Econ 2 Spring 2014 Feed

Econ 2: Spring 2014: Week 12: The Lesser Depression and the Government Budget

Reread Essentials, chapter 15 "Fiscal Policy”. Read chapters 18 and 19: “Crises and Consequence” and “The International Economy”

M Apr. 14: The Lesser Depression

W Apr 16: The Government and Its Budget

Problem Set 6 out later in the week…

Further Reading:


Econ 2: Spring 2014: U.C. Berkeley: Week 11: Inflation, Monetary Policy, Crises, etc...

Read Essentials, chapter 16 "Money, Banking, and the Federal Reserve System", chapter 17 "Monetary Policy), chapter 18 "Crisis and Consequence"

M Apr 7: Lecture: Aggregate Demand and Aggregate Supply

W Apr 9: Lecture; The Greater Crash and the Lesser Depression

Section 11:

Further Reading:


This File: Econ 2: Spring 2014: U.C. Berkeley: Week 11: Inflation, Monetary Policy, Crises, etc...: http://delong.typepad.com/sdj/2014/04/econ-2-spring-2014-uc-berkeley-week-11-inflation-monetary-policy-crises-etc.html

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Econ 2: Spring 2014: Problem Set 5

20140402 Econ 2 Problem Set 5.pdf


A.Suppose that it is December 2020, current forecasts are for a year-2022 level of real GDP of $19.5 trillion without policy changes. Suppose further that you have just moved to Washington to work for the newly-chosen President-Elect as Special Assistant to the Chief Economist of the Office of Management and Budget. Suppose still further that the short-term safe interest rates the Federal Reserve controls are still very close to zero and that the Federal Reserve has promised to keep them very close to zero until at least 2023. Suppose still further that risk spreads on interest rates of different assets are at normal levels.

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Week 10: GDP and Its Fluctuations

Read Essentials, chapter 14 "Aggregate Demand and Aggregate Supply", 15 "Fiscal Policy"

M Mar 31: Aggregate Supply and Aggregate Demand

W Apr 2: Getting to Where We Are:

Section 10:

Further Reading:

Further Further Reading:

Paper Assignment


Econ 2: Spring 2014: UC Berkeley: Problem Sets and Exercises


Econ 2: Spring 2014: U.C. Berkeley: Week 9: The Income-Expenditure Framework and Aggregate Demand (and a Little Aggregate Supply)

Read Essentials, chs. 10, 11, 12, and 14 before spring vacation


Econ 2: Spring 2014: UC Berkeley: Week 8: Introduction to Macroeconomics

Read Essentials, chs. 10, 11, 12, and 14 before spring vacation


Econ 2: Spring 2014: UC Berkeley: Week 7: Firms, Missing Micro, and Review

Read Essentials, chapter 8 "Monopoly, Oligopoly, and Monopolistic Competition". DRAFT Problem Set 2 Answers; DRAFT Sample Midterm I Answers; DRAFT Sample Midterm II ANSWERS.


Econ 2: Spring 2014: Re-Recorded (and Streamlined) Lectures: UNDER CONSTRUCTION

Principles

Moral Philosophy

Economics

How Markets Work

Distorting and Undistorting Competitive Markets

When We Can't Make the Market Work Optimally

The Theory of the Firm

Pieces Left Out of Micro

  • Labor
  • Education
  • Cartels
  • Finance
  • Investment
  • Monopolistic competition and variety
  • Spite, envy, and network effects in consumption
  • Self control, rules-of-thumb, and other behavioral economics topics

Introduction to Macroeconomics

Aggregate Demand


Course Syllabus: Econ 2: Spring 2014: U.C. Berkeley

Week 1: Introduction

Week 2: Supply and Demand

Week 3: Working with Supply and Demand

Week 4: Taxes and Externalities

Week 5: When We Can't Make the Market Work Optimally...

