FOREX FRQ Cheat Sheet

FOREX FRQ Cheat Sheet

Tentative cheat sheet for the FRQ's for Forex.
Use this in tandem with the FOREX cheat sheet.

NOT!! this kind of Foreign Exchange.

2012 Microeconomics Exam FRQ #3

2012 Microeconomics Exam FRQ #3

Watch me answer this question https://youtu.be/PWN6_fSDgiM

(a) at the world price of $2 per pound, how much sugar is imported?

Ok, at $2 price 14m pounds is demanded (look at the demand curve),,, and at $2 then 2m pounds is supplied (look at supply curve).

Answer - One point is earned for stating that Loriland is importing 12 million pounds.

(b) Suppose that Lorillard imposes a per unit tariff on sugar imports and the new domestic price including the tariff is $4.

(i) Identify the new level of domestic production.

 Answer - One point is earned for identifying the new level of domestic production as 6 million pounds. 

(ii) Calculate the domestic consumer surplus for Lorillard. Show your work..

Answer - One point is earned for calculating the domestic consumer surplus as $25 million and showing the work: 1⁄2 [($9 - $4) × 10] = $25 

(iii) Calculate the total tariff revenue collected by the government. Show your work.

Answer - One point is earned for calculating the revenue from the tariff as $8 million and showing the work: ($4 - $2) (10 - 6) = $8. 

(c) Given the world price of $2, what per-unit tariff maximises the sum of domestic consumer surplus and producer surplus?

Consumer surplus is maxed with no tariffs,,, and producer surplus is maxed when all the international producers are able to sell in the country (without a tariff).

Answer - One point is earned for identifying the per-unit tariff that maximizes the sum of consumer and

producer surplus as $0. 

Ha..

2012 Microeconomics Exam FRQ # 2

2012 Microeconomics Exam FRQ # 2

Watch me answer it on Youtube https://youtu.be/pu9aX-eOWYg

(a) The table above shows Theresa's marginal utility from bagels and toy cars.
(i) What is here total utility from purchasing three toy cars?

So simple it's easy to get wrong... overthinking again?

3 toy cars (10+8+6) = 24 utils

Answer - One point is earned for determining the total utility, which is 24. 

(ii) Theresa's weekly income is $11, the price of a bagel is $2 dollars, and the price of a toy car is $1.

What quantity of bagels and toy cars will maximise Theresa's utility if she spends her entire weekly income on bagels and toy cars?

Explain using marginal analysis.

First, you must know the formula..

Then make a chart------

If you get to a place where both purchases have the same utility then you will be indifferent,, either one will do as long as you have cash to spend.

or

Using Marginal Analysis

MU/PB = 6/2 = 3 and MU/PTC = 3/1 = 3

the marginal utility per dollar spent on bagels equals the marginal utility per dollar spent on toy cars.  

Answer - One point is earned for stating that three bagels and five toy cars will be purchased.

Answer - One point is earned for explaining that with this combination of bagels and toys, the marginal utility per dollar spent on bagels equals the marginal utility per dollar spent on toy cars.   

Using Marginal Analysis

MU/PB = 6/2 = 3 and MU/PTC = 3/1 = 3

(b) Assume that the price of wheat, an input for the price of bagels, increases. Will Theresa's demand for bagels increase, decrease, or remain unchanged. Explain.

Remember, that input prices affect suppliers of a good,, not demanders.. So, Theresa will not change her demand for bagels if the price of wheat increases.

Answer - One point is earned for stating that Theresa’s demand for bagels will not change because the increase in the price of wheat will affect the supply of bagels, not the demand.

(c) Suppose that Theresa's income elasticity for bagels is -0.2. Does the value of Theresa's income elasticity indicate that bagels are a normal good, inferior good, substitute, or compliments?
  

Answer - One point is earned for stating that bagels are inferior goods.

(d) Suppose the price of toy cars increase by 10%. Theresa buys 5% fewer toy cars and 4% less of a different toy, blocks. Calculate the cross-price elasticity for toy cars and blocks, and indicate if it is positive or negative.

You gotta be *&(6%^# kidding me.

If the Price of Toy Cars is given then we need the Qd of another good and in this situation the Qd we need is for blocks. 

Xed is the comparison between 2 different goods

Toy Cars & Blocks

 Formula - 

% change in   Qd = -.04   (4% less) (Blocks)
% change in Price = .10 (Toy Cars)

Answer - One point is earned for calculating the cross-price elasticity for toy cars and blocks:

-0.04/0.10 = -0.4 

Hong Kong Macroeconomics Boot Camp April 18th, Saturday, 10pm-5pm

Hong Kong Macroeconomics Boot Camp April 18th, Saturday, 10pm-5pm
@ Redhill Peninsula,,, Billiards Room at the Clubhouse

to answer an e-mail:: Yes,, I'm teaching specifically to the test, only to the test.

Study Hard Study Early

2012 Microeconomics Exam FRQ #1

2012 Microeconomics Exam FRQ #1

Don't give up,, you can do it!!!

Watch me answer it here

https://youtu.be/9ThoLHmE_SA

1. Steverail, the only provider of train service operating between two cities, is currently incurring economic losses.

The only provider = Monopoly
incurring losses = draw a monopoly graph showing a loss

(a) Using a CLG, show each of the following.

(i) Steverail's loss-minimizing price and quantity, labeled Pm and Qm, respectively.
(ii) The area of economic losses, shaded.
(iii) The allocatively efficient quantity, labeled Qe.

(b) If Steverail raises the price above Pm, identified in part (a) (i), would total revenue increase, decrease, or not change.

Ok, I have drawn a total revenue curve on the bottom of the monopoly curve for Steverail's business.
If you know that where MR = 0 is unit elasticity then you know that the Demand curve above unit elasticity is the elastic section. In the elastic section of the demand curve,  if a monopolist raises his price his revenue will decrease.

