAA_yHhj-E85ZEKg2n_4M8jmGuYB7lU7ug=w400-h186" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgoRE-VzpFZRLjaSvUJ8978qgZdTb1NlOWLKFN43XilQiKlml-6aMPSjtFgChFPtl0ZugYRaSxUV-Tik9IXe4iCs1AryFcu02ngKUAH1I0vD_6HT4z4MJzRtIbc4AoWNyNpg9gkNEacZYburytlCov8DABVNTorRptiFz3ptYEOfRDgGVluKQU2RMexmQ" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="244" data-original-width="515" height="190" src="https://blogger.googleusercontent.com/img/a/AVvXsEgoRE-VzpFZRLjaSvUJ8978qgZdTb1NlOWLKFN43XilQiKlml-6aMPSjtFgChFPtl0ZugYRaSxUV-Tik9IXe4iCs1AryFcu02ngKUAH1I0vD_6HT4z4MJzRtIbc4AoWNyNpg9gkNEacZYburytlCov8DABVNTorRptiFz3ptYEOfRDgGVluKQU2RMexmQ=w400-h190" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;">(D) $500</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">RRR = 20%</div><div class="separator" style="clear: both; text-align: center;">Money Multiplier = 1/RRR = 5</div><div class="separator" style="clear: both; text-align: center;">Banks Loan out money from Excess Reserves increases the Money Supply</div><div class="separator" style="clear: both; text-align: center;">$100 in excess reserves x 5 = $500 increase in the Money Supply</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgs-tvGXSmvPOMFGppHdHEebaby-aVz_mP3RzkEJ718nW8ZW04mTzEyJ9YDl1j5yeYTgfhF_2MNoc8BSKyjv2LeOwpodmE0xynpyZxQ0BBpzt3bV_sqKGsf7znxunoNW_qVOcSmiXIXoWzKP5kysxUKW9i3Oq5cJjRfYNcl5EGdFZE-x93CMRsaRhxIxA" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="274" data-original-width="522" height="210" src="https://blogger.googleusercontent.com/img/a/AVvXsEgs-tvGXSmvPOMFGppHdHEebaby-aVz_mP3RzkEJ718nW8ZW04mTzEyJ9YDl1j5yeYTgfhF_2MNoc8BSKyjv2LeOwpodmE0xynpyZxQ0BBpzt3bV_sqKGsf7znxunoNW_qVOcSmiXIXoWzKP5kysxUKW9i3Oq5cJjRfYNcl5EGdFZE-x93CMRsaRhxIxA=w400-h210" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;">(B) $900</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">$100 in Check Dep.</div><div class="separator" style="clear: both; text-align: center;">RRR = 10% therefore $10 in Req Res.</div><div class="separator" style="clear: both; text-align: center;">$90 flows into Excess Res.</div><div class="separator" style="clear: both; text-align: center;">Banks loan out all of their Exc Res.</div><div class="separator" style="clear: both; text-align: center;">Money Multiplier = 1/RRR = 1/.1 = 10</div><div class="separator" style="clear: both; text-align: center;">$90 x 10 = MS increases by $900</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEilW6xvikpo-cvF3nFXtW4W4CHxJZlDNSOtl-wyAcG8YjrOOen6Yhoa2000gaI-MyTyB1cwijvSAfVfyMgEkyUqi99Ze_X-zp6sqjsFY8wf5wzx6TRnYG6FkCtdKPTT16hQiMHLZxQuWV6pMoLkV_wMC-RRYbSQfLWZtWnWBPdhrcaYUy4jc139w3O5VQ" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="236" data-original-width="512" height="185" src="https://blogger.googleusercontent.com/img/a/AVvXsEilW6xvikpo-cvF3nFXtW4W4CHxJZlDNSOtl-wyAcG8YjrOOen6Yhoa2000gaI-MyTyB1cwijvSAfVfyMgEkyUqi99Ze_X-zp6sqjsFY8wf5wzx6TRnYG6FkCtdKPTT16hQiMHLZxQuWV6pMoLkV_wMC-RRYbSQfLWZtWnWBPdhrcaYUy4jc139w3O5VQ=w400-h185" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;">(B) less than $5 million</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">** Notice in the question (A $1 million increase in <u>Reserves</u>)</div><div class="separator" style="clear: both; text-align: center;">If the full $1million was in excess reserves</div><div class="separator" style="clear: both; text-align: center;">and it all was loaned out.</div><div class="separator" style="clear: both; text-align: center;">The Money Multiplier = 1/RRR = 1/.2 = 5</div><div class="separator" style="clear: both; text-align: center;">$1million x 5 = 5 million increase in money supply</div><div class="separator" style="clear: both; text-align: center;">but</div><div class="separator" style="clear: both; text-align: center;">The problem said: banks voluntarily keep some excess reserves.</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">If banks loan out less than the $1 million in exc. res. then the money supply can't increase by the full $5 million</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEiQjGmr9XPJXKP5Xhglc4H5ni2kCzVC557NVvZmWFZY18nqjo8NtN5p5DutxyilM61_n6wNClHuVbLb1T_apAYaFYaIQcWJufXIS8dFVaWsWcDpztGkKwfo6FD14u_iuaSFEqdduhC-rxmwOclovXuxMIcvaOJKWKudALdwQU9VOi3Vu3b_aS6U5K-fZg" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="237" data-original-width="519" height="183" src="https://blogger.googleusercontent.com/img/a/AVvXsEiQjGmr9XPJXKP5Xhglc4H5ni2kCzVC557NVvZmWFZY18nqjo8NtN5p5DutxyilM61_n6wNClHuVbLb1T_apAYaFYaIQcWJufXIS8dFVaWsWcDpztGkKwfo6FD14u_iuaSFEqdduhC-rxmwOclovXuxMIcvaOJKWKudALdwQU9VOi3Vu3b_aS6U5K-fZg=w400-h183" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;">(C) $2,000 billion</div><div class="separator" style="clear: both; text-align: center;">** Tricky tricky question</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">Recognize that when the FED buys bonds the MS increases by $400b immediately</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">Then when citizens deposit that $400b in the banks the money supply</div><div class="separator" style="clear: both; text-align: center;">increases again when banks loan out money</div><div class="separator" style="clear: both; text-align: center;">Exc Res. = $320 x 5 = $1,600 increase in the MS</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">Therefore $1,600 Bank increased MS</div><div class="separator" style="clear: both; text-align: center;"> + $400 FED increased MS</div><div class="separator" style="clear: both; text-align: center;">= $2,000 total increase in MS</div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjsLwdssiGKZqWjkzsPUzVnoZEPc84YMfURqVDNmH8O90BdZzFwoEaW99Da4pqs3rb2xxnz5mVhgV_dzjMYYvR3SfVfPsz23eN1aW2h-OtMEwEFiGaCXYqkExsg34q-ty3O3EYE6gvNhLSim4ZFquDqJ6AbllpR6vAVrphdGVDftfsR1ManCPuvJ1ZhPw" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="339" data-original-width="614" height="221" src="https://blogger.googleusercontent.com/img/a/AVvXsEjsLwdssiGKZqWjkzsPUzVnoZEPc84YMfURqVDNmH8O90BdZzFwoEaW99Da4pqs3rb2xxnz5mVhgV_dzjMYYvR3SfVfPsz23eN1aW2h-OtMEwEFiGaCXYqkExsg34q-ty3O3EYE6gvNhLSim4ZFquDqJ6AbllpR6vAVrphdGVDftfsR1ManCPuvJ1ZhPw=w400-h221" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgLt96YRg1R7ptr6wXa09qf2tE0iy4HxTSQry0KVgpGVERB6-QJZBCM9hsMTW2r1w7GHF16Xt9o71u3Ej3paTSbi67R3qLBR1opIwuG_YcEImkLfAhP8IGZMcqc9jaUOoSGIsmPkv0DNIoZIizX0_7OVGovyk4YHk258bjuNhZUhVDXUW0dCpEXf0oDIQ" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="302" data-original-width="561" height="215" src="https://blogger.googleusercontent.com/img/a/AVvXsEgLt96YRg1R7ptr6wXa09qf2tE0iy4HxTSQry0KVgpGVERB6-QJZBCM9hsMTW2r1w7GHF16Xt9o71u3Ej3paTSbi67R3qLBR1opIwuG_YcEImkLfAhP8IGZMcqc9jaUOoSGIsmPkv0DNIoZIizX0_7OVGovyk4YHk258bjuNhZUhVDXUW0dCpEXf0oDIQ=w400-h215" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;">(C) $900</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgVjYxVhFdHyBaEjIffaae7JzYyhJt8MyXSTQrd2QZ9nhG_P9MgetHfcvbMc48DfcWDTzK3mvWd626y3aiKI1BMPweTqZA9gkmFNr8G0UNtFgbR7XhXqu1lR0MV4m2WJRBTYD6qy7bFqhBrR4iFWbBQxG6UuOPgJ1ryI1EWB6NVnXUOGNBFVbthVc2fDQ" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="269" data-original-width="570" height="151" src="https://blogger.googleusercontent.com/img/a/AVvXsEgVjYxVhFdHyBaEjIffaae7JzYyhJt8MyXSTQrd2QZ9nhG_P9MgetHfcvbMc48DfcWDTzK3mvWd626y3aiKI1BMPweTqZA9gkmFNr8G0UNtFgbR7XhXqu1lR0MV4m2WJRBTYD6qy7bFqhBrR4iFWbBQxG6UuOPgJ1ryI1EWB6NVnXUOGNBFVbthVc2fDQ" width="320" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEiSMforbsCVWrMOD3xu0n1ukyPtRdQQRK6SLPw84KKq7qZFtrrMhuLmpQ4fhmMnc81-OjRXexBuds3KefGK0aPnv8TRV_i7s_mRnEweeYnfch42_ke7uvUIBzHXTxsUuPrSzniXk-efJ4EKSsr9Bii0pZZK8nKBNleBvYXZHw9M39JNpFtDA-YaetSzfQ" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="246" data-original-width="513" height="191" src="https://blogger.googleusercontent.com/img/a/AVvXsEiSMforbsCVWrMOD3xu0n1ukyPtRdQQRK6SLPw84KKq7qZFtrrMhuLmpQ4fhmMnc81-OjRXexBuds3KefGK0aPnv8TRV_i7s_mRnEweeYnfch42_ke7uvUIBzHXTxsUuPrSzniXk-efJ4EKSsr9Bii0pZZK8nKBNleBvYXZHw9M39JNpFtDA-YaetSzfQ=w400-h191" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;">(E) Decrease of $5 million</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">Selling Bonds is Contrationary - MS will decrease</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">RRR = 20% = Money Multiplier = 1/.2 = 5</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">$1 million sold bonds = $1m x 5 = $5 million decrease in MS</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEhrHzZAE7PT0wxtNXQPLySHFuP2tL_63oDSQHoluUy_d26zDW8iecyhaj9uIr_IeL119Zci_IMxlct-PU_9gpDjdoGzyZIWQB_ZWOSyO3OSBJ9_rsX_kD3SiMaFGhsdT-wUBvsp_6OeM5HxwQjv21_9X1k-HvMswxT1R-aNcrRjiaShbxmLzv8PcXyiYg" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="434" data-original-width="421" height="400" src="https://blogger.googleusercontent.com/img/a/AVvXsEhrHzZAE7PT0wxtNXQPLySHFuP2tL_63oDSQHoluUy_d26zDW8iecyhaj9uIr_IeL119Zci_IMxlct-PU_9gpDjdoGzyZIWQB_ZWOSyO3OSBJ9_rsX_kD3SiMaFGhsdT-wUBvsp_6OeM5HxwQjv21_9X1k-HvMswxT1R-aNcrRjiaShbxmLzv8PcXyiYg=w388-h400" width="388" /></a></div><div class="separator" style="clear: both; text-align: center;">(D) B can increase loans by $40</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">** Notice these T - Accts only have Actual Reserves</div><div class="separator" style="clear: both; text-align: center;">You need to break them up into </div><div class="separator" style="clear: both; text-align: center;">Required Reserves</div><div class="separator" style="clear: both; text-align: center;">Excess Reserves</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEg2SL2nln5r1HYhnAULGydgkmdUmS_HLf4QQLHJCRuCujim8dX_zjSkT1i9dZ1vB9F6ib22AYQGGlTDvKvI-6CSPcC3ZOPPkkpTtEUykHfGkZ4tr-z13Vu6o2R7vRi6riqflbdSAmmTcRYImA4Y5kAGBS_ARS50yap4hrPdQcpL5rMFvomf3_SjuAFmeA" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="357" data-original-width="615" height="233" src="https://blogger.googleusercontent.com/img/a/AVvXsEg2SL2nln5r1HYhnAULGydgkmdUmS_HLf4QQLHJCRuCujim8dX_zjSkT1i9dZ1vB9F6ib22AYQGGlTDvKvI-6CSPcC3ZOPPkkpTtEUykHfGkZ4tr-z13Vu6o2R7vRi6riqflbdSAmmTcRYImA4Y5kAGBS_ARS50yap4hrPdQcpL5rMFvomf3_SjuAFmeA=w400-h233" width="400" /></a></div><br /></div></div></div></div></div></div></div></div></div></div></div></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjLmFy3fSAg3BS14_NIiy-zoioAPPFpboIDEeCChgRrBtmIyuO7OQnbQRwKKuMPcptL9BT-zkS2cYBKtCPujhuoabXqONCJUtHwdTcyfjJAD3u2-daUgIQP7JMugLZr3jgwwKKj7FzRuWbk5gtIex-iZD9SKMopORfeaiqqwMyYRoIlVGd7F3Ka69RuiA" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="864" data-original-width="1137" height="486" src="https://blogger.googleusercontent.com/img/a/AVvXsEjLmFy3fSAg3BS14_NIiy-zoioAPPFpboIDEeCChgRrBtmIyuO7OQnbQRwKKuMPcptL9BT-zkS2cYBKtCPujhuoabXqONCJUtHwdTcyfjJAD3u2-daUgIQP7JMugLZr3jgwwKKj7FzRuWbk5gtIex-iZD9SKMopORfeaiqqwMyYRoIlVGd7F3Ka69RuiA=w640-h486" width="640" /></a></div></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both;"><b><br /></b></div></div>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-24916626560450128242021-10-07T21:04:00.003-07:002021-10-19T19:26:35.928-07:00Automatic Stabilizer Cheat Sheet<p style="text-align: center;"> <span style="text-align: left;"><span style="font-size: x-large;"><b>Automatic Stabilizer Cheat Sheet</b></span></span></p><p style="text-align: center;"><span style="font-size: x-large;"></span></p><div class="separator" style="clear: both; text-align: center;"><span style="font-size: x-large;"><iframe allowfullscreen='allowfullscreen' webkitallowfullscreen='webkitallowfullscreen' mozallowfullscreen='mozallowfullscreen' width='320' height='266' src='https://www.blogger.com/video.g?token=AD6v5dwe6Xm283WdQOPNygI0kavlVBsBEHIVk---bOxUuOW5IJKag0Aqsnr0m_tlh2lkjpzoi3m4dZX-h0RRhtO0Aw' class='b-hbp-video b-uploaded' frameborder='0'></iframe></span></div><div class="separator" style="clear: both; text-align: center;"><span style="font-size: x-large;"><br /></span></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjbV0_xctoqTF5L5B4P4EuVyF09z7nTEswdyEZBfpKe1m9VDD4l56FPgtcgRPn2VPon-Weniog2mNkepkr4sfmmYRsXd7p364rB9nsUOZRTrNJ2Jg5oKCL5Lbm3Vo_MJMT9C5Lknsmkq6XJ/s848/Screen+Shot+2021-10-19+at+12.01.19+PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="604" data-original-width="848" height="456" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjbV0_xctoqTF5L5B4P4EuVyF09z7nTEswdyEZBfpKe1m9VDD4l56FPgtcgRPn2VPon-Weniog2mNkepkr4sfmmYRsXd7p364rB9nsUOZRTrNJ2Jg5oKCL5Lbm3Vo_MJMT9C5Lknsmkq6XJ/w640-h456/Screen+Shot+2021-10-19+at+12.01.19+PM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjInRcJ6XKc1KuO-Di9P_mhRZs3TaY91tOJK8fvGWRp7GELc5yvyzWtB4aDH9Tms-UtVhl3un-2-SPvxEE8F0EE3ZvCbiu9J8vG4i4HQOCbK-oBUH75pYTheNvnA5DKEwukYzNvEi2UttoB/s914/Screen+Shot+2021-10-19+at+12.05.20+PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="374" data-original-width="914" height="262" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjInRcJ6XKc1KuO-Di9P_mhRZs3TaY91tOJK8fvGWRp7GELc5yvyzWtB4aDH9Tms-UtVhl3un-2-SPvxEE8F0EE3ZvCbiu9J8vG4i4HQOCbK-oBUH75pYTheNvnA5DKEwukYzNvEi2UttoB/w640-h262/Screen+Shot+2021-10-19+at+12.05.20+PM.png" width="640" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><span