Uploaded by Subham Bardhan


Q1 Some events occur and the economy is expected to experience inflation.
a. List the events that might cause an expected inflation.
b. Describe the initial effects of an expected inflation.
c. Describe what happens as an expected inflation proceeds.
A 30-year mortgage for $95,000 is issued at a 9% nominal interest rate.
(a) What is the monthly payment?
(b) How long does it take to pay off the mortgage, if $1,000 per month is paid?
(c) How long does it take to pay off the mortgage, if double payments are paid?
Unit labor requirement and wages for Spain and United Kingdom are described in the table below:
i. If the exchange rate is £0.8/€1, find out the pattern of specialization for both the countries.
ii. If the wage rate of UK increases to £4/hr, given the same exchange rate as before, how does the
pattern of specialization change for both the countries?
Determine which strategies are dominated in the following normal-form game:
i. What is the sample size and what is the value of the RSS?
ii. What are the df of the ESS and RSS?
iii. What is R2?
iv. Which test will you use to test the hypothesis that X2 and X3 have zero influence on Y? Write down
its formula.