Week 6: When We Can't Make the Market Work Optimally... II

Week 7: Firms, Missing Micro, and Review

Week 8: Introduction to Macroeconomics

Week 9: Aggregate Demand (and a Little Aggregate Supply)

Continue reading "Course Syllabus: Econ 2: Spring 2014: U.C. Berkeley" »


Econ 2: Spring 2014: Sample Midterm II

1) Identifications (20 minutes—if you are not through after 20 minutes, skip to the next question): Briefly, in one or two sentences, explain the terms set out and how they have been used in the course so far:

a) Supply Curves

b) Producer Surplus

c) Non-rivalry

d) Equilibrium


2) (20 minutes—if you are not through after 20 minutes, skip to the next question): Suppose we have the demand curve: Pd = 1000 x Q-1.5

a) Pick a point on the demand curve. Calculate the elasticity of demand at that point.

b) Go back to the same point you picked in (a). Now pick the point on the demand curve with twice the quantity produced that you originally chose. Which point on the demand curve sees a greater dollar volume of sales?

c) What is the relationship between your answer to (a) and your answer to (b)?


3) (20 minutes—if you are not through after 20 minutes, skip to the next question): Suppose we have a demand curve for Atlantic cod right now this year , in tons of fish and thousands of dollars per ton: Pd = 40 - 0.001Q; and suppose we have a supply curve for Atlantic cod of Ps = 4

a) Draw the supply and demand curves.

b) Calculate the equilibrium price and quantity. Calculate the equilibrium producer and consumer surplus.

c) Suppose we notice that there is an externality cost: the total burden from resource depletion by this year’s fishing is: XC = 10 x Q—each ton of fish landed costs an extra ten thousand dollars in resource depletion. What tax would you impose on the fishing industry, and why?

d) Would you think that fishers would be very upset at this tax, and lobby against it? Why or why not?


4) (20 minutes): Go back to our first-run opening-week movie-industry monopoly example: 2000 people in the town; one movie theatre; ample capacity to seat everyone who might want to come to see this week’s first-run movie. Demand Curve: Pd = 20 - .02 Q. No variable or marginal costs of showing the movie to more people: a non-rival good. Suppose that it costs $6000 to make a movie.

a) How many people should see the movie if we are to maximize societal well-being? What price should be charged to moviegoers? How much consumer surplus is there? How much is there in the way of costs that must be covered somehow?

b) Suppose people worry that government bureaucracies will produce lousy movies, so it is decided not to nationalize the movie industry but instead to let a monopoly make and show movies. What happens?

c) Suppose that we do nationalize the movie industry, and pay for it by imposing a $3 a person “movie tax” on everyone in the town. Relative to monopoly, and relative to no movies being shown, who gains and who loses from this scenario?

d) What would you think of a proposal to encourage better movies by doubling the movie tax and giving an annual prize to the best movie as voted by moviegoers as a way of keeping the bureaucracy from leading to low-quality movies?


20140227 Sample Midterm II Econ 2 Spring 2014 UC Berkeley.pdf


Econ 2: Spring 2014: Sample Midterm I

1) Identifications (20 minutes—if you are not through after 20 minutes, skip to the next question): Briefly, in one or two sentences, explain the terms set out and how they have been used in the course so far:

a) Demand Curves

b) Producer Surplus

c) Externalities

d) Market Failure


2) (20 minutes—if you are not through after 20 minutes, skip to the next question): Go back to our first-run opening-week movie-industry monopoly example: 4000 people in the town; one movie theatre; ample capacity to seat everyone who might want to come to see this week’s first-run movie. Demand Curve: Pd = 20 - .01 Q. No variable or marginal costs of showing the movie to more people: a non-rival good. Suppose that it costs $1000 to make a movie.

a) How many people should see the movie if we are to maximize societal well-being? What price should be charged to moviegoers? How much consumer surplus is there? How much is there in the way of costs that must be covered somehow?

b) Suppose people worry that government bureaucracies will produce lousy movies, so it is decided not to nationalize the movie industry but instead to let a monopoly make and show movies. What happens?

c) Suppose that other movie companies petition for the right to use the theatre, and get it. Suppose that if N movie companies make movies, each sells 2000/(N+1) tickets, and the price of tickets is the price at which that number of tickets satisfies demand. In equilibrium—where it is not worth another movie company’s while to enter the market—how many movies will be made each week? What will the consumer surplus be? What will the producer surplus be?


3) (20 minutes—if you are not through after 20 minutes, skip to the next question): Let’s go back to our six producers, Arya, Bran, Tegan, Taylor, Sarah, and Zedd, trying to decide whether they should go to work teaching yoga lessons or pulling lattes. In an hour the six workers could each teach at most the following number of yoga students: Arya 10; Bran 6; Tegan 4; Taylor 10; Sarah 2; and Zedd 0. In an hour the six workers could prepare at most the following number