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1answer
24 views

Should unemployment caused by the government closing non-essential businesses during quarantine be counted as structrural unemployment?

I have following definition of structural unemployment: Long-term unemployment caused by shocks or permanent features of economy making it harder for certain workers to find a job So the answer to ...
0
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0answers
7 views

Applying Econometrics to Monetary Economics

I've been given a problem in which I am told that GDP is a function of the supply of money, prices and demand, $$Y = (M/P)^\delta$$ Taking logs, $$\log(Y) = \alpha + \beta \log(m - p) +u$$ ...
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0answers
12 views

Stimulus (Rescue) Package

With regard to the recent 2 trillion dollar coronavirus package, is the money just being printed or borrowed? A gentleman from the tax payer union claims the taxpayer will eventually be on the hook.
0
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1answer
22 views

How's a levered hedge fund effectively selling a gigantic put option on its ability to finance its own positions?

I grasp the basics of a put option. John C. Hull. Options, Futures, and Other Derivatives (2017 10 edn). pp 8-9. A put option gives the holder the right to sell the underlying asset by a certain ...
10
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2answers
297 views

The Economics of Coronavirus

People are concerned about the economic impacts of the virus. How severe will the economic downturn be? Will the coronavirus cause a global recession worse than the 2008 crisis? I'm not looking here ...
1
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1answer
17 views

How can you profit from junk bonds and selling treasuries, if the junk bond doesn't default?

Junk Bond/Treasury convergence Typically junk bonds, given their speculative grade, are undervalued as people avoid them. Therefore the spread over treasuries is more than the risk of default, by ...
1
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2answers
63 views

What is the difference between trade deficit and current account deficit?

I read this article and still don't understand the difference. "Spends more money on what it imports compared to the money it receives for what it exports" (how it defines current account deficit). "...
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0answers
4 views
0
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0answers
18 views

Given $f(x_1,x_2) = \min\{x_1,x_2\}^\alpha$ find the profit-maximizing factor demands, supply function and profit fuction

Given $$f(x_1,x_2) = \min\{x_1,x_2\}^\alpha$$ I have to find the profit-maximizing demand functions, supply function and profit function but I am not sure how to when the function is given as it is. ...
4
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0answers
15 views

Deriving a demand curve from a Cobb-Douglas utility

Probably a daft question but I derived an equation for a demand curve from a general Cobb-Douglas utility function $$U(x,y)=\beta x^{\alpha}y^{1-\alpha}$$ given a budget constraint $$M=xP_x+yP_y$$ and ...
0
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0answers
9 views

Intertemporal Slutsky and Endowment

To make sure I'm understanding Slutsky's equation and intertemporal choice correctly: given a choice between consumption today and consumption in the future, an increase in the interest rate will ...
2
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1answer
143 views

Why are my 2SLS estimates much larger than my OLS estimates?

When performing IV regression, it is often taken as a sign of unbiasedness if the IV estimates are similar to the OLS estimates of the same model. My question is: If the estimates are very different,...
3
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1answer
123 views

Why did Greece not solve its debt problem by selling treasury bond to its own people?

Since the Greek vehemently opposed the conditions imposed by the EU for the 3rd bailout, I don't understand why the Greek government did not raise the money needed to repay the previous loans by ...
-1
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0answers
23 views

Is it detrimental if self-interest is not acknowledged in resource allocation situations?

Please note: I am doing a literature survey/review, and I would like references to published work. I contend that if we are dealing with a resource allocation mechanism that allocates scarce ...
-3
votes
1answer
95 views

Is being a tax nomad possible at least in theory in a two or more states planet? [closed]

I define a tax nomad as: A person who works at least with a computation device and is frequently (say, about once in two years) relocating between different, two or more (federal) states, and, also: ...
4
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2answers
434 views

How to borrow at risk free rate

When learning about derivatives, we learnt about risk-free hedges and portfolios. However, one of the concepts was about borrowing and lending at the risk free rate. Now, for lending it's as simple as ...
0
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1answer
21 views

What should Lowe's(the home improvement company) do to keep their company profitable during the next recession?