style="font-size: x-large;"><br /></span></div><span style="font-size: x-large;"><br /><b><br /></b></span><p></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-10660721993159904412021-10-04T12:53:00.008-07:002021-10-04T12:54:13.251-07:002021 (Set 2) AP Macro FRQ#1<p style="text-align: center;"><b><span style="font-size: x-large;"> 2021 (Set 2) AP Macro FRQ#1</span></b></p><p style="text-align: center;"><b><span style="font-size: x-large;"></span></b></p><div class="separator" style="clear: both; text-align: center;"><b><span style="font-size: x-large;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKzVMi9OLkc__5v0NnwD8WSbAXMQXcZN-GFXVNZLKC4j0NexQ6mIZ0zvQZ-b3BKHSfiilkdut57ByAPDebuA0w21jszsf0XRWNoIPOkuARko-3M6wySAOXFPx3qbpO8CQeA_MpRHa3TPjk/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="274" data-original-width="440" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKzVMi9OLkc__5v0NnwD8WSbAXMQXcZN-GFXVNZLKC4j0NexQ6mIZ0zvQZ-b3BKHSfiilkdut57ByAPDebuA0w21jszsf0XRWNoIPOkuARko-3M6wySAOXFPx3qbpO8CQeA_MpRHa3TPjk/s16000/Screen+Shot+2021-10-04+at+12.51.37+PM.png" /></a></span></b></div><b><span style="font-size: x-large;"><div style="text-align: center;"><b><span style="font-size: x-large;"><br /></span></b></div><div style="text-align: center;"><b><span style="font-size: x-large;">watch me answer it here<br /></span></b><a class="style-scope ytcp-video-info" href="https://youtu.be/qrfyoGmBHQ4" style="background-color: #f9f9f9; font-family: Roboto, Noto, sans-serif; font-size: 15px; text-align: start; text-decoration-line: none; white-space: nowrap;" target="_blank">https://youtu.be/qrfyoGmBHQ4</a></div><div style="text-align: center;"><br /></div><div style="text-align: center;"><br /></div><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjL2CzpF2SfymJaSwFpifL6PNzKLnnOkYtd6pLA0XhImzaJy8Mqw5jloqZTpubrNU28ItTo1sM-OuAb9wWUwuKyZi0qqEhMzj6RrBa-sfP986uNUXLzybqA9gle1sqQplH4LxgM5vJIR_uT/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="324" data-original-width="438" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjL2CzpF2SfymJaSwFpifL6PNzKLnnOkYtd6pLA0XhImzaJy8Mqw5jloqZTpubrNU28ItTo1sM-OuAb9wWUwuKyZi0qqEhMzj6RrBa-sfP986uNUXLzybqA9gle1sqQplH4LxgM5vJIR_uT/s16000/Screen+Shot+2021-10-04+at+12.51.49+PM.png" /></a></div><br /><br /></div></span></b><p></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-32564074781987138552021-10-02T09:00:00.003-07:002021-10-02T09:04:07.945-07:00Business Cycle Cheat Sheet<p style="text-align: center;"><b><span style="font-size: x-large;"> Business Cycle Cheat Sheet</span></b></p><p style="text-align: center;"><b><span style="font-size: x-large;"></span></b></p><div class="separator" style="clear: both; text-align: center;"><b><span style="font-size: x-large;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEimUNGgYfHyUiGx_AysQ57PxiAoOgDrOuz_TypSxKRU7VLko4C9Ji1S27FxdW5bTyWjTdnUxSIEfm7gpgYBvL6iKaXHqK8w7uG3CuW3fZQhz-ztNc6PljpCKvmsD613dWV_t0z4NmtmlZFo/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="568" data-original-width="378" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEimUNGgYfHyUiGx_AysQ57PxiAoOgDrOuz_TypSxKRU7VLko4C9Ji1S27FxdW5bTyWjTdnUxSIEfm7gpgYBvL6iKaXHqK8w7uG3CuW3fZQhz-ztNc6PljpCKvmsD613dWV_t0z4NmtmlZFo/s16000/Screen+Shot+2021-10-02+at+8.56.25+AM.png" /></a></span></b></div><div class="separator" style="clear: both; text-align: center;"><b><span style="font-size: x-large;"><br /></span></b></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><b><span style="font-size: x-large;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjV6G4WIdWIi__zxub95M85JU0Dfgd_pOdmOYJC1LiI1mXXjCS4Rhtd4jR087oQf0XYIAa0shdgl00HIxGl8Ul3vFo06WpD2s8c3UycSnla7QeCp0wFvCZBDPWkv2ejApVKzV-qZdWa11se/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="495" data-original-width="710" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjV6G4WIdWIi__zxub95M85JU0Dfgd_pOdmOYJC1LiI1mXXjCS4Rhtd4jR087oQf0XYIAa0shdgl00HIxGl8Ul3vFo06WpD2s8c3UycSnla7QeCp0wFvCZBDPWkv2ejApVKzV-qZdWa11se/s16000/Screen+Shot+2021-10-02+at+8.59.23+AM.png" /></a></span></b></div><b><span style="font-size: x-large;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEifAoFR1vFKkYV3gfhTqyy3nvJVEVBTuMH0Rac9QOVocteGT0z5X57gIhC36YmfkBIF4Fb2r7iRDQLG9PQZsz77VTy-fXMZk6vcEPs5C3Nd34EzmLhALLEotydoZqvtsCmZVKH-hHJkX3D-/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="359" data-original-width="364" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEifAoFR1vFKkYV3gfhTqyy3nvJVEVBTuMH0Rac9QOVocteGT0z5X57gIhC36YmfkBIF4Fb2r7iRDQLG9PQZsz77VTy-fXMZk6vcEPs5C3Nd34EzmLhALLEotydoZqvtsCmZVKH-hHJkX3D-/s16000/Screen+Shot+2021-10-02+at+9.03.38+AM.png" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><b><span style="font-size: x-large;"><br /></span></b></div><br /><br /></span></b></div><b><span style="font-size: x-large;"><br /><br /></span></b></div><b><span style="font-size: x-large;"><br /><br /></span></b><p></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-45994365422758926112021-09-17T13:48:00.006-07:002021-09-20T16:27:53.815-07:00<p style="text-align: center;"><b><span style="font-size: x-large;"> 2021 (Set 1) AP Macro FRQ#3</span></b></p><p style="text-align: center;"></p><div class="separator" style="clear: both; font-size: xx-large; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg5CT8rsXOBjFgLp8TPn0c1B-6ALn76SULg8rItahNH-alrOySJuQ0qjhQ0RkErXvW5TW88n95eIA7L6GKszCps6aTSJTPLtgMgyX4hbZILprvBiD584ciHhRAXsU9pydF8nrePYwq6BbAN/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="518" data-original-width="583" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg5CT8rsXOBjFgLp8TPn0c1B-6ALn76SULg8rItahNH-alrOySJuQ0qjhQ0RkErXvW5TW88n95eIA7L6GKszCps6aTSJTPLtgMgyX4hbZILprvBiD584ciHhRAXsU9pydF8nrePYwq6BbAN/s16000/Screen+Shot+2021-09-17+at+1.01.39+PM.png" /></a></div><div class="separator" style="clear: both; font-size: xx-large; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-size: xx-large; font-weight: bold; text-align: center;">watch me answer it here</div><div class="separator" style="clear: both; font-size: xx-large; font-weight: bold; text-align: center;"><a class="style-scope ytcp-video-info" href="https://youtu.be/Aza1drO05qQ" style="background-color: #f9f9f9; font-family: Roboto, Noto, sans-serif; font-size: 15px; font-weight: 400; text-align: start; text-decoration-line: none; white-space: nowrap;" target="_blank">https://youtu.be/Aza1drO05qQ</a></div><div class="separator" style="clear: both; font-size: xx-large; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; font-size: xx-large; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhpj7-R-IGS-OYZfFcjG7iGvXx3UrsD-2pJtVdcuYsCb9-BBGi0XMMmhaIku3hQnH6UDZVVZXieta-9BqE8szofZSBjt4Pr0s8veXL8MhFqfuFFOpatQcQO_Lmp9HEP3nBtL0WcgA-hXZoE/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="432" data-original-width="692" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhpj7-R-IGS-OYZfFcjG7iGvXx3UrsD-2pJtVdcuYsCb9-BBGi0XMMmhaIku3hQnH6UDZVVZXieta-9BqE8szofZSBjt4Pr0s8veXL8MhFqfuFFOpatQcQO_Lmp9HEP3nBtL0WcgA-hXZoE/s16000/Screen+Shot+2021-09-17+at+12.44.02+PM.png" /></a></div><div style="text-align: left;"><span style="font-weight: 700;">A) What is the numerical value of the cyclical rate of unemployment in Flowerland?</span></div><div style="text-align: left;"><span style="font-weight: 700;"><br /></span></div><div style="text-align: left;"><span style="font-weight: 700;">The NRU (Natural rate of unemployment) is 5%</span></div><div style="text-align: left;"><span style="font-weight: 700;">The NRU consists of Frictional & Structural unemployment</span></div><div style="text-align: left;"><span style="font-weight: 700;">NRU = 5% = Frictional 4% + Structural 1%</span></div><div style="text-align: left;"><span style="font-weight: 700;"><br /></span></div><div style="text-align: left;"><span style="font-weight: 700;">Actual Unemployment = 7% = (Recession) in recessions we have cyclical unemployment</span></div><div style="text-align: left;"><span style="font-weight: 700;"><br /></span></div><div style="text-align: left;"><b>Actual Unemployment = 7% - NRU (5%) =<u> 2% cyclical unemployment</u></b></div></div><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhT9nJZZAWCHPUD3Gsb5amRnscLTRStF503_FjngOljj_LmzVghhVruEQkBo2Z_RdNYoE7UyEYo_ugSGiWQeVPCEeD0Fv0Utydqny4jygJzlM6HcnfBsrj8ftLlSS09edMMh0U9k9Okd3te/s453/Screen+Shot+2021-09-17+at+12.44.42+PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="26" data-original-width="453" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhT9nJZZAWCHPUD3Gsb5amRnscLTRStF503_FjngOljj_LmzVghhVruEQkBo2Z_RdNYoE7UyEYo_ugSGiWQeVPCEeD0Fv0Utydqny4jygJzlM6HcnfBsrj8ftLlSS09edMMh0U9k9Okd3te/s16000/Screen+Shot+2021-09-17+at+12.44.42+PM.png" /></a></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"><b>B) Assume the <u><i>foreign </i></u>demand for lavendar oil produced in Flowerland increases. What will happen to each of the following in Flowerland in the short-run?</b></div><div class="separator" style="clear: both; text-align: left;"><b><br /></b></div><div class="separator" style="clear: both; text-align: left;"><b>(i) Aggregate Demand? Explain.</b></div><div class="separator" style="clear: both; text-align: left;"><b><br /></b></div><div class="separator" style="clear: both; text-align: left;"><b>Foreign demand increases meaning that exports increase which increases aggregate demand.</b></div><div class="separator" style="clear: both; text-align: left;"><b><br /></b></div><div class="separator" style="clear: both; text-align: left;"><b>(ii) Cyclical Unemployment? </b></div><div class="separator" style="clear: both; text-align: left;"><b><br /></b></div><div class="separator" style="clear: both; text-align: left;"><b>As Aggregate Demand increases cyclical unemployment will decrease as we move further and further out of a recession.</b></div><div class="separator" style="clear: both; text-align: left;"><b><br /></b></div><div class="separator" style="clear: both; text-align: left;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_46zyVB0VT2Cmmp2j53R62Ip0iHzyPiC7RdI86Jah1I_VotHZLrnCB8w-mtVjDG-vTKTx1l6nk-7D-RBCmp4wZRlIpH4x4lePModiSWQOGxX8hXw3LCBmSpWV8ex-SnOycvYzph60LUqq/s564/Screen+Shot+2021-09-17+at+12.44.49+PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="55" data-original-width="564" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_46zyVB0VT2Cmmp2j53R62Ip0iHzyPiC7RdI86Jah1I_VotHZLrnCB8w-mtVjDG-vTKTx1l6nk-7D-RBCmp4wZRlIpH4x4lePModiSWQOGxX8hXw3LCBmSpWV8ex-SnOycvYzph60LUqq/s16000/Screen+Shot+2021-09-17+at+12.44.49+PM.png" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;"><b>C) Assume 2019 is the base year. Calculate the 2020 Price Index.</b></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;"><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgjHCIL9S_Z9fT1EdUTrJ3N1Y-cE8hzDmYAle_2TRlVv44IrK41_fFzZpIItIrZad2z3rxYw1pbEUDoM9GatCE-M3U3cojAkaEtyub0JAfMxSQYIMw8EwsFucplfMBsZ6ykQIKD2JGbylAp/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="228" data-original-width="499" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgjHCIL9S_Z9fT1EdUTrJ3N1Y-cE8hzDmYAle_2TRlVv44IrK41_fFzZpIItIrZad2z3rxYw1pbEUDoM9GatCE-M3U3cojAkaEtyub0JAfMxSQYIMw8EwsFucplfMBsZ6ykQIKD2JGbylAp/s16000/Screen+Shot+2021-09-17+at+1.34.46+PM.png" /></a></div><br /></div><div class="separator" style="clear: both; text-align: center;"><b> Understand that in the Base Year NGDP = RGDP and the CPI is always 100</b></div><div class="separator" style="clear: both; text-align: center;"><b>NGDP/RGDP x 100 = CPI</b></div><div class="separator" style="clear: both; text-align: center;"><b>so</b></div><div class="separator" style="clear: both; text-align: center;"><b>200/200 = 1 (x 100) = CPI of 100 for 2019</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi67qDhQSnc-0WFfJo8Vrm_UmpJeoPIORnD2sENDhJnUj57fZhgbAMmK1PXubxAsE8YWXAj5dotfjoOe3Yhyc2NB3D6uBLNtp6crhIrRGnfNWZUp5QoGgmEVUcJRswqcuN5OtOL9uRSeXVs/s606/Screen+Shot+2021-09-17+at+1.29.17+PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="221" data-original-width="606" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi67qDhQSnc-0WFfJo8Vrm_UmpJeoPIORnD2sENDhJnUj57fZhgbAMmK1PXubxAsE8YWXAj5dotfjoOe3Yhyc2NB3D6uBLNtp6crhIrRGnfNWZUp5QoGgmEVUcJRswqcuN5OtOL9uRSeXVs/s16000/Screen+Shot+2021-09-17+at+1.29.17+PM.png" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><b>Understand that in 2020 the <u>NGDP = 260</u></b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b>2020 RGDP is (Quantity x Prices in the Base Year) or <u>200 = RGDP</u></b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b>NGDP/RGDP x 100 = CPI</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b>so</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b>260/200 = 1.3</b></div><div class="separator" style="clear: both; text-align: center;"><b>1.3 x 100 = 130</b></div><div class="separator" style="clear: both; text-align: center;"><b><u>CPI for 2020 = 130</u></b></div><br /><b>D) If nominal income in Flower increased by 20% from 2019-2020, what happens to the standard of living? Explain.