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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.
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0answers
4 views

The derivation of Central bank's loss function?

How to derive the central bank's loss function?
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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. ...
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2answers
57 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
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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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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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 &...
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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. ...
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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 ...
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,...
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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 ...
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0answers
23 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 ...
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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 ...
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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
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: $$ Q = A L_1^{\alpha_1} L_2^{\alpha_2} L_3^{\alpha_3} $$ ...
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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 ...
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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?
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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 (...
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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 ...
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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 ...
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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, ...
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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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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), ...
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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, ...
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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 ...
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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
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 $\dfrac{M}{P}$ ...
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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, ...
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0answers
22 views

How can the Federal Reserve Chair lack any degree in economics? [closed]

Jerome Powell has no degree in economics! I see he has worked in finance, but working in finance unquestionably isn't the same as degrees in economics! Thus how's it reasonable for Obama to nominate ...
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1answer
37 views

What does this sentence (from Galbraith) mean?

In Galbraith's Economics in perspective. A critical history (a spanish edition, bear that in mind), by chapter 2 the author says: The conservatives, in a non-socialist economy, proclaim the right ...
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3answers
37 views

Why is the Dollar Index strong after the Fed dropped the Fed Fund Rate?

I have a query about the current forex market. In 16 March 2020, the US Federal Reserve Bank announces to cut the interest rate to 0%. This move supposedly weaken the Dollar Index, but why for a ...
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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 ...
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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 ...
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0answers
23 views

According to human capital theory, in which country will citizens be more likely to go to college?

Assume that in country A college tuition is 10,000 per year, citizens save 5% of their income for retirement, and there is a mandatory retirement age of 60 years old. In country B, the tuition for ...
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0answers
43 views

What are the exact sources of CARES Act economic transfers?

The bill Coronavirus Aid, Relief, and Economic Security Act provides "2 trillion". (There is also H.R.6201 - Families First Coronavirus Response Act providing aid.) From which sources will the ...
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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, ...
-2
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0answers
16 views

supply and demand problems [closed]

how do you calculate the supply and demand given the amount of suppliers and their quantity supply and amount of consumers and their quantity demand producers: 100 Qs: -100+20P consumers: 10000 Qd: ...
0
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1answer
30 views

Is it possible for a firm does not have shutdown point?

If a firm has a quadratic cost function, is it means that the firm does not have shut down point and never shut down? Are the changes in fixed cost do not affect the firm's shutdown decision?
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1answer
23 views

Won’t paying wages to temporarily unemployed due to Coronavirus result in inflation?

UK government promises to pay 80% of wages for people unemployed due to coronavirus. I am not economist, so I am probably missing something, but shouldn’t paying wages to unemployed due to coronavirus ...
1
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1answer
30 views

Why is investment included in GDP?

Why is real investment included in GDP? I thought GDP is only supposed to measure final goods produced? I thought capital is an intermediate good but I guess I am wrong. An intermediate good is sold ...
0
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1answer
41 views

Difference(s) between Rational Expectations Equilibrium and Nash equilibium

What is the major difference between the notion of rational expectations equilibrium and Nash equilibium? And why do we, only, have a rational expectation about the first moment (the price) in the ...
0
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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 ...
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 ...
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 ...
0
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1answer
26 views

What is the difference between the discount window and Fed repos?

I'm wondering how the Fed's discount window differs from it's involvement in the repo market. To the best of my knowledge, both are tools used to conduct monetary policy and both are also short-term, ...

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