# All Questions

7,971 questions
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### optimization problem for two individuals

Two flat mates 1 and 2, rent a flat and play their own music on the only CD player owned by flat-owner. They both like their own music, but dislike the music played by the other. Given the timing ...
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### two period consumption problem

Ms. A earns 25,000 dollars in period 1 and 15,000 dollars in period 2. Mr. B earns 15,000 dollars in period 1 and 30,000 dollars in period 2. they can borrow money at an interest rate of 200% and can ...
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### Show that this income tax is effectively a lump sum tax

This is a standard income, leisure tradeoff model. $$\max_{c,l} \min\{c; l\}$$ $$s.t. \space c = w(1-t)(1-l)$$ $l$ is leisure (where total time is 1), $w$ is wage, $c$ is consumption, and $t$ is ...
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### Given a Walrasian equilibrium, compute all intitial endowments that lead to given Walrasian equilibrium

If you would be so kind to take a look at the following problem:* Consider an economy with two agents Stan ($S$) and Laurel ($L$) and two goods: Cans of coke ($C$) and Pretzels ($P$). The total ...
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### Beta convergence: data uncertainties

Maybe these questions are silly for many of you but I’m trying to conduct a beta convergence analysis using data from the Penn World Table, and I have run into some uncertainties. For the dependent ...
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### Does countercyclical fiscal/governmental policy has any sense at all? [closed]

Economic downturns are induced by the contractive monetary policy conducted by the central banks in response to the supply side restrictions (which manifest in high CPI inflation). Usually economists ...
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### No price-setting firm's profit levels [on hold]

We have an homework question and we have no idea how to solve it. No price-setting firm can achieve a profit level that is higher than. (a) the competitive profit (b) the short-run profit (c) the ...
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### How to calculate capital investment?

So i have this question: After spending 3 million on research, Better Mousetraps has developed a new trap. The project requires an initial investment in plant and equipment of 6 million. This ...
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I am working on my master thesis, where I investigate the impact of the Russian embargo on Georgia's exports. I have already identified my dependent variable, as well as the variables of interest. ...
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### What is the most general definition of “the core” in game theory?

I’ve seen definitions of “the core” that rely on some specific assumptions, such as that the game is one of a transfer of resources, or that there is “transferability of utility” (presumably intending ...
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### How to transform an estimator into a correlation coefficient?

Let us assume the following equation: w_t = a * w_t-1 + u where w_t is the wealth of the son and w_t-1 is the wealth of his father. Let's further asumme that u ...
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### How do you use a Log-linear model when you have negative Xs?

I am trying to us a Log-linear model to derive an elasticity. However, some of my Xs are negative numbers. Being as the model relies on the natural log of the Ys and the Xs, how can this model work ...
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### Measure of New Firms Born in Each Period

In an economy with stochastic overlapping generations of firms, how do we easily understand the measure of new firms born? The set-up states: "In each period, measure $\rho\in(0,1)$ of new firms are ...
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### How are you supposed to calculate overhead expenses?

I'm doing a college assignment (creating a software product) in Computer Science and have been given a template for the part of the report about economics. At one moment it states the following: <...
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### Constrained Optimisation: Why is it that when I merge constraints, I get different results?

The problem that I am given is the following: $\max \ln c_0 + \beta \mathbb{E} [\ln c_1 ] \\ \text{ s.t. } c_0 + x_g q_g + x_b q_b = y_0\\ c_g = y_g + x_g\\ c_b = y_b + x_b$ Where $y_0$, $y_b$ ...
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### GDP Deflator and Economics Well-Being

The question is regarding GDP deflator. nominal & real GDP 2015, and GDP Deflator; 800, 400, 200 nominal & real GDP 2014, and GDP Deflator; 400, 400, 100 As far as I understand the increase ...
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### How to predict income n years after graduation using income dataset with age, but not graduation year?

I'm trying to predict the income of graduates of certain Master's programs n years after graduation, using the American Community Survey individual level dataset to calibrate my equation. It gives me ...
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### Sequential Game is Extensive form game?

Dynamic, Sequential, Stochastic, Extensive form and Evolutionary games. I know what all of them mean very roughly. I want to clarify them. As I understand Extensive form is a description of a ...
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### Puzzle: Fairness of consumer price indices

I have learned a bit how the consumer price index (= inflation rate) in Germany is calculated. It's a complex process, which takes into account a lot of measured values (mainly specific prices for ...
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### Subgame perfect Nash equilibrium with incomplete information [duplicate]

Take the following two-stage game with incomplete information and simultaneous actions in each state. (1) In the beginning of stage 1 players 1 and 2 do not observe the value of $\epsilon$ but they ...
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### Utility functions of countries

In international relationships, often the interacting agents are countries. For example, countries negotiate, sign agreements, give loans to each other, trade, etc. Thus it is interesting whether ...
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### Household utility functions

In basic consumer theory, there is an individual consumer who has a utility function, this function induces the individual's demand (given budget and prices), and this in turn determines the ...
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### Affordable reservation prices

An important theoretical construct in microeconomics seem to be reservation prices, i.e. the maximum price a person is willing to pay for something. Consider a typical market basket of goods a person ...
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### How does a division of a company spinning off from it's 'parent' company change it from a cost center to a profit center?