</b></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><b>In 2019 the CPI (inflation was 0) was 100 , <u>always 100 in the base year</u></b></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><b>In 2020 the CPI is 130 therefore the inflation rate increase by 30% from 2019</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b>If the people's wages (nominl income) only increased by 20% </b></div><div class="separator" style="clear: both; text-align: center;"><b>but the price of everything (inflation) increased by 30% </b></div><div class="separator" style="clear: both; text-align: center;"><b>then </b></div><div class="separator" style="clear: both; text-align: center;"><b>their real wages (real income) decreased by 10%</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b>They can buy 10% less stuff after their raises and inflation take effect.</b></div><div class="separator" style="clear: both; text-align: center;"><b>Their purchasing power, <u>standard of living</u> and real wages decreased by 10%</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgydv2gYvEh-C-DORYB8WRw_LZoBTK6LTDvb8Ukx8hqbOMpBgew035Dv-KE9mNqI-BBtp4HuBBB64JnagUTzotLmdkzSp-WgzTwXSU2JryJPegCROdANQelrFr2Fnkw6Kw9_arYa7yoQmbJ/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="48" data-original-width="585" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgydv2gYvEh-C-DORYB8WRw_LZoBTK6LTDvb8Ukx8hqbOMpBgew035Dv-KE9mNqI-BBtp4HuBBB64JnagUTzotLmdkzSp-WgzTwXSU2JryJPegCROdANQelrFr2Fnkw6Kw9_arYa7yoQmbJ/s16000/Screen+Shot+2021-09-17+at+12.45.02+PM.png" /></a></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj_ENHmu0o9QNfekLqeClr1R6V6e44pzdZr_ufVh-C87Z0xGc4RjJyPe7Au0kziGCPxeRV5EfEH3ByEORPzH_4Eh3RK-ykr7N4ohiAUNwYsNM0PB7CERXXfVQY9vLWW8onkpyvnMH4r7B20/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="426" data-original-width="583" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj_ENHmu0o9QNfekLqeClr1R6V6e44pzdZr_ufVh-C87Z0xGc4RjJyPe7Au0kziGCPxeRV5EfEH3ByEORPzH_4Eh3RK-ykr7N4ohiAUNwYsNM0PB7CERXXfVQY9vLWW8onkpyvnMH4r7B20/s16000/Screen+Shot+2021-09-17+at+1.47.36+PM.png" /></a></div><br /><br /><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><br /><b><br /></b></div><br />EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-35304690067540183762021-09-11T09:20:00.006-07:002021-09-17T12:20:06.560-07:002021 (Set 2) AP Macro FRQ#2<p style="text-align: center;"><b><span style="font-size: x-large;"> 2021 (Set 2) AP Macro FRQ#2</span></b></p><p style="text-align: center;"></p><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjOpO1xv_Z2Nur3MjWTJ3kib2DopRwewO3l_799qpRDsJ67rxp4y8FFPr00X9ADZ7tn_tP9YNZiy8mFsXl3K98-qIV_6m-jNWzI_AurmXe23VPhhlsjU8wpzZuDkqzsdGLGqiClYNoL6-Oi/s547/Screen+Shot+2021-09-11+at+8.37.24+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="547" data-original-width="537" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjOpO1xv_Z2Nur3MjWTJ3kib2DopRwewO3l_799qpRDsJ67rxp4y8FFPr00X9ADZ7tn_tP9YNZiy8mFsXl3K98-qIV_6m-jNWzI_AurmXe23VPhhlsjU8wpzZuDkqzsdGLGqiClYNoL6-Oi/w393-h400/Screen+Shot+2021-09-11+at+8.37.24+AM.png" width="393" /></a></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><br /></div>Watch me answer it here</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><a class="style-scope ytcp-video-info" href="https://youtu.be/33MXyLESSdU" style="background-color: #f9f9f9; font-family: Roboto, Noto, sans-serif; font-size: 15px; font-weight: 400; text-align: start; text-decoration-line: none; white-space: nowrap;" target="_blank">https://youtu.be/33MXyLESSdU</a><br /><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_w7vzTZ_9R1v4ffmEXb2b10t6RixMXd7uA5EZZnkRlK81c45sQKZTZ8Knc_iddYOWA1JbdcfHreAk9EY1IfKCemVWZJ3J8YvPCvLUVOrWslI7K4x2eankoz6SOx4Ht4t0xr5aWvrQlPxA/s689/Screen+Shot+2021-09-11+at+8.33.15+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="273" data-original-width="689" height="254" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_w7vzTZ_9R1v4ffmEXb2b10t6RixMXd7uA5EZZnkRlK81c45sQKZTZ8Knc_iddYOWA1JbdcfHreAk9EY1IfKCemVWZJ3J8YvPCvLUVOrWslI7K4x2eankoz6SOx4Ht4t0xr5aWvrQlPxA/w640-h254/Screen+Shot+2021-09-11+at+8.33.15+AM.png" width="640" /></a></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">a) Draw a single CLG with both SR & LR Phillips curve. Showing the initial SR equilibrium point as X.</div><div style="text-align: center;"><span style="font-weight: 700;">Recession = a movement down the SRPC</span></div><div style="text-align: center;"><span style="font-weight: 700;">AD shifting left is a movement down the SRPC</span></div><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjf-JJlHmY1uMvfSTuD8en7BMuxl9TQRY_Ckb_AYjEn9DT3S5KWNb55wehOnZ8ictB-uaZhW91HU-eZeWXynyJlx7Y-J3ZxOzaYeovdVQtbYU5ZNP0N9XyeL01Q5kZI_gwSDaId7ZVkcIvn/s695/Screen+Shot+2021-09-11+at+8.43.51+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="185" data-original-width="695" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjf-JJlHmY1uMvfSTuD8en7BMuxl9TQRY_Ckb_AYjEn9DT3S5KWNb55wehOnZ8ictB-uaZhW91HU-eZeWXynyJlx7Y-J3ZxOzaYeovdVQtbYU5ZNP0N9XyeL01Q5kZI_gwSDaId7ZVkcIvn/s16000/Screen+Shot+2021-09-11+at+8.43.51+AM.png" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhv30ex0i8Nf40WfP-7ZCBoa_zTq-WL-2juTAY83NWuzMOz-L44bLycKgV1yJMsVDzl16HOG624I4w4zMVRoCZABqms1gzf9QPOdoV-Nus3BqT3SmaBYSCYG10ax0TSfnLNmS0JPC1e3zYr/s249/Screen+Shot+2021-09-11+at+8.45.20+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="226" data-original-width="249" height="226" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhv30ex0i8Nf40WfP-7ZCBoa_zTq-WL-2juTAY83NWuzMOz-L44bLycKgV1yJMsVDzl16HOG624I4w4zMVRoCZABqms1gzf9QPOdoV-Nus3BqT3SmaBYSCYG10ax0TSfnLNmS0JPC1e3zYr/s0/Screen+Shot+2021-09-11+at+8.45.20+AM.png" width="249" /></a></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: left;"><b>b) Suppose the government impements fiscal policy in order to achieve full employment output and the MPC is .75.</b></div><div class="separator" style="clear: both; text-align: left;"><b><br /></b></div><div class="separator" style="clear: both; text-align: left;"><b>i) Calculate the minimum government spending needed to get back to full employment. Understand the recessionary output gap is 600 billion. So we need 600 billion of RGDP to get to full employment.</b></div><div class="separator" style="clear: both; text-align: left;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b>The government does not have to spend the full 600b to get us back to full employment because of the magical (multiplier)</b></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgvlVoAfXg9EdW9zK2FFiboblKzzuYm5lb1sFp1hHCfaPWNVVernxRui7kf1oD2HMQaTqRYcrxJI2eVjjNBgqCYAO1mNhdk0UyMnkj3FDqlh0yroAMqLmC1KyRAEmVbaqEHi90kmvG3IhME/s317/Screen+Shot+2021-09-11+at+8.51.02+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="206" data-original-width="317" height="206" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgvlVoAfXg9EdW9zK2FFiboblKzzuYm5lb1sFp1hHCfaPWNVVernxRui7kf1oD2HMQaTqRYcrxJI2eVjjNBgqCYAO1mNhdk0UyMnkj3FDqlh0yroAMqLmC1KyRAEmVbaqEHi90kmvG3IhME/s0/Screen+Shot+2021-09-11+at+8.51.02+AM.png" width="317" /></a></div><div class="separator" style="clear: both; text-align: center;"><b> The MPC = .75</b></div><div class="separator" style="clear: both; text-align: center;"><b>The MPS = .25</b></div><div class="separator" style="clear: both; text-align: center;"><b>MPC (.75) + MPS (.25) always = 1</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b>The multiplier is 1/MPS = 1/.25 = 4 , The multiplier is 4</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b>Government spending x multiplier = change in RGDP</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b>Gov't spending ? x 4 = 600b</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b>or we can rewrite it as 600b/4 = <u>150b</u></b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b><u>Government needs to spend 150b x 4 = the 600b to get us back to full employment</u></b></div><div class="separator" style="clear: both; text-align: center;"><br /></div></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-O5CyhEnqF2YjNxw8F9n_bACqS8rN6hynSPlu8ytOzBrpsPe9mDIOOGwM-Ql75RHdZ0P2ZyT3ASrfXJD9Ik27NtwSu2ebctucvBwWwjXETMh1Yj13lOGSfyXFtNWowFaLtnoRfr0LdwL-/s576/Screen+Shot+2021-09-11+at+8.57.01+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="106" data-original-width="576" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-O5CyhEnqF2YjNxw8F9n_bACqS8rN6hynSPlu8ytOzBrpsPe9mDIOOGwM-Ql75RHdZ0P2ZyT3ASrfXJD9Ik27NtwSu2ebctucvBwWwjXETMh1Yj13lOGSfyXFtNWowFaLtnoRfr0LdwL-/s16000/Screen+Shot+2021-09-11+at+8.57.01+AM.png" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;"><b>ii) Suppose instead the gov't wants to change taxes. Calculate the minimum change in taxes needed to push aggregate demand by the amount of the output gap (600b).</b></div><div class="separator" style="clear: both; text-align: left;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b><u><i>((The Tax Multiplier is always (1 less) than the Government Spending Multiplier))</i></u></b></div>Put it in your brain and don't forget it.</div><div style="text-align: center;"><br /></div><div style="text-align: center;"><b>Since the Government Spending multiplier in (i) was 4 the Tax multiplier is 3</b></div><div style="text-align: center;"><b><br /></b></div><div style="text-align: center;"><b>so 600b/3 = 200b</b></div><div style="text-align: center;"><b><br /></b></div><div style="text-align: center;"><b>The government must lower taxes by 200b to push Aggregate Demand back to the 600b full employment point as less taxes is expansionary.</b></div><div style="text-align: center;"><b><br /></b></div><div style="text-align: center;"><b>The Tax multiplier formula is -MPC/MPS or 600b/3 = -200b<div class="separator" style="clear: both; text-align: center;">Taxes need to be reduced by 200b that is why the minus is there</div><div class="separator" style="clear: both; text-align: center;"><br /></div></b><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLdHVaqTnwR2J8c36dWRx248OgpAqgDzfulRXfthaz07wzay2kUuPxwS-g56LKADMcd3jPqtqL9-ZyQEyIn79hjdt0uiClK7KHFzhyphenhyphenyRAI58JG1TjmOqh4qktt4P5RPcF764qiHCsWuWTt/s520/Screen+Shot+2021-09-11+at+9.06.03+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="86" data-original-width="520" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLdHVaqTnwR2J8c36dWRx248OgpAqgDzfulRXfthaz07wzay2kUuPxwS-g56LKADMcd3jPqtqL9-ZyQEyIn79hjdt0uiClK7KHFzhyphenhyphenyRAI58JG1TjmOqh4qktt4P5RPcF764qiHCsWuWTt/s16000/Screen+Shot+2021-09-11+at+9.06.03+AM.png" /></a></div><br /><div style="text-align: left;"><b>c) Assume instead the government takes no policy actions to close the output gap. Explain how the economy will adjust in the long-run.</b></div><div style="text-align: left;"><b><br /></b></div><div style="text-align: center;"><b>Recognize that this is now a Classical View question.