Monopoly Cheat Sheet

Answer - One point is earned for stating that the total revenue would decrease because the demand is price elastic in that range of the demand curve where MR > 0.

(c) Assume a per-unit subsidy is provided to Steverail.

(i) Will Steverail's quantity increase, decrease, or not change? Explain.

Per-unit subsidies are viewed as Variable Costs (VC) and therefore shift the MC curve right and the ATC curve down. Quantity is increased and prices fall. A shifting of the MC curve also means that there is a new profit-max (MR = MC), hence the new lower price and greater quantity.

Why is the Per-Unit Subsidy considered a variable costs,,, because you only get the subsidy based on the amount you produce. If you don't produce you get nothing,,, so the amount of the subsidy you receive is variable.

Answer - One point is earned for stating that the quantity will increase because the subsidy will cause the MC curve to shift downward and intersect the MR curve at a larger quantity.

(ii) Will consumer surplus, increase, decrease, or not change?

A lower price will increase consumer surplus.

Answer - One point is earned for stating that the consumer surplus will increase.

(d) Assume instead that a lump-sum subsidy is provided to Steverail. For the short-run answer the following.

(i) Will the dead weight loss increase, decrease, or remain unchanged? Explain.

Ok,, so let me paint a picture. You are operating a coffee shop outside of your high school. On day a man stops by and gives you a $1,000 dollars (subsidy)... Does this effect what you pay your employees? Does this cause you to sell more coffee/ less coffee? No it doesn't,, your employees keep selling the same amounts of coffee as before. You now just have an extra $1,000 dollars in your pocket.

Deadweight loss is an inefficiency in that profit maximizing monopolies produce where MR = MC, and we know that at P = MC is allocative efficiency (no DWL)... So a lump-sum subsidy causes no change in quantity produced and does not effect DWL, society is no better off, but it does make you $1,000 richer.

Answer - One point is earned for stating that the deadweight loss will not change because the lumpsum subsidy does not change the profit-maximizing quantity.

(ii) Will Steverail's economic losses, increase, decrease or not change?

A lump-sum subsidy will decrease the loss,,, money in your pocket will decrease your overall losses.

Answer - One point is earned for stating that economic losses will decrease. 

2012 AP Macroeconomics Exam FRQ # 3

2012 AP Macroeconomics Exam FRQ # 3

Watch me answer it here

https://youtu.be/wkJxo4ureQM

(a) Draw a CLG of short-run AS, LRAS and AD. Show each of the following.

(b) Assume that there is an increase in exports from Andersonland. On your graph in part (a), show the effect of higher exports on the equilibrium in the short-run, labeling the new equilibrium output and price level Y2 and PL2, respectively.

(c) Based on your answer in part (b), what is the impact of higher exports on real wages in the short-run? Explain.

In the short-run is what you have to have noticed,,,, as wages can't adjust in the short-run,,, therefore if the price level is increasing and wages are not,,  real wages are falling.

Answer - One point is earned for stating that real wages will fall because the price level has increased and the nominal wages are fixed in the short run.

(d) As a result of an increase in exports, export oriented industries increase expenditures on new container ships and equipment.

(i) What component of aggregate demand will change?

New container ships and equipment are increases in capital and therefore Investment will increase.

Answer - One point is earned for stating that the investment component of AD will change.

(ii) What is the impact on the Long-run aggregate supply? Explain.

Think of increases in the capital stock as increasing efficiency and productivity and increasing the potential output of the economy.

Answer - One point is earned for stating that the long-run aggregate supply curve will shift to the right because the capital stock has increased.

2012 Macroeconomics Exam FRQ #2

2012 Macroeconomics Exam FRQ #2

Watch me answer it on youtube https://youtu.be/WPH4Pmot8aM

(a) What is the reserve requirement?

If demand deposits are $100,000 and required reserves are $10,000 we can assume that the reserve requirements are 10%.

Answer - One point is earned for calculating the correct reserve requirement of 10 percent

($10,000/$100,000). 

(b) Assume that Luis withdraws $5,000in cash from his checking account at Mi Tierra Bank.

(i) By how much will Mi Tierra Bank's reserves change based on Luis's withdrawal.

So, Luis deposited $100,000 into the bank, of which 10% is required by the Fed to be held as required reserves. The banks has loaned out $85,000 dollars of the amount Luis deposited into the bank, leaving $5,000 in cash on hand,, called excess reserves.

If Luis takes out $5,000 then reserves will decrease by $5,000.

Answer - One point is earned for stating that total bank reserves will decrease by $5,000 

(ii) What is the initial effect of the withdrawal on the M1 measure of money supply? Explain.

First, you must know what the M1 money supply actually is.. 

Monetary Policy Cheat Sheet

M1 is paper money, coins and checkable deposits,,, no matter if the money is in the bank as checkable deposits or in Luis's pocket as cash it doesn't effect the M1 money supply. I guess if Luis took the money and burned it,, then the M1 level of the money supply would have been changed.

Short of burning the money,, the M1 doesn't change from bank  (checkable deposits) to customer (cash).

Answer - One point is earned for stating that the $5,000 withdrawal has no effect on the M1 measure of the money supply because it only changes the composition of M1 between cash and demand deposits. 

(iii) As a result of the withdrawal, what is the new value of the excess reserves on the balance sheet of the Mi Tierra Bank, based on the reserve requirements from part (a).

This is tricky,, you must decrease the Demand deposits by the $5,000 and decrease excess reserves by $5,000 and then add back to excess reserves the amount $500 that doesn't need to be held in reserved requirements due to the $5,000 withdrawal.

Answer - One point is earned for stating that the new value of the excess reserves is $500.