Reading an article about how many IT divisions of big companies in Japan, became seperate companies. The motivation is apparently to turn them in profit centers. Can anyone explain how becoming a ...
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### If every company in the economy earns zero economic profit, can they contribute to real economic growth?

I understand that zero economic profit does not equal to zero accounting profit. It means that every resource that goes into the production is perfectly utilized considering alternative uses in the ...
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### Arrows Theorem: Dictatorship

How does Arrow's Impossible Theorem show that the only aggregation rule that works is Dictatorship. Couldn't we have a Non-dictatorship with IIA or a Non-Dictatorship with Pareto Efficiency?
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### Pareto Efficiency [on hold]

Consider each of the two statements below whether they are true or false. Please give the proof for each. A. All Pareto-efficient allocations are envy-free. B. All envy-free allocations are Pareto-...
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### Why people respond to surveys like that of Purchasing Managers' Index?

A lot of data, including indexes, rely on surveys. For example, Purchasing Managers' Index. (1) Why people answer these surveys (is there any benefit)? (2) How to make sure the data is correct? What ...
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### I have a dataset. How do I convert this data into Indifference Curves?

This is all hypothetical. I understand indifference curves. However, I don't understand how they are produced. I read this question, and the survey answer made sense to me... Research Design: ...
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### Real Business Cycle model and demand shock

Suppose there is an increase in demand in a real business cycle set-up. Since aggregate supply is fixed and prices are fully flexible, won't that leave output unchanged as prices adjust to clear the ...
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### Independence Axiom for Linear Utility - Who proved this first?

Who first proposed the following axiomatization of linear utility using Independence? I remembered that it was Debreu but I am not so sure. What was the first paper proving this? Consider a ...
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### Relation between variation of the drift and insurance fee?

what is the relation between insurance fee and the variation of the drift of the underlying asset? I've created a simulation code, and changing those two values does not change the result. As I assume ...
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### Two periods two agents; savings and interest rate problem

I am trying to answer the following question but not getting the right result Note: I use v and u interchangeably in my notation In previous problems I simply used the Euler equation approach in the ...
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### Why is an inflation rate of 2% optimal? [duplicate]

Learning from different sources I got the impression that the European Central Bank targets at a inflation rate of 2% (not sure along which time scale actually). Can it be explained by general ...
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### The law of supply and demand - How does it work?

I've learned what the principle of supply and demand says, and would paraphrase it like this: The price of a good is at equilibrium when supply and demand are equal. Or with other words: The ...
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### Definition of subgame perfect Nash equilibrium

Take a two-stage game with complete information and simultaneous actions in each state: (1) Player 1 and 2 simultaneously choose action $a_1\in A_1$ and $a_2\in A_2$ respectively. (2) Player 1 and ...
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### Fehr & Schmidt, ultimatum game, inequaltiy aversion, perfect subgame Nash equilibrium

I am preparing for an exam. I have found an old exam but I have no solutions for it, so I tried to solve it, but I dont know if I did it correctly and need therefore your help. The problem looks as ...
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### Is the New Keynesian Phillips Curve a supply curve?

In New Keynesian models, the Phillips curve typically takes the form: $\pi_t=\beta E_t(\pi_{t+1})+\kappa y_t$ Here, $\pi_t$ refers to inflation in period $t$, and $y_t$ refers to output. Would it ...
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### Finding the optimal consumption bundle given the strictly concave utility function $v(x,y) = U(x) +y$?

I am also finding it difficult to understand what are the fundamental differences between analysing optimal bundles between concave and convex functions ? Does it also happen that the optimal bundle ...
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### Reference Request for Planned Economies

I'm asking this board for resources and figures on the Soviet command economy, specifically good places to start. I understand this question has political connotations, and that there are claims of ...
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### How to calculate indentical cash flows?

So i have this question: Homemade leverage Companies A and B differ only in their capital structure. A is financed 30% debt and 70% equity; B is financed 10% debt and 90% equity. The debt of both ...
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### Difference between shocks, innovations and disturbances

In macroeconomics and macroeconomic models, shocks, innovations, and disturbances are very prominent and often mentioned in the literature. In general, is there a difference between macroeconomic ...
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### Convert a sequential move game into a simultaneous move game

A statement from Ponssard and Zamir "Zero-sum sequential games with incomplete information" at the bottom of the first page reads AM's result is for zero-sum two-person games in which the two ...
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### Is there any mainstream criticism of the Benes-Kumhof conclusion that the Chicago Plan would improve the US economy nowadays?

A 2012 IMF Working paper by Benes and Kumhof "The Chicago Plan Revisited " has this abstract, finding in favor of the Chicago Plan an all counts basically: At the height of the Great Depression a ...
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### Can a progressive marginal taxation be regressive in terms of average tax rate?

Or does progressive marginal taxation imply that it is a progressive average taxation? Here, I mean that if $T(Y)$ is a tax function of income, marginal tax rate would be $dT/dY$ and average tax rate ...
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### Taxes and GDP, where do these come in in the formula?

We all know that the formula for GDP I'd given by GDP = C + I + G + NX I would like to know, whether I am right in deducing that when consumers and industry pay taxes, or when there are import and ...