</b></div><div style="text-align: center;"><b><br /></b></div><div style="text-align: center;"><b>If we are in a recession and there is no Fiscal or Monetary policy</b></div><div style="text-align: center;"><b>in the long run wages, prices, inflationary expectations will decrease</b></div><div style="text-align: center;"><b>wages and input prices decreasing shifts the SRAS curve to the right</b></div><div style="text-align: center;"><b>We return back to full employment at a lower PL (price level)</b></div><div style="text-align: center;"><b><br /></b></div><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhiOn_KEkGKDEH4coyOnX_TvlJjnDemKnXuNpeKZQstLsebJGL8qNsu7hm11SZRgejgTXmwXKF2fGl7JqKSaaiue2u798z-wKustcovIn9xkhTD3ICQ7K7oYFqW4ntjJiccfyJlgbMkxska/s652/Screen+Shot+2021-09-11+at+9.10.48+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="180" data-original-width="652" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhiOn_KEkGKDEH4coyOnX_TvlJjnDemKnXuNpeKZQstLsebJGL8qNsu7hm11SZRgejgTXmwXKF2fGl7JqKSaaiue2u798z-wKustcovIn9xkhTD3ICQ7K7oYFqW4ntjJiccfyJlgbMkxska/s16000/Screen+Shot+2021-09-11+at+9.10.48+AM.png" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjVw9xHi0-vf-e20KDhWH370SYnCANEFneJX8sVijQauvMWpju63jC1K7xIJPD7Sp2e34JcyTWxZy8uQxiE1CmKP4oISrjKRIMgqoBHsN7sboGvPWXlRbmMAgXGgdRHK7wVZcOcKpcU9EsL/s564/Screen+Shot+2021-09-11+at+9.14.21+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="43" data-original-width="564" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjVw9xHi0-vf-e20KDhWH370SYnCANEFneJX8sVijQauvMWpju63jC1K7xIJPD7Sp2e34JcyTWxZy8uQxiE1CmKP4oISrjKRIMgqoBHsN7sboGvPWXlRbmMAgXGgdRHK7wVZcOcKpcU9EsL/s16000/Screen+Shot+2021-09-11+at+9.14.21+AM.png" /></a></div><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjAFeHaiDXj3cZibUDCD5UL9U0ocjqFJDQHv06BeRqIFOCum6Fmeo-VyrvHQ0BSTXQAcloIjEn_7RXz_I_M_MxM81k7o3y5BpFAx1ZVA8_vS-duALU63t_tGcRryOAympSOo6SaPOUyOnJz/s651/Screen+Shot+2021-09-11+at+9.18.13+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="603" data-original-width="651" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjAFeHaiDXj3cZibUDCD5UL9U0ocjqFJDQHv06BeRqIFOCum6Fmeo-VyrvHQ0BSTXQAcloIjEn_7RXz_I_M_MxM81k7o3y5BpFAx1ZVA8_vS-duALU63t_tGcRryOAympSOo6SaPOUyOnJz/s16000/Screen+Shot+2021-09-11+at+9.18.13+AM.png" /></a></div><br /><div style="text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><span style="font-weight: 700;"><br /></span></div><div style="text-align: left;"><br /></div><p></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-87116949390074542082021-09-11T08:31:00.007-07:002021-09-17T12:35:23.156-07:002021 (Set 1) AP Macro FRQ#2<p style="text-align: center;"><span style="font-size: x-large;"><b> 2021 (Set 1) AP Macro FRQ#2</b></span></p><p style="text-align: center;"></p><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; font-size: xx-large; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhttiJtY1WL6tXPBEriil42rWEkVJiNu9i5rpP-F5HmHNNyiUdFFloK1xO_XvgI-T1q2YHDhG0v3ZBw8Lo4dh43IUbNalc5sJDfYHWIrf8sL6uh4UgY13AWijsVGvjGNRT3Q6FI-p7odga_/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="559" data-original-width="579" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhttiJtY1WL6tXPBEriil42rWEkVJiNu9i5rpP-F5HmHNNyiUdFFloK1xO_XvgI-T1q2YHDhG0v3ZBw8Lo4dh43IUbNalc5sJDfYHWIrf8sL6uh4UgY13AWijsVGvjGNRT3Q6FI-p7odga_/s16000/Screen+Shot+2021-09-11+at+8.01.31+AM.png" /></a></div><div class="separator" style="clear: both; font-size: xx-large; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-size: xx-large; font-weight: bold; text-align: center;">Watch me answer it here</div><div class="separator" style="clear: both; font-size: xx-large; font-weight: bold; text-align: center;"><a class="style-scope ytcp-video-info" href="https://youtu.be/UUaSOOIfgHw" style="background-color: #f9f9f9; font-family: Roboto, Noto, sans-serif; font-size: 15px; font-weight: 400; text-align: start; text-decoration-line: none; white-space: nowrap;" target="_blank">https://youtu.be/UUaSOOIfgHw</a></div><div class="separator" style="clear: both; font-size: xx-large; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-size: xx-large; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhXtSZRGZJCInKit47inovLAjTWbWw0pzEnHn23rT4Fa8g32BaUrRFrqTCWnSnswNGX07_DhyOWVL4JwDxgEbsI5TBP8TvHDdt7faNvNvDfbOAnRj4X2Sg9my6Gg2_QFSNxrppCyay-HRaO/s685/Screen+Shot+2021-09-11+at+7.44.02+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="186" data-original-width="685" height="174" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhXtSZRGZJCInKit47inovLAjTWbWw0pzEnHn23rT4Fa8g32BaUrRFrqTCWnSnswNGX07_DhyOWVL4JwDxgEbsI5TBP8TvHDdt7faNvNvDfbOAnRj4X2Sg9my6Gg2_QFSNxrppCyay-HRaO/w640-h174/Screen+Shot+2021-09-11+at+7.44.02+AM.png" width="640" /></a></div><div class="separator" style="clear: both; font-size: xx-large; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">2. Assume the country is operating below full employment.</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">Below full employment = Recession</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">a) Identify a fiscal policy that could restore the economy back to full employment.</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">Fiscal Policy is either (Government spending or Taxes)</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">Recession = (More Government Spending or Reduce Taxes)</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFcPbd1HvdCyXjDIzaNBhPyZhfVxI9smPVdHh_YvxqdJptgg4Yp7-tG-v46DGd2JBj2NN3nz5DnTi7FK6eZZ7eSr84bZ8SPdCu4ARAP_CRnO11kE01GbmvdLp_GeRKt7kctrjqASMqG9Ta/s556/Screen+Shot+2021-09-11+at+7.44.33+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="49" data-original-width="556" height="56" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFcPbd1HvdCyXjDIzaNBhPyZhfVxI9smPVdHh_YvxqdJptgg4Yp7-tG-v46DGd2JBj2NN3nz5DnTi7FK6eZZ7eSr84bZ8SPdCu4ARAP_CRnO11kE01GbmvdLp_GeRKt7kctrjqASMqG9Ta/w640-h56/Screen+Shot+2021-09-11+at+7.44.33+AM.png" width="640" /></a></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">b) Draw a CLG of the loanable funds market and show the effects of the fiscal policy chosen on the equilibrium real interest rate.</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7louMpfWYrHgzYC5piD7BfJ0Qc7mh_WKPbC5-lMEtnjJtYDPthOe2LR0NwziX9bb03s_Rk1amUThaVd9z9rwLlLhOrSqz8I-xnpA4PApl6FUIwM544XOxGXpKG1v6WM4N5DKf-25w8i7q/s534/Screen+Shot+2021-09-11+at+7.44.47+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="274" data-original-width="534" height="205" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7louMpfWYrHgzYC5piD7BfJ0Qc7mh_WKPbC5-lMEtnjJtYDPthOe2LR0NwziX9bb03s_Rk1amUThaVd9z9rwLlLhOrSqz8I-xnpA4PApl6FUIwM544XOxGXpKG1v6WM4N5DKf-25w8i7q/w400-h205/Screen+Shot+2021-09-11+at+7.44.47+AM.png" width="400" /></a></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><b>Government spending = an </b><u>increase in the RIR</u><b> (Real Interest Rate)</b></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">If the government wants to spend more money they must either tax citizens more or borrow the funds. Borrowing of the funds means selling bonds to citizens.</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">The citizens must take the money out of the banks to pay for the bonds.</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">(Demand shift) = People walking into banks needing to take out money to buy bonds </div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">increases (rightward shift) of the demand for loanable funds</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">(Supply Shift) = As people take the money out of the bank it </div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">reduces (shifts leftward) the supply of loanable funds in the banks.</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">Both shifts are technically correct (Use the one that seems correct to you)</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">Easiest for me to recognize that anytime the govenment is spending they are borrowing from the Banks reducing the supply of lonable funds which <u>increases the RIR.</u></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div style="text-align: left;"><b>c) Based solely (only) on the real interest rate change what will happen to the following?</b></div><div style="text-align: left;"><b><br /></b></div><div style="text-align: left;"><b>i) Net Exports. Explain.</b></div><div style="text-align: left;"><b><br /></b></div><div style="text-align: center;"><b>If the RIR increases then the demand for the currency will increase causing the currency to appreciate which will </b><b>decrease the amount of exports for the country.</b></div><div style="text-align: center;"><b><br /></b></div><div style="text-align: center;"><b>As the RIR increases citizens of other countries will want to put their money in our banks to get the higher interest rate (they want higher profits)</b></div><div style="text-align: center;"><b>To put their money in our banks they must exchange it in the FOREX, causing the demand for our currency to increase which drives up the value of our currency.</b></div><div style="text-align: center;"><b>Since our currency is increasing in value our goods are becoming more expensive.</b></div><div style="text-align: center;"><b>More expensive goods means less people will want to buy our goods therefore</b></div><div style="text-align: center;"><b>our exports will decline.</b></div><div style="text-align: center;"><b><br /></b></div><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiYtxxoNnaIlTQcKVPMGrzCHHCnF2QysqQAIntevd0i7ODyinnRyOcTO3dhXPLWIYwRZBvkaFcMwN57ZnPSaEWK4GAXZHIGc0_yotnYb36qSK-M6fcmCJ8VxIWK-WJa_XAcb9aTW1VN9sgB/s577/Screen+Shot+2021-09-11+at+7.44.55+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="91" data-original-width="577" height="100" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiYtxxoNnaIlTQcKVPMGrzCHHCnF2QysqQAIntevd0i7ODyinnRyOcTO3dhXPLWIYwRZBvkaFcMwN57ZnPSaEWK4GAXZHIGc0_yotnYb36qSK-M6fcmCJ8VxIWK-WJa_XAcb9aTW1VN9sgB/w640-h100/Screen+Shot+2021-09-11+at+7.44.55+AM.png" width="640" /></a></div><br /><div style="text-align: left;"><span style="font-weight: 700;">ii) Stock of physical capital (capital goods) . Explain.</span></div><div style="text-align: left;"><span style="font-weight: 700;"><br /></span></div><div style="text-align: center;"><span style="font-weight: 700;">As the RIR increases (Loans are now more expensive)</span></div><div style="text-align: center;"><span style="font-weight: 700;">Domestic Investment (taking out of loans) will decrease which implies that less capital goods will be produced in our country. Less physical stock (capital formation/goods) means that the country's long-run growth will be damaged.</span></div><div style="text-align: center;"><span style="font-weight: 700;"><br /></span></div><div style="text-align: center;"><b>RIR increase = Less physical stock (capital goods/formation)</b></div><div style="text-align: center;"><b><br /></b></div><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEilVxSx9FEuA2qUHBbhac5MDLpF7LliD72mE5XbR5w-7MngXxKX7Fxhyphenhyphen2U3k6TiJ4A1GqggZ2pkV2YbUO63apjzcVe9RQ5dig9ERkbaWlcNmHp1ripeddQd24xzWzU_bQMjI7UwhvvIDq6G/s553/Screen+Shot+2021-09-11+at+7.45.00+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="44" data-original-width="553" height="50" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEilVxSx9FEuA2qUHBbhac5MDLpF7LliD72mE5XbR5w-7MngXxKX7Fxhyphenhyphen2U3k6TiJ4A1GqggZ2pkV2YbUO63apjzcVe9RQ5dig9ERkbaWlcNmHp1ripeddQd24xzWzU_bQMjI7UwhvvIDq6G/w640-h50/Screen+Shot+2021-09-11+at+7.45.00+AM.png" width="640" /></a></div><br /><b><br /></b></div></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><br /><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-size: xx-large; font-weight: bold; text-align: center;"><br /></div><br /><div class="separator" style="clear: both; font-size: xx-large; font-weight: bold; text-align: center;"><br /></div><br /><br /></div><br /><br /></div><br /><br /><p></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-14524867820280850472021-09-08T16:32:00.006-07:002021-09-11T07:36:18.743-07:002021 (Set 1) AP MAcro FRQ#1<p style="text-align: center;"><b><span style="font-size: large;"> 2021 (Set 1) AP Macro FRQ#1</span></b></p><p style="text-align: center;"></p><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj6hySpsFQuTiOdCR9c-mRPAomze1aYGrz6CgHJj6DUkn3WFjL7hnh6XkSIdoyF-MMYSsMmSGHBvcnJFNVpHv88dRmkyDDhuBZzg25k9fuLcyM0MwbqM6HloowkGq3szW_EAOA_NmravjMN/s593/Screen+Shot+2021-09-08+at+3.36.55+PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="417" data-original-width="593" height="450" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj6hySpsFQuTiOdCR9c-mRPAomze1aYGrz6CgHJj6DUkn3WFjL7hnh6XkSIdoyF-MMYSsMmSGHBvcnJFNVpHv88dRmkyDDhuBZzg25k9fuLcyM0MwbqM6HloowkGq3szW_EAOA_NmravjMN/w640-h450/Screen+Shot+2021-09-08+at+3.36.55+PM.png" width="640" /></a></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">Watch me answer it here</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><a class="style-scope ytcp-video-info" href="https://youtu.be/sWLvz-ZkArI" style="background-color: #f9f9f9; font-family: Roboto, Noto, sans-serif; font-size: 15px; font-weight: 400; text-align: start; text-decoration-line: none; white-space: nowrap;" target="_blank">https://youtu.be/sWLvz-ZkArI</a></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2Ohl72V3-3JD21T0EarcFSfU4ZaZtARYIE6g11Zi0vFws9GUQuR1OXx6z-EBEAhlZ4bCFQcKLn2NMDo69Ffym9qgOJFuxHyd7VxMkIgHVJxF1G14JgQo_EzONPaZIlZi4ehOFWeobiFZj/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="424" data-original-width="688" height="394" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2Ohl72V3-3JD21T0EarcFSfU4ZaZtARYIE6g11Zi0vFws9GUQuR1OXx6z-EBEAhlZ4bCFQcKLn2NMDo69Ffym9qgOJFuxHyd7VxMkIgHVJxF1G14JgQo_EzONPaZIlZi4ehOFWeobiFZj/w640-h394/Screen+Shot+2021-09-08+at+11.23.37+AM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;">1. Assume the economy of Sweden is in <u>long-run equilibrium</u> and has a <u>surplus in its current account.