During the 2008-2009 recession Lowe's lost money because they did not act fast. What can Lowe's do in the event of a new recession to prevent a similar situation from occurring again.
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0answers
27 views

Finding Potential Function of Sudoku Game (Can't understand how given function is a potential function)

Link of question and solution can be found here: https://web.ece.ucsb.edu/~jrmarden/files/ece194v/hw8solutions_F19.pdf Consider a Sudoku puzzle as illustrated below: $$ A=\left[\begin{array}{cccc} 0 &...
-3
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1answer
34 views

what would be an efficient investment when central banks have massive qe?

Recently the central bank said in a statement on its website. “Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift ...
-1
votes
1answer
20 views

What amount of Quantitative Easing will cause hyperinflation?

You all know that Quantitative Easing shifts the LM and AD curves right, so I haven't taken the time to redraw this picture. What's the maximum amount of Quantitative Easing that the Federal Reserve ...
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0answers
8 views

Creation of Money - Hypothetical Situation

Imagine you sell me some consulting services. I don't have any cash, so I give you a $100 IOU instead. You now have a $100 Note Receivable on your Balance Sheet. ...
0
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1answer
19 views

Monetary policy: increasing interest rate

What happens to the quantity of treasury bonds when central bank sells short-term bonds? The overall question for the assignment is: Suppose that the central bank of a country decides to increase the ...
1
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0answers
8 views

Time-dependent market-clearing equilibrium price

I'm working my way through Chiang and Wainwright's Fundamental Methods of Mathematical Economics (4th ed) while holed up at home. On p. 532, in exercise 16.4 2. (b), the authors ask you to find the ...
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3answers
86 views

How much more can the Federal Reserve or US gov't spend on COVID-19?

I studied in Canada, and don't know much about U.S. On Mar. 26 2020, the Federal Reserve’s Balance Sheet Tops $5 Trillion for First Time : economy. I quote MarketWatch In an NBC News interview ...
1
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2answers
31 views

How to interpret fixed effect regression R-sq. results for panel data?

I runned a fixed effect regression in Stata (xtreg, fe) for panel data. I obtained below R-sq. results. How should I interpret them? Which one is my main interest(within,below or overall)? How can I ...
0
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0answers
17 views

Production Possibility Frontier with 3 Goods

I want to make PPF Curve with 3 goods. Assumption : Economy that can produce three goods, Cloth $(C)$, Food $(F)$, Wine $(W)$. Two factors of production Capital $(K)$ and Labor $(L)$ So the ...
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0answers
5 views

'Constrained optimisation' for mutually exclusive goods?

Taking the standard approach to constrained optimisation, where we maximise utility subject to a budget constraint with some allocation on the consumption of two goods, does it make apply the same ...
1
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0answers
13 views

Optimization problem of a Cobb-Douglas function with 3 inputs

A perfectly competitive firm uses 3 inputs to manufacture a certain product according to the following Cobb-Douglas production function: $$ Q = A L_1^{\alpha_1} L_2^{\alpha_2} L_3^{\alpha_3} $$ ...
1
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1answer
19 views

Understanding distortions in investment in human capital

I am currently reading Economics of The Colour Bar by WH Hutt, and I'm having trouble understanding this bit he has written: “But when the price of any commodity is raised above the free market level, ...
0
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0answers
4 views

FDI, FPI relation with interest rates

I understand how a rise in interest rate might lead to an inflow of capital into debt securities, however wouldnt these Foreign Portfolio Investments (FPI) remove their funds from equity. And for ...
16
votes
4answers
4k views

Why is fractional reserve banking allowed?

I learned about banks' fractional reserves and that revolted me. How is that not considered to be fraud? The idea doesn't seem too sophisticated, on the contrary, it sounds very simple: the bank ...
0
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0answers
3 views

Reason for the increase in aggregate demand due to the existence of black money

How can existence of black money amd black assets due to corruption, tax evasion etc., increase the aggregate demand? Can anyone explain this with an example?
1
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2answers
86 views

How is the Corona $2 trilion stimulus package going to be financed?

Perhaps this is a simple question but as a non-US citizen I don't understand how the US government is going to finance the $2 trillion stimulus package to combat the economic damage due to the Corona ...
-3
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1answer
27 views

Meaning of the sentence

I am having trouble understanding this economic concept: Consumer can obtain maximum utility only if he/she incurs expenditure on various commodities in such a manner as to equalise marginal ...
1
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0answers
25 views

$a\geq 0$, $x\succsim y$ implies $x+a\succsim y+a$ so the preference is linear?