</u></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">a) Is the Swedish capital account and financial account in deficit, surplus or in balance? Explain.</div><br />If the Capital account is in a surplus that implies the financial account must be in a deficit as</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">CA + FA = 0</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg6KaXR5aTJDUCU7b2dI9CWS0KMQUpl5slcQ5sV-lms7J8kEaWP4BASXij9QSNGyS9oiTlZdwF24oIabiJ4olCdW332JEkFWv-r5hAXBWXeTpma3zATKm13tQZeeqn7fLXhZld4IDYdj71g/s548/Screen+Shot+2021-09-08+at+3.45.43+PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="60" data-original-width="548" height="44" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg6KaXR5aTJDUCU7b2dI9CWS0KMQUpl5slcQ5sV-lms7J8kEaWP4BASXij9QSNGyS9oiTlZdwF24oIabiJ4olCdW332JEkFWv-r5hAXBWXeTpma3zATKm13tQZeeqn7fLXhZld4IDYdj71g/w400-h44/Screen+Shot+2021-09-08+at+3.45.43+PM.png" width="400" /></a></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">b) Draw a CLG of the AD/AS curve for Sweden showing the PL and Y.</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZfYHYbAn6LqqBdTNVq8ClMCQHW7yfTbzVUn-8qFpsUaUS1f6HmNrXrm9xJy5-eOgUmpVTfKjxtAEKChjEHGhT7xRjAFvKmPUo3vJ7rBPb5txc5QKRBGx0zgJdS3G86LPzKUV5uue_D2Iq/s272/Screen+Shot+2021-09-08+at+3.45.50+PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="227" data-original-width="272" height="267" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZfYHYbAn6LqqBdTNVq8ClMCQHW7yfTbzVUn-8qFpsUaUS1f6HmNrXrm9xJy5-eOgUmpVTfKjxtAEKChjEHGhT7xRjAFvKmPUo3vJ7rBPb5txc5QKRBGx0zgJdS3G86LPzKUV5uue_D2Iq/w320-h267/Screen+Shot+2021-09-08+at+3.45.50+PM.png" width="320" /></a></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">Recognize that you must have read #1, <u>Sweden is in long-run equilibrium</u>.</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">c) The UK decreases its imports from Sweden. On the graph show the new eqilibrium PL & Y.</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUBsvEzevSUpo7CpTMgFNhIdHs-2SvucpfkMYbDyZt_oK_iJ3QhXMuJHEjVjIVgnGj_Dq2ETJOQRal1k6bLzE7j75kdH232hrdcoySi0EuaGIrthpb56SK9yFdHmKFiNstGbWvGiCVfpuK/s540/Screen+Shot+2021-09-08+at+3.46.00+PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="287" data-original-width="540" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUBsvEzevSUpo7CpTMgFNhIdHs-2SvucpfkMYbDyZt_oK_iJ3QhXMuJHEjVjIVgnGj_Dq2ETJOQRal1k6bLzE7j75kdH232hrdcoySi0EuaGIrthpb56SK9yFdHmKFiNstGbWvGiCVfpuK/w400-h213/Screen+Shot+2021-09-08+at+3.46.00+PM.png" width="400" /></a></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">A decrease in UK imports is a decrease in Swedens exports.</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">If exports decrease, then AD decreases along with the Price Level (PL), RGDP and Output</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">d) As a result of the decrease in imports into the UK will Sweden's policy makers be more worried about cyclical unemployment or inflation in the short-run? Explain.</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">Cyclical unemployment occurs due to a downturn in the economy = recession.</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">If we are at long-run equilibrium and exports in Sweden decrease we move into a </div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">recessionary gap = cyclical unemployment</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZGE-izZI_gvX5qhNpl52n6QefF3nA-J3L0vjHEbeZf_YtahQ8KF3fd0UVM37iyBU3D1zD_pCyyHwdJg_cTeqZpb1CnRuHhsjbfnHofxwMYg1rWfzegoGKXN-8htWhuULP38_TU_HcGHRX/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="24" data-original-width="287" height="27" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZGE-izZI_gvX5qhNpl52n6QefF3nA-J3L0vjHEbeZf_YtahQ8KF3fd0UVM37iyBU3D1zD_pCyyHwdJg_cTeqZpb1CnRuHhsjbfnHofxwMYg1rWfzegoGKXN-8htWhuULP38_TU_HcGHRX/" width="320" /></a></div></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmREV-jEIwWgVIMX8E7YVl1XQQHz_mkC8VwrL9j8SncsbX30m3HJuy3zmEKjz4qleNlNd-BQZ0S1XnRcHiUUv9t6U7PbahXuY02Q7EuFpuzNeIvkc9nLQ4U8XDcECiiaMlCnPIeLc2LF7P/s531/Screen+Shot+2021-09-08+at+3.46.06+PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="90" data-original-width="531" height="68" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmREV-jEIwWgVIMX8E7YVl1XQQHz_mkC8VwrL9j8SncsbX30m3HJuy3zmEKjz4qleNlNd-BQZ0S1XnRcHiUUv9t6U7PbahXuY02Q7EuFpuzNeIvkc9nLQ4U8XDcECiiaMlCnPIeLc2LF7P/w400-h68/Screen+Shot+2021-09-08+at+3.46.06+PM.png" width="400" /></a></div><div style="text-align: left;"><span style="font-weight: 700;">e) If the Swedish central bank's (Monetary policy) goal is to return the econmy to long-run equilibrium what open market operation must it use?</span></div><div style="text-align: left;"><span style="font-weight: 700;"><br /></span></div><div style="text-align: center;"><span style="font-weight: 700;">FED = Open market operations means either buying bonds or selling bonds.</span></div><div style="text-align: center;"><span style="font-weight: 700;"><br /></span></div><div style="text-align: center;"><span style="font-weight: 700;">To move us from a recession to long-run equilibrium the central bank must use expansionary policy by <u>buying bonds</u>.</span></div><div style="text-align: center;"><span style="font-weight: 700;"><br /></span></div><div style="text-align: center;"><span style="font-weight: 700;"><u>Buying</u> bonds causes the Money Supply (MS) to increases which causes the </span></div><div style="text-align: center;"><span style="font-weight: 700;">Nominal Interest Rate (NIR) to fall, causing Investment to increase, </span></div><div style="text-align: center;"><span style="font-weight: 700;">AD to increase, RGDP & Output to increase pushing the economy</span></div><div style="text-align: center;"><span style="font-weight: 700;">back to Long-run Equilibrium</span></div><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjlcWbhkJIrIi2B32zVtJyhwalKvSsu6D7t9YKz7OQclT07fxkJlgOR8zEeIhG-IybAf6j8k6cgnf7HZjodm-WWCH99dl-M9x-HKrX9qxgEqRoy5JkgGlQB_kY8Bc0MSXNOHaeCDbeLAgYB/s518/Screen+Shot+2021-09-08+at+4.10.54+PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="27" data-original-width="518" height="34" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjlcWbhkJIrIi2B32zVtJyhwalKvSsu6D7t9YKz7OQclT07fxkJlgOR8zEeIhG-IybAf6j8k6cgnf7HZjodm-WWCH99dl-M9x-HKrX9qxgEqRoy5JkgGlQB_kY8Bc0MSXNOHaeCDbeLAgYB/w640-h34/Screen+Shot+2021-09-08+at+4.10.54+PM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgn_Yg9zCNI2_Dsn_yXq8BSyo_TX-ZXgFUL29R2IjF7e3gBOTtjNYt82ItmlJf3776ym7vzmkOQUyL3NcS3jL6XGN-qhyT1x3asXV3webN_KiQFJ_xSSCtMzoI3Ogrnn8GeMp-JhMMXwYLH/s389/Screen+Shot+2021-09-08+at+3.46.13+PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="30" data-original-width="389" height="31" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgn_Yg9zCNI2_Dsn_yXq8BSyo_TX-ZXgFUL29R2IjF7e3gBOTtjNYt82ItmlJf3776ym7vzmkOQUyL3NcS3jL6XGN-qhyT1x3asXV3webN_KiQFJ_xSSCtMzoI3Ogrnn8GeMp-JhMMXwYLH/w400-h31/Screen+Shot+2021-09-08+at+3.46.13+PM.png" width="400" /></a></div><div class="separator" style="clear: both; text-align: left;"><b>f) Draw a CLG of the Sedish krona showing the effects in the FOREX of the UK's decrease in imports from Sweden on the Krona's value in the FOREX.</b></div><div class="separator" style="clear: both; text-align: left;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b>As UK citizens buy less goods from Sweden the demand for Swedish krona decreases.</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiM-sH1NCFc-UrysKgqaS821h63WsbTnv8GGPwmBIVqI_zZILcF2SSsYXTBbDm-UO9KtSbLzyNMa-ti5f44fC_RJXz2lOrfbm_CrsXcCdLllqoi9zcXECjwuuD9-fJYwU_R5k3g7U4-E34c/s516/Screen+Shot+2021-09-08+at+3.46.28+PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="297" data-original-width="516" height="230" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiM-sH1NCFc-UrysKgqaS821h63WsbTnv8GGPwmBIVqI_zZILcF2SSsYXTBbDm-UO9KtSbLzyNMa-ti5f44fC_RJXz2lOrfbm_CrsXcCdLllqoi9zcXECjwuuD9-fJYwU_R5k3g7U4-E34c/w400-h230/Screen+Shot+2021-09-08+at+3.46.28+PM.png" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;"><b>g) If the Swedish central banks goal is to reverse the exchange rate change shown in part f, by changing the <u style="font-style: italic;">interest rate</u>, what open market operation would it use?</b></div><div class="separator" style="clear: both; text-align: left;"><b><br /></b></div><div class="separator" style="clear: both; text-align: left;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b>Open market operations buy the central bank is either buying or selling bonds.</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b>The Swedish Central Bank would <u>sell bonds</u></b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b><u>Selling bonds</u>, decreases the Money Supply (MS), increasing the Nominal Interest Rate (NIR)</b></div><div class="separator" style="clear: both; text-align: center;"><b>When the NIR is increasing the Real Interest Rate (RIR) is increasing </b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b>Larger RIR's attract inflows of currency from the UK into Sweden</b></div><div class="separator" style="clear: both; text-align: center;"><b>meaning that the demand for the Swedish krona will increase</b></div><div class="separator" style="clear: both; text-align: center;"><b>as UK citizens wants to make more profits by depositing money in Swedish </b></div><div class="separator" style="clear: both; text-align: center;"><b>banks to receive the </b><b>higher Real Interest Rates</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><b>to put money in Swedish banks the UK citizens must buy krona</b></div><div class="separator" style="clear: both; text-align: center;"><b>in the FOREX</b></div><div class="separator" style="clear: both; text-align: center;"><b>this increases the demand for the krona</b></div><div class="separator" style="clear: both; text-align: center;"><b>causing the value of the krona to increase.</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjhFTMLPCBP0cgeAqUw314FC92qoIZcjJKdnVJM7sbhenknFtA2W_8A1CG-TZ5vkzWQDwcJzoxGbXz_O9jQ8-VQ3TLakHzeruyYLDKUJS1Rmj7OxhrDCdX6XUWCQDBbsZHxj5OyvCYwn7zU/s356/Screen+Shot+2021-09-08+at+3.46.36+PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="26" data-original-width="356" height="29" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjhFTMLPCBP0cgeAqUw314FC92qoIZcjJKdnVJM7sbhenknFtA2W_8A1CG-TZ5vkzWQDwcJzoxGbXz_O9jQ8-VQ3TLakHzeruyYLDKUJS1Rmj7OxhrDCdX6XUWCQDBbsZHxj5OyvCYwn7zU/w400-h29/Screen+Shot+2021-09-08+at+3.46.36+PM.png" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;"><b>h) Explain G</b></div><div class="separator" style="clear: both; text-align: left;"><b><br /></b></div><div class="separator" style="clear: both; text-align: left;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgEcUIM3qNW3dC7urWpJh_KO5MVz-Qbb-ARHu9TTammwbyRyKe0GBNj6T-4mlVTQOIJVNlzaeKSV5uUeDAVhxpyw_y4NogwBwZZ5SO2psbgrHrALdwYxXggoqogqi2e41eARYOcBWQtKpOI/s551/Screen+Shot+2021-09-08+at+3.46.42+PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="72" data-original-width="551" height="84" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgEcUIM3qNW3dC7urWpJh_KO5MVz-Qbb-ARHu9TTammwbyRyKe0GBNj6T-4mlVTQOIJVNlzaeKSV5uUeDAVhxpyw_y4NogwBwZZ5SO2psbgrHrALdwYxXggoqogqi2e41eARYOcBWQtKpOI/w640-h84/Screen+Shot+2021-09-08+at+3.46.42+PM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiCLWPF1Yq67YgDlM3mmGk230EqP10N6CGq0EIHlXKX3PRxDEbeMRLWpRkkB1Wy2wcIlb7jtaUlhxivDFS_IYsnvlyh6O_JXTDsx6YD7lIYijtehtcFRvPSnn0baKAiQT4VOCfLF75xQMV0/s648/Screen+Shot+2021-09-08+at+4.29.46+PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="410" data-original-width="648" height="202" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiCLWPF1Yq67YgDlM3mmGk230EqP10N6CGq0EIHlXKX3PRxDEbeMRLWpRkkB1Wy2wcIlb7jtaUlhxivDFS_IYsnvlyh6O_JXTDsx6YD7lIYijtehtcFRvPSnn0baKAiQT4VOCfLF75xQMV0/w320-h202/Screen+Shot+2021-09-08+at+4.29.46+PM.png" width="320" /></a></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjGaLVgrjGQtgpxg7ZvtgryMzJR2tJD2Bh8o4TJZHS3x3Cu7KDO5UkREOOKNaVG8V5681gotV-dccVOSiMxb1e1GSO6VAqIGycIq4ycURgle9BMAPkZiOfvfhiv1XGIh0Sa0QGYrJ_9gAp2/s670/Screen+Shot+2021-09-08+at+4.30.48+PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="167" data-original-width="670" height="160" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjGaLVgrjGQtgpxg7ZvtgryMzJR2tJD2Bh8o4TJZHS3x3Cu7KDO5UkREOOKNaVG8V5681gotV-dccVOSiMxb1e1GSO6VAqIGycIq4ycURgle9BMAPkZiOfvfhiv1XGIh0Sa0QGYrJ_9gAp2/w640-h160/Screen+Shot+2021-09-08+at+4.30.48+PM.png" width="640" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><div style="text-align: center;"><br /></div><b><br /></b></div><br /><b><br /></b></div><br /><b><br /></b></div><br /><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><span style="font-weight: 700;"><br /></span></div><div style="text-align: center;"><span style="font-weight: 700;"><br /></span></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><br /><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><br /><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><br /><div style="text-align: left;"><span style="font-size: x-large; font-weight: 700;"><br /></span></div><p></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-11086515738826350092021-09-06T10:14:00.005-07:002021-09-06T10:19:36.348-07:002021 (Set 2) AP Micro FRQ#3 (Utility/ MC=MB)<p style="text-align: center;"><b><span style="font-size: large;"> 2021 (Set 2) AP Micro FRQ#3 (Utility/ MC=MB)</span></b></p><p style="text-align: center;"></p><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhadI42HaAJEnDuj5ESjB9ZLxZpYdCRa1cG0b4G5_p8zdq5ozaI3WjQii4O5tzjNAL4tqnvlwmgdI4lKK3-zZY6DTaVhyRWKuzy5PBYYxH9X_uZpW839LA1Y1qZcpo8zbot9Yu1kdOY6pkK/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="458" data-original-width="466" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhadI42HaAJEnDuj5ESjB9ZLxZpYdCRa1cG0b4G5_p8zdq5ozaI3WjQii4O5tzjNAL4tqnvlwmgdI4lKK3-zZY6DTaVhyRWKuzy5PBYYxH9X_uZpW839LA1Y1qZcpo8zbot9Yu1kdOY6pkK/s16000/Screen+Shot+2021-09-06+at+8.53.26+AM.png" /></a></div><p style="text-align: center;"></p><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;">Watch me answer it here</div><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><a class="style-scope ytcp-video-info" href="https://youtu.be/ELrUrIilKQM" style="background-color: #f9f9f9; font-family: Roboto, Noto, sans-serif; font-size: 15px; font-weight: 400; text-align: start; text-decoration-line: none; white-space: nowrap;" target="_blank">https://youtu.be/ELrUrIilKQM</a></div><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_vEfWyTDUUSI590Z-87yp8vGEJKuBPYM5EulDYjHPOBAheP89a-VUjirp45MYVHIqdp2pEGpHyDaQHIIWjn6etZdsMKXwhdRV3cgM_oJeFjFr3kZRBgVUT6Ox1wsaRJ4I7tJ6JzoijrLV/s671/Screen+Shot+2021-09-06+at+8.54.47+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="535" data-original-width="671" height="510" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_vEfWyTDUUSI590Z-87yp8vGEJKuBPYM5EulDYjHPOBAheP89a-VUjirp45MYVHIqdp2pEGpHyDaQHIIWjn6etZdsMKXwhdRV3cgM_oJeFjFr3kZRBgVUT6Ox1wsaRJ4I7tJ6JzoijrLV/w640-h510/Screen+Shot+2021-09-06+at+8.54.47+AM.png" width="640" /></a></div><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">a) Calculate the total <u>net</u> benefit of placing three advertisments.</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">Net = Benefits - Costs</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">Total Benefit of 3 advertisements = $3,000</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">Total Cost of 3 advertisements = $800</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">Total <u>NET</u> Benefit = Total Benefit - Total Cost = Total Net Benefit</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">$3,000 - $800 = $2,200</div><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEivOOJeaWIiTeOLxjy7-sQojhj9KwIXDK8j6Js0Ia6tbBbqIdQFwTaI6oRGZmc1v8aSkJBwBym4uH9YWHwboeHr2e7ax_Wz9U2PVdmoDSdIsb4J24jY6K96P2SLyoB4QUfZrsVRHWH_0mcm/s657/Screen+Shot+2021-09-06+at+8.55.07+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="85" data-original-width="657" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEivOOJeaWIiTeOLxjy7-sQojhj9KwIXDK8j6Js0Ia6tbBbqIdQFwTaI6oRGZmc1v8aSkJBwBym4uH9YWHwboeHr2e7ax_Wz9U2PVdmoDSdIsb4J24jY6K96P2SLyoB4QUfZrsVRHWH_0mcm/s16000/Screen+Shot+2021-09-06+at+8.55.07+AM.png" /></a></div><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">b) Calculate the <u>marginal</u> <u>net</u> benefit of the third advertisement.</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">Marginal = Change in Total / Change in Quantity</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIupE6ufBiWX9v5GIcwFsmtzNPcWBwirwreK3NmYVUL0kUHS_AC_w3rUeL_Zr5JjWcAVc9nbfJtAHBOzOSTHkL8OpMMmNpMRZylvf8Rw0D2G5zscPeED-_k00i_tphvUaeeAbEdos9hK4O/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="418" data-original-width="577" height="290" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIupE6ufBiWX9v5GIcwFsmtzNPcWBwirwreK3NmYVUL0kUHS_AC_w3rUeL_Zr5JjWcAVc9nbfJtAHBOzOSTHkL8OpMMmNpMRZylvf8Rw0D2G5zscPeED-_k00i_tphvUaeeAbEdos9hK4O/w400-h290/Screen+Shot+2021-09-06+at+9.16.20+AM.png" width="400" /></a></div><br /><br /></div><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg1pxgLVPSgtmIPvAieU17jeE_P6oHXlNwOtfgMp6i65gWRRwThCVCcZferRjDpnkZ3Nt5fsQ8vwWH_3lWetKvL8ZzQc0CgSVbiJQv32jVMt8i32a6Ni1iYYIekIcm-g3_nLLSXOunxdbKd/s670/Screen+Shot+2021-09-06+at+8.55.12+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="80" data-original-width="670" height="76" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg1pxgLVPSgtmIPvAieU17jeE_P6oHXlNwOtfgMp6i65gWRRwThCVCcZferRjDpnkZ3Nt5fsQ8vwWH_3lWetKvL8ZzQc0CgSVbiJQv32jVMt8i32a6Ni1iYYIekIcm-g3_nLLSXOunxdbKd/w640-h76/Screen+Shot+2021-09-06+at+8.55.12+AM.png" width="640" /></a></div><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">c) What is the optimal number of advertisements? Explain using marginal analysis.</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">The Optimal number of advertisements is where the MC = MB</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">If we can't get there then we want to get as close as possible to the MC = MB </div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">without having the MC > MB.</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjyGY_naA-dveECuSvOA50o2ez_RRNRbk7JOb-QV8QZywJMO6oLEah1Ff5uZfEbvN5RX_tQkm25z2LUAq2ruSz5k3P0CLeC-SssrhXow3wlqj7fZJZGvcU_9GJvH-L2kTnPkXO8i36ZuNqo/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="414" data-original-width="575" height="288" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjyGY_naA-dveECuSvOA50o2ez_RRNRbk7JOb-QV8QZywJMO6oLEah1Ff5uZfEbvN5RX_tQkm25z2LUAq2ruSz5k3P0CLeC-SssrhXow3wlqj7fZJZGvcU_9GJvH-L2kTnPkXO8i36ZuNqo/w400-h288/Screen+Shot+2021-09-06+at+9.24.47+AM.png" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;">The 4th advertisement has a MC of 500 and a MB of 600 = a 100 difference which is as close to where the MC=MB without having the MC > MB.</div><div class="separator" style="clear: both; text-align: center;">the 5th advertisement the MC > MB and we would never want to buy advertisements where the MC is greater than the MB as we would be losing money on that advertisement.</div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhkkCv9TGju-aoLtzFsLrBuffdhyphenhyphenxVVowH-E_78qbpjVuaJQYiI_3y11fWbQf-rsC-5lDi9kkQrMz0xMjmLrpZB69oEgCGBl_JFT0naMaT6WgHKfpJvu1PBrK_R1otvS-vj-i5KIVCQyOr8/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="233" data-original-width="378" height="197" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhkkCv9TGju-aoLtzFsLrBuffdhyphenhyphenxVVowH-E_78qbpjVuaJQYiI_3y11fWbQf-rsC-5lDi9kkQrMz0xMjmLrpZB69oEgCGBl_JFT0naMaT6WgHKfpJvu1PBrK_R1otvS-vj-i5KIVCQyOr8/" width="320" /></a></div><br /></div></div><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKDIlk91TWwFxWVdUgZTR9oz1ZcO3Lr9Hhd2V8fXNcbk_C1heuo0zZl6daw6sS_4l3Rn7t4Iil3xN630SDJhVk32glpaF6Rvq24Q6Jq_B6wLF1KMSDjbezoqt6qyq_bH9WQSa-0JJYubyD/s658/Screen+Shot+2021-09-06+at+8.55.21+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="82" data-original-width="658" height="80" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKDIlk91TWwFxWVdUgZTR9oz1ZcO3Lr9Hhd2V8fXNcbk_C1heuo0zZl6daw6sS_4l3Rn7t4Iil3xN630SDJhVk32glpaF6Rvq24Q6Jq_B6wLF1KMSDjbezoqt6qyq_bH9WQSa-0JJYubyD/w640-h80/Screen+Shot+2021-09-06+at+8.55.21+AM.png" width="640" /></a></div><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">d) Suppose over the next year the MB for each advertisement increases by $300. Identify the optimal number of advertisements.</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj61mLbmPly7S4UtR5uMQkMTBDzrtIdOv6CrXCacqWyAHo9cZRXgn8Uo5Cfyk-LO00rrw-7hTSDBLNAn5GGYO3o2gKmjZu26O8xn10py1FeDcACsH837b6ciz-WBldkR7JjY6M8hQb6iZvB/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="389" data-original-width="590" height="264" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj61mLbmPly7S4UtR5uMQkMTBDzrtIdOv6CrXCacqWyAHo9cZRXgn8Uo5Cfyk-LO00rrw-7hTSDBLNAn5GGYO3o2gKmjZu26O8xn10py1FeDcACsH837b6ciz-WBldkR7JjY6M8hQb6iZvB/w400-h264/Screen+Shot+2021-09-06+at+9.59.13+AM.png" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;">The MB for the 4th unit is now 900and the MC for the 4th unit is still 500 a 400 difference.</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">The 5th units MC is now greater than its MB and we never want our MC to be greater than the MB or we will be loosing money on that Unit.</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">So we stay at the 4th unit.</div><br /></div><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiRApGuaZS-fUNZY0_uvulfAgHVhFj-gx5qZ6fvSrfpOmZJA3y_2E_rTQRavh4JpFwnEonIwTupHsL9nk81kOP1R-09m1B0jNmoGfHVg5hnOmC3ebAWIunkFpe-LWTajwDZ1iEeBCDp8udH/s667/Screen+Shot+2021-09-06+at+8.55.27+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="32" data-original-width="667" height="30" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiRApGuaZS-fUNZY0_uvulfAgHVhFj-gx5qZ6fvSrfpOmZJA3y_2E_rTQRavh4JpFwnEonIwTupHsL9nk81kOP1R-09m1B0jNmoGfHVg5hnOmC3ebAWIunkFpe-LWTajwDZ1iEeBCDp8udH/w640-h30/Screen+Shot+2021-09-06+at+8.55.27+AM.png" width="640" /></a></div><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">e) There are many firms and they advertise.</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">We only have one market structure that <u>advertises</u> for the AP.