$\succsim$ is a continuous and local non-satiate weak order. $x,y,a$ are vectors in $\mathbb R^n$ We say $a\geq0$ if all directions of the vector $a$ is greater or equal to zero. We want to prove (...
-1
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2answers
43 views

Isn't recession is when there's an actual decrease and not just a less rapid growth?

I heard that for 2020, the global economic forecast is recession. The growth will be less than 2.5%. But isn't recession is when there's a decrease in GDP (for two consecutive quarters, as I recall), ...
0
votes
1answer
51 views

Why isn't the Federal Reserve bothered by the drawbacks of its unlimited Quantitative Easing?

On Mar. 26 2020, Fed announces unlimited QE and sets up several new lending programs : finance. I know little on the U.S., as my B.A. economics degree is from a Ontario university. If I remember the ...
-2
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2answers
42 views

What is the Federal Reserve's “money printing” impact on inflation

In wake of Coronavirus, when the Fed announces it is printing \$2.2T, what is the impact on inflation? Does the M2 increase by \$2.2T? (Thus a 12.5% increase in inflation? That can't be right?) Is ...
0
votes
1answer
31 views

Finding an instrumental variable for unemployment

I have the following regression model: Marijuana Usei = β0 + β1Unemployedi + β2Personal Incomei + β3Educational Attainmenti+ β4Sexi + β5Agei + β6Racei + εi The model is a probit model I need to ...
2
votes
2answers
64 views

How are trade deficits financed?

The usual answer is either "foreign debt" or "Foreign Direct Investment". But: Why does that make sense? And why wouldn't be financed otherwise like from importers taking out bank loans domestically ...
2
votes
1answer
1k views

In panel data application, when using Fama and MacBeth regression is preferable over the fixed or random effect model? thought

When discussing panel data, many econometric books, usually, focus just on fixed or random effect model as means of estimating regression for panel data. Despite this tendency, I have seen many papers ...
-1
votes
1answer
47 views

Shouldn't the total global debt amount to zero and not $253 trillion?

In Jan 2020, the Institute of International Finance (IIF) came out with a report (read summary here) that the total global debt is expected to climb to a new all-time high of more than $257 trillion ...
-1
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0answers
32 views

How would you design a new economic and government system that does not involve money? [closed]

The requirements are: All essential needs are taken care of (food, shelter, medical, internet) Bad actors must be punished We maximize for happiness The emphasis is on new systems. Not known systems ...
1
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0answers
27 views

Weak Instrument - Stock and Yogo

I have the following structural equations where $G,Z$ are endogenous and $X,Y$ are exogenous $$ G_d=B_0+B_1Z+B_2X+u_1\\ G_s=a_0 +a_1Z+a_2Y+u_2 \\ G_d=G_s $$ Now, I would like to perform 2SLS, thus, ...
0
votes
1answer
216 views

Balance of payments and the free floating exchange rate system

I am a beginner economics student and recently, I have been learning about how balance of payments surpluses are important for a country to control the value of its currency using its accumulated ...
-1
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0answers
13 views

Can the Federal Reserve's Quantitative Easing negative interest rates?

When I did my B.A. in economics, I never thought about extending $L(i)$ to negative y-axis. What if a central bank like the US Federal Reserve now quantitiatively eases more and shifts $\dfrac{M}{P}$ ...
2
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0answers
13 views

Does the sudden spike in the US jobless claim pose systemic risk to the US unemployment insurance system?

There has been an unprecedented short-term increase in US unemployment owing to the Covid-19 crisis. Initial jobless claims soared to a seasonally adjusted 3.28 million in the week ended March 21, ...
0
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2answers
48 views

Why does global suspension of economic activity result in catastrophic loss/debt?

Covid-19 has forced a suspension of at least 50% of financial transactions and business activities. Materially, not much has been lost: consumables have been spared, equipment is dormant, ...
1
vote
1answer
53 views

Who is working right now? (coronoavirus)

Is there any research, graphs, or any formal (non-opinion) information on where I can get information on what people are working right now? I want to know, who is still collecting a paycheck. I am a ...
2
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0answers
35 views

Federal Reserve Leveraging of COVID-19 Fund

Reading an article in The New York Times about the COVID-19 stimulus bill, I stumbled on this detail the Fed can take a limited amount of funds and deploy them widely: The central bank only needs ...

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