</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">Monopolistic Competition</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">Natural Monopoly Cheat Sheet</div><div class="separator" style="clear: both; text-align: center;"><a href="https://econowaugh.blogspot.com/2018/04/monopolistic-competition-cheat-sheet.html">Here</a><br /></div><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiL9ioVIWe0YMW7ZvvKnQyGkU-0cKMDxc8Q6eJ5pXqMBHbOmA2BXGZ4VL0fk6A9aa8vNdQCltBohJpzXaWbV_lMrXziJYaLzZsR_vrLh_bMguZhf01ThJ0It0xa8fYDctSc5wArOaDTxtYF/s664/Screen+Shot+2021-09-06+at+8.55.33+AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="28" data-original-width="664" height="26" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiL9ioVIWe0YMW7ZvvKnQyGkU-0cKMDxc8Q6eJ5pXqMBHbOmA2BXGZ4VL0fk6A9aa8vNdQCltBohJpzXaWbV_lMrXziJYaLzZsR_vrLh_bMguZhf01ThJ0It0xa8fYDctSc5wArOaDTxtYF/w640-h26/Screen+Shot+2021-09-06+at+8.55.33+AM.png" width="640" /></a></div><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEibrO0YSSVv4RC5n78g7AonBXz8zGI8e-6rdZPZEBrWn3i2f8o4XANDqvFtq1MgEeZp1qIvVSoJbjNY8RQZzD6XSi8YtNzOFsg34vG3KuuCsrdeW4oJZxKvzZOsqPbd_ybWNIXoNglC4Tyy/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="235" data-original-width="561" height="269" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEibrO0YSSVv4RC5n78g7AonBXz8zGI8e-6rdZPZEBrWn3i2f8o4XANDqvFtq1MgEeZp1qIvVSoJbjNY8RQZzD6XSi8YtNzOFsg34vG3KuuCsrdeW4oJZxKvzZOsqPbd_ybWNIXoNglC4Tyy/w640-h269/Screen+Shot+2021-09-06+at+10.09.13+AM.png" width="640" /></a></div><br /><br /></div><br /><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><br /></div><br /><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><br /></div><br /><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><br /></div><br /><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><br /></div><br /><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-size: x-large; font-weight: bold; text-align: center;"><br /></div><b style="font-size: x-large; font-weight: bold;"><span style="font-size: large;"><br /></span></b><p></p><br /><br /><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><br /><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><br /><br /><br /><br /><br /><div class="separator" style="clear: both; text-align: center;"><br /></div><p></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-32537158158874467642021-07-31T14:35:00.003-07:002021-09-11T08:32:09.277-07:00<p style="text-align: center;"><b><span style="font-size: x-large;"> 2019 AP Macro (Set 1) FRQ#3</span></b></p><p style="text-align: center;"></p><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhdngtIRbp28QZgotxWLUy8IBhnj3DJENPQBRMNr3s3hjOaFqJIIp1WU50lFTlWK5a2DX_TM_TcKZ_YKUNb75oQ_pFiQ3HljY1qcJtS3MffQo7FvIHb0ctFp0FwSeUkNgs9S5sWFnrc-AdR/s340/Screen+Shot+2021-07-31+at+1.42.20+PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="207" data-original-width="340" height="195" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhdngtIRbp28QZgotxWLUy8IBhnj3DJENPQBRMNr3s3hjOaFqJIIp1WU50lFTlWK5a2DX_TM_TcKZ_YKUNb75oQ_pFiQ3HljY1qcJtS3MffQo7FvIHb0ctFp0FwSeUkNgs9S5sWFnrc-AdR/s320/Screen+Shot+2021-07-31+at+1.42.20+PM.png" width="320" /></a></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">Watch me answer it here</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><a class="style-scope ytcp-video-info" href="https://youtu.be/aG6B62m3eX0" style="background-color: #f9f9f9; font-family: Roboto, Noto, sans-serif; font-size: 15px; font-weight: 400; text-align: start; text-decoration-line: none; white-space: nowrap;" target="_blank">https://youtu.be/aG6B62m3eX0</a></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgmNa1Jni_Qe7NzUhm3Q7cRtTVywol3tPV_MghNvE6G_GDWG6YE0tPwI-Q371toSfk81njfh4hPbFv21V80Yc7qfAwCOactnnPsB_yaTQSqy5IvECdZo9p-qmRQhjMsznb1AGPW9svd9zLb/s721/Screen+Shot+2021-07-31+at+1.37.20+PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="232" data-original-width="721" height="206" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgmNa1Jni_Qe7NzUhm3Q7cRtTVywol3tPV_MghNvE6G_GDWG6YE0tPwI-Q371toSfk81njfh4hPbFv21V80Yc7qfAwCOactnnPsB_yaTQSqy5IvECdZo9p-qmRQhjMsznb1AGPW9svd9zLb/w640-h206/Screen+Shot+2021-07-31+at+1.37.20+PM.png" width="640" /></a></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">(a.) Draw a CLG of the short run and long run Phillips curve. Label the current short-run equilibrium as Point X and plot the values on the graph.</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjeYqzB9GfMzwlsLbaStu0Ex1udHnSCgIga1Qh_fQXsmSu5HU13stm8m6qAQCqOVKihgraB0KVz8T2Tf1Gg6QWVq-FXB9BdEjbi2KIRu77MOHn-__qKZbHe57JXKfFapW5dk-dHaftoLG4D/s674/Screen+Shot+2021-07-31+at+2.07.17+PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="314" data-original-width="674" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjeYqzB9GfMzwlsLbaStu0Ex1udHnSCgIga1Qh_fQXsmSu5HU13stm8m6qAQCqOVKihgraB0KVz8T2Tf1Gg6QWVq-FXB9BdEjbi2KIRu77MOHn-__qKZbHe57JXKfFapW5dk-dHaftoLG4D/s16000/Screen+Shot+2021-07-31+at+2.07.17+PM.png" /></a></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEixGPMm76Giy2-OJimje3JkTDJwa_iAHNDta2-eT-W03IzAGw4NHeAXKH-uEVN03Pxv8_DT23eV8ubmbXIwBue771gw-Wj6jISJBj4SW79rsT_iQCDcCg3QaM4019lv8s319QlzHtq2qsaW/s666/Screen+Shot+2021-07-31+at+2.08.29+PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="69" data-original-width="666" height="66" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEixGPMm76Giy2-OJimje3JkTDJwa_iAHNDta2-eT-W03IzAGw4NHeAXKH-uEVN03Pxv8_DT23eV8ubmbXIwBue771gw-Wj6jISJBj4SW79rsT_iQCDcCg3QaM4019lv8s319QlzHtq2qsaW/w640-h66/Screen+Shot+2021-07-31+at+2.08.29+PM.png" width="640" /></a></div><br /><div class="separator" style="clear: both; font-weight: bold; text-align: left;">(b) Is the actual inflation rate greater, less than or equal to the Expected Inflation Rate of 3%.</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">Less than.</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;">The economy is currencty in a recession and has a lower PL and greater unemployment rate than the Expected inflation rate and NRU.</div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhgT7QczDHi9cHvKPagG0r_xuBefF-aessZmt2BR0lq2qoR2KSh-Vd9ZNsdV86Nunfy8KqFnJt709guS9ntdgULbgh-uh0TWCtDwCYrzsdyWu1dDjk0y7foo6h8OC4n3fEL_ZeISo5zKaCf/s651/Screen+Shot+2021-07-31+at+2.25.33+PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="65" data-original-width="651" height="64" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhgT7QczDHi9cHvKPagG0r_xuBefF-aessZmt2BR0lq2qoR2KSh-Vd9ZNsdV86Nunfy8KqFnJt709guS9ntdgULbgh-uh0TWCtDwCYrzsdyWu1dDjk0y7foo6h8OC4n3fEL_ZeISo5zKaCf/w640-h64/Screen+Shot+2021-07-31+at+2.25.33+PM.png" width="640" /></a></div><br /><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">(c) Assume loans were made taking into account the expected rate of inflation at 3%, will lenders (creditors, bankers) be better off, worse off after they realize the actual inflation rate identified in part B? Explain.</div><p style="font-weight: bold; text-align: center;"><b>Better off as the actual inflation rate is less than the expected rate.</b></p><div class="separator" style="clear: both; text-align: center;">Bankers must take into account the inflation rate. Why?</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">Suppose you make a loan to someone with an interest rate of 3%. This is the nominal rate you have charged them and actual inflation turns out to be 3%. </div><div class="separator" style="clear: both; text-align: center;">Stupid, Stupid, Stupid</div><div class="separator" style="clear: both; text-align: center;">{{Nominal - INflation = Real}}</div><div class="separator" style="clear: both; text-align: center;">If you charge then 3% and the Inflation rate is 3% then you have made 0 real dollars</div><div class="separator" style="clear: both; text-align: center;">Remember inflation implies that the price of everything increased by 3%, </div><div class="separator" style="clear: both; text-align: center;">you made 3% on your loan but the price of everything increased by 3%.</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">If you had charges 5% and the inflation rate was 3% then you would have made 2% on your money.</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">If you charged 3% and the inflation rate was 1%, then you earned 2% on your loan<b> and this is what we have in the problem above. The actual rate is less than the expected rate of 3% and therefore the banker wins.</b></div><div class="separator" style="clear: both; text-align: center;"><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhBNXrZwrsuPsR1gc7pIzDZ4-fWxJQCSxleDZmoFSrID2VFIV8ssPAOqIu2EWp_FjReo1t0sFVDsqho5LudD6fpHaNokM3fgxNWiHNssmfOnDXGqwn0sdGuhYFupcyBRS35GFjuhpugRNvm/s729/Screen+Shot+2021-07-31+at+2.14.09+PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="583" data-original-width="729" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhBNXrZwrsuPsR1gc7pIzDZ4-fWxJQCSxleDZmoFSrID2VFIV8ssPAOqIu2EWp_FjReo1t0sFVDsqho5LudD6fpHaNokM3fgxNWiHNssmfOnDXGqwn0sdGuhYFupcyBRS35GFjuhpugRNvm/w400-h320/Screen+Shot+2021-07-31+at+2.14.09+PM.png" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiMIW8SyDkh9De7Fo1IpHcikYU_8gnNA9VNTN-ALvOr26X0ABxl_nhlItKCkUDGE-b9_1LC-jrchNh9P76M2SnFnFYqE6y7jAMbErvnVf9m4BkkXB1e_A01ppbOQuKj4iNrCgS2kuqUmZK7/s676/Screen+Shot+2021-07-31+at+2.24.52+PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="97" data-original-width="676" height="92" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiMIW8SyDkh9De7Fo1IpHcikYU_8gnNA9VNTN-ALvOr26X0ABxl_nhlItKCkUDGE-b9_1LC-jrchNh9P76M2SnFnFYqE6y7jAMbErvnVf9m4BkkXB1e_A01ppbOQuKj4iNrCgS2kuqUmZK7/w640-h92/Screen+Shot+2021-07-31+at+2.24.52+PM.png" width="640" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;"><b>(d) Based on the relationshipbetween the actual and the expected, what will happen to the natural rate of unemployment in the long-run?</b></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: center;">What we know is that in the long-run we always return to the LR rate of unemployment at 4%.</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">The only time the college board has tested the NRU actually changing was 1 year when they had unemployment benefits increasing. This caused more people to choose to stay unemployed and therefore the NRU increased as the LRPC shifted right.</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">In the situation above (in the long-run) wages would fall, input prices would fall and the SRPC would shift leftward taking us back to fullemployment at a lower price level.</div><div class="separator" style="clear: both; text-align: center;">but the NRU would remain unaffected.</div><div class="separator" style="clear: both; text-align: center;">(Think Classical view)</div><br /><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhNgfnFONusgFbKb5ppyR-YLqkL5sRJt6qhzASPQipCXx5_gIhAx96CpoV04m6gxmgkT5VViJWBwm1gxxvuQ83Il_WeflLW4-MW63Z6_XfPutGcEPpB2hjppRM_FfTGczX84r_N4MVfmmcb/s675/Screen+Shot+2021-07-31+at+2.26.39+PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="67" data-original-width="675" height="64" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhNgfnFONusgFbKb5ppyR-YLqkL5sRJt6qhzASPQipCXx5_gIhAx96CpoV04m6gxmgkT5VViJWBwm1gxxvuQ83Il_WeflLW4-MW63Z6_XfPutGcEPpB2hjppRM_FfTGczX84r_N4MVfmmcb/w640-h64/Screen+Shot+2021-07-31+at+2.26.39+PM.png" width="640" /></a></div><br /><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><br /></div><br /><span style="font-size: x-large; font-weight: bold;"><br /></span><p></p><p style="text-align: center;"><br /></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-38241291526580818952021-03-25T13:08:00.002-07:002021-03-25T13:36:46.754-07:00Basic Review (Fundamentals, PPC, Circular Flow, Comparative Advantage)<blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><p></p><div class="separator" style="clear: both; text-align: center;"><br /></div></blockquote><p style="text-align: center;"><b><span style="font-size: large;">Basic Review </span></b></p><p style="text-align: center;"><b><span style="font-size: large;">(Fundamentals, PPC, Circular Flow, Comparative Advantage)</span></b></p><p style="text-align: center;"><span style="font-size: medium;"></span></p><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><span style="font-size: medium;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiDKrCFq51ml8bT_chQmP5dO3ECckBJbIQdNfx95tnHDeXamHoCU28USR3ZENkMdrUFo2tL7dGE-Qd6taK2dgtoj29D6mtO3r1Xr_eubNQEhgSCAbeU1VhcVpd13ptPVIdmH2M_e-TlShq2/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="308" data-original-width="580" height="341" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiDKrCFq51ml8bT_chQmP5dO3ECckBJbIQdNfx95tnHDeXamHoCU28USR3ZENkMdrUFo2tL7dGE-Qd6taK2dgtoj29D6mtO3r1Xr_eubNQEhgSCAbeU1VhcVpd13ptPVIdmH2M_e-TlShq2/w640-h341/Screen+Shot+2021-03-25+at+1.06.06+PM.png" width="640" /></a></span></div><span style="font-size: medium;"><br /><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhNvU7e4ozlUasPP28zdKH7H2D8c16Oz7Gi9O7X1U3aCerrJnIZ7iOUdRl8P8PaNp3m3qn0ajjKaBuHNXgEhwqco-nZHD2LASr6uuIs-X955oX_ISFaRwIF3erkYFmTztEXpDJPjchR2yKL/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="90" data-original-width="468" height="124" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhNvU7e4ozlUasPP28zdKH7H2D8c16Oz7Gi9O7X1U3aCerrJnIZ7iOUdRl8P8PaNp3m3qn0ajjKaBuHNXgEhwqco-nZHD2LASr6uuIs-X955oX_ISFaRwIF3erkYFmTztEXpDJPjchR2yKL/w640-h124/image.png" width="640" /></a></div></div></div><div class="separator" style="clear: both; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhnLHn9EJClRNptMCirvMOcQD8nmN2v0eSnZhdCn3mFRv8P63TcIKHsSmBhuS01IAzLIb6o5udp5vI9ovNMRa8g0bFAZOV84mT4nMQtieUYnoH-zjC0_lJr1pCPycYJq4L68vougrKMGFPV/s297/Screen+Shot+2021-03-25+at+1.16.55+PM.png" imageanchor="1" style="margin-left: 1em; 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margin-right: 1em;"><img border="0" data-original-height="126" data-original-width="311" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjtpTejW83L73xj7uTz1OW8ZKM9vmpXHQWV5KFBECt2OCbD4XXZMkPU03LWd-HWG1NGeLDl9rocpRagd9snHPRiqUem2PLlKgmVDpr94X1gHob-q0O1wEsn60t09UkQhRxrkcLNqj9uxgBD/s0/Screen+Shot+2021-03-25+at+1.16.10+PM.png" /></a></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><div class="separator" style="clear: both; text-align: center;"><br /></div><br />Opportunity Cost</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">39 - E</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">46 - E</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">31 - D</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">1 - C</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">Market & Command</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">2 - B</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">1 - E</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">4 - A</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">2 - A</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">Economics & Scarcity</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">16 - B</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;">1 - B</div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><br /></div><div class="separator" style="clear: both; font-weight: bold; text-align: left;"><div class="separator" style="clear: both; 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text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><br /></div><br /></div><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><br /><br /></div><br /><br /></div><br /><br /></div><br /><br /></div><br /><br /><br /></span><p></p><p style="text-align: center;"><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p> </p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-4635951316587928402021-03-10T09:35:00.001-08:002021-03-10T09:35:07.276-08:00<p style="text-align: center;"> <span style="font-size: x-large;"><b>2005 AP Micro FRQ#2 (Indirect Tax)</b></span></p><p style="text-align: center;"></p><div class="separator" style="clear: both; font-size: xx-large; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjabFfrXCI4wHU07VkhBAxUehgETqqcOJJDvJKvVUgodIVBiJosm0JECv3iVmLcI4o2bYeSGILDMVFl6L54rz1pUX7REU7ususT8nL_EBkF5bdNkxfXniDp9G5IJbZePoum8L8cvjkeMiIT/s697/Screen+Shot+2021-03-10+at+9.48.39+AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="587" data-original-width="697" height="538" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjabFfrXCI4wHU07VkhBAxUehgETqqcOJJDvJKvVUgodIVBiJosm0JECv3iVmLcI4o2bYeSGILDMVFl6L54rz1pUX7REU7ususT8nL_EBkF5bdNkxfXniDp9G5IJbZePoum8L8cvjkeMiIT/w640-h538/Screen+Shot+2021-03-10+at+9.48.39+AM.png" width="640" /></a></div><h4 style="text-align: center;"><b>Watch me answer it here<br /></b><a class="style-scope ytcp-video-info" href="https://youtu.be/YMCeq-VRTDU" style="background-color: #f9f9f9; font-family: Roboto, Noto, sans-serif; font-size: 15px; text-align: start; text-decoration-line: none; white-space: nowrap;" target="_blank">https://youtu.be/YMCeq-VRTDU</a></h4><p></p><p style="text-align: center;"></p><div class="separator" style="clear: both; font-size: xx-large; font-weight: bold; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhCwCoOVdUDF6ZkrbX-JJW35LAQeBHQch8KIWpkdx-dHKy49ZS3755dmlRrB5IPB0DPgnJ6XKOcYK_HKSfnYI3O8PIZVyezQxjA6XbUP60Cl9bdng-dIrp1BqoE51hnipeI7sQReB3LXAAN/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="611" data-original-width="710" height="550" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhCwCoOVdUDF6ZkrbX-JJW35LAQeBHQch8KIWpkdx-dHKy49ZS3755dmlRrB5IPB0DPgnJ6XKOcYK_HKSfnYI3O8PIZVyezQxjA6XbUP60Cl9bdng-dIrp1BqoE51hnipeI7sQReB3LXAAN/w640-h550/Screen+Shot+2021-03-10+at+9.34.34+AM.png" width="640" /></a></div><br /><div style="text-align: left;">2. The graph above shows the market for a good that is subject to a per-unit tax. </div><div style="text-align: left;"><br /></div><div style="text-align: left;">(a) Using the labelling on the graph, identify each of the following.</div><div style="text-align: left;"><br /></div><div style="text-align: left;">(i) The equilibrium price and quantity before the tax.</div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPzxNIm5AKE8052Udoei6sRnr8xddB1lEoQc2RHvJDayXf6Ya4-PJoR3l4JgGOx92WJ_-wrMwnVY5GHMJBEXYdzgMk88mKLPMn2VvYAzoW9_TbSN6t7QP173tH00rjetuZeNTC51xFz_zc/s486/Screen+Shot+2021-03-10+at+9.54.05+AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="436" data-original-width="486" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPzxNIm5AKE8052Udoei6sRnr8xddB1lEoQc2RHvJDayXf6Ya4-PJoR3l4JgGOx92WJ_-wrMwnVY5GHMJBEXYdzgMk88mKLPMn2VvYAzoW9_TbSN6t7QP173tH00rjetuZeNTC51xFz_zc/s320/Screen+Shot+2021-03-10+at+9.54.05+AM.png" width="320" /></a></div><div class="separator" style="clear: both; text-align: center;">The new price is $13 and the quantity is now 80.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">(ii) The area representing the Consumer Surplus before the tax.</div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEji1DvGLL_GImXan8GXMQF39Sy83hucuPrG2QeirqtRADcd3PsGla7T_gzrIJJ0stMwqC4Nwd9YQ8K39NKrlO0MBk3aDSZGSYbofTebmV7VXN4MAG90pEgqSQ87TBtnw5LuJ_xpgBWg6Dav/s498/Screen+Shot+2021-03-10+at+9.56.51+AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="434" data-original-width="498" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEji1DvGLL_GImXan8GXMQF39Sy83hucuPrG2QeirqtRADcd3PsGla7T_gzrIJJ0stMwqC4Nwd9YQ8K39NKrlO0MBk3aDSZGSYbofTebmV7VXN4MAG90pEgqSQ87TBtnw5LuJ_xpgBWg6Dav/s320/Screen+Shot+2021-03-10+at+9.56.51+AM.png" width="320" /></a></div><div class="separator" style="clear: both; text-align: center;">The area of Consumer surplus before the tax is everything above the price and below the demand curve.</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><b>Area ABCF = Consumer Surplus before the tax.</b></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;">(iii) <span style="text-align: center;">Producer surplus is everything below the price and above the surplus.</span></div><div class="separator" style="clear: both; text-align: left;"><span style="text-align: center;"> </span></div><div class="separator" style="clear: both; text-align: justify;"><span style="text-align: center;"><b>Area of Producer Surplus is DGE = Producer Surplus before the tax.</b></span></div><div class="separator" style="clear: both; text-align: justify;"><span style="text-align: center;"><br /></span></div><div class="separator" style="clear: both; text-align: justify;"><div class="separator" style="clear: both; text-align: left;">(b) Based on the graph does the price paid by the buyer rise by the full amount of the tax.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"><b>NO, as the demand curve is elastic and therefore the consumer and the producer will split the tax or the demand is not perfectly inelastic. If the demand was perfectly inelastic the producer could raise the price by the full amount of the tax. </b></div><span style="text-align: center;"><br /></span></div><div style="text-align: left;">(c) Using the labelling on the graph, identify each of the following after the imposition of the tax.</div><div style="text-align: left;"><br /></div><div style="text-align: left;">(i) Net price recieved by the seller.</div><div style="text-align: left;"></div><p></p><div class="separator" style="clear: both; text-align: center;"><b>Price recieved by the seller = $11</b></div><div class="separator" style="clear: both; text-align: center;"><b>13 new price - $2 tax = $11 received by seller</b></div><div><br /><br /></div><p style="text-align: center;"></p><div style="text-align: left;">(ii) The amount of tax revenue.</div><div style="text-align: left;"><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhhJaMftufQkyYwwAe3e8EGIxInFGiTSIgJ-n5WDFePj06ooTlrrOzIQoQd0qT8kvyDSSyQHg-hrbjEysh1ZkIpI6GJ1nNED_3DG3qsbXJJ-a9c4Weu2h06E6PonbKABAcLzdj_RFnHvgrm/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="384" data-original-width="503" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhhJaMftufQkyYwwAe3e8EGIxInFGiTSIgJ-n5WDFePj06ooTlrrOzIQoQd0qT8kvyDSSyQHg-hrbjEysh1ZkIpI6GJ1nNED_3DG3qsbXJJ-a9c4Weu2h06E6PonbKABAcLzdj_RFnHvgrm/" width="314" /></a></div><div class="separator" style="clear: both; text-align: center;"><b>The amount of tax (government) revenue is the amount of the tax ($2)</b></div><div class="separator" style="clear: both; text-align: center;"><b>multiplied by the new quantity sold (80) after the tax.</b></div><div class="separator" style="clear: both; text-align: center;"><b>2 x 80 = $160 government revenue</b></div><div class="separator" style="clear: both; text-align: center;"><b>Area = BCD</b></div></div><div style="text-align: left;"><br /></div><div style="text-align: left;">(iii) Area representing consumer surplus (after the tax).</div><p></p><div class="separator" style="clear: both; text-align: center;"><b>The area of Consumer surplus after the tax is everything above the price and below the demand curve.</b></div><div><div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both;"><b><br /></b></div><div class="separator" style="clear: both;"><b>Area A = Consumer Surplus after the tax</b></div></div></div><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEimrBH7EQN-6vZWv2cocWG9nj5UsoHghfT3IkM37ylNrRnErvGMVcNbdUdetX0ThhrcjAXnkVwzjjNz-c8q_v7R1At8kHH_MakVH1lerUeFRnqS89KmpBEjv7c0-sGy5H6P-3qYhgGnm2tS/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="390" data-original-width="411" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEimrBH7EQN-6vZWv2cocWG9nj5UsoHghfT3IkM37ylNrRnErvGMVcNbdUdetX0ThhrcjAXnkVwzjjNz-c8q_v7R1At8kHH_MakVH1lerUeFRnqS89KmpBEjv7c0-sGy5H6P-3qYhgGnm2tS/" width="253" /></a></div><br /><br /></div></div><p style="text-align: center;"></p><div style="text-align: left;"><br /></div><div style="text-align: left;">(iv) Area representing Dead-Weight Loss</div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgfpjbZ7s9amk4ULmMoCqERak8YApQkRprL_sQ6f_uga-x3bY44VsyOYLyjmoTChcb5M5XnYPs9g-wE2gDuRKqXDmhBu3lVDns9Um-tnYTB39w_SD8iiyDZuq1Yax7EE5HUC5YJzizvbvl1/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="480" data-original-width="857" height="224" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgfpjbZ7s9amk4ULmMoCqERak8YApQkRprL_sQ6f_uga-x3bY44VsyOYLyjmoTChcb5M5XnYPs9g-wE2gDuRKqXDmhBu3lVDns9Um-tnYTB39w_SD8iiyDZuq1Yax7EE5HUC5YJzizvbvl1/w400-h224/Screen+Shot+2021-03-10+at+10.12.21+AM.png" width="400" /></a></div><br /><b>Dead Weight loss is area FG</b></div><div class="separator" style="clear: both; text-align: center;"><b>It is the loss of CS & PS due to the reduced</b></div><div class="separator" style="clear: both; text-align: center;"><b>amount of quantity that society actually gets.</b></div><div class="separator" style="clear: both; text-align: center;"><b>Society is worse off due to the tax due to the </b></div><div class="separator" style="clear: both; text-align: center;"><b>reduced quantity.</b></div><div class="separator" style="clear: both; text-align: center;"><b>There is a loss of Total Surplus.</b></div><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><div style="text-align: left;"><br /></div><p></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0tag:blogger.com,1999:blog-88692926955547012.post-60166187147830996772021-02-01T08:50:00.006-08:002021-02-01T08:50:55.409-08:002009 AP Micro FRQ#3 (World Price, Tariffs)<p style="text-align: center;"><b><span style="font-size: x-large;">2009 AP Micro FRQ#3 (World Price, Tariffs)</span></b></p><p style="text-align: center;"><b></b></p><div class="separator" style="clear: both; text-align: center;"><b><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEirHTGa87CMJtB8_kRt3FQC8WtQtFB9RFT3cVWtunzKB1OkInC4bV-J89fNd1Ep8aoN7uKMcya4n0KubLeWdqS69xeFZMJmKAokZ0TMRD051SRsX3DsSTNP361I5I303MGYn-KQh7DdP5JZ/s702/Screen+Shot+2021-02-01+at+9.49.13+AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="594" data-original-width="702" height="339" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEirHTGa87CMJtB8_kRt3FQC8WtQtFB9RFT3cVWtunzKB1OkInC4bV-J89fNd1Ep8aoN7uKMcya4n0KubLeWdqS69xeFZMJmKAokZ0TMRD051SRsX3DsSTNP361I5I303MGYn-KQh7DdP5JZ/w400-h339/Screen+Shot+2021-02-01+at+9.49.13+AM.png" width="400" /></a></b></div><p></p><div style="text-align: center;"><b>watch me answer it here</b></div><div style="text-align: center;"><a class="style-scope ytcp-video-info" href="https://youtu.be/POk4t7enQZ8" style="background-color: #f4f4f4; font-family: Roboto, Noto, sans-serif; font-size: 15px; text-align: start; text-decoration-line: none; white-space: nowrap;" target="_blank">https://youtu.be/POk4t7enQZ8</a></div><p style="text-align: center;"><b><br /></b></p><p style="text-align: center;"><b><span style="font-size: x-large;"><br /></span></b></p>EconowaughAPhttp://www.blogger.com/profile/05545659010437472005noreply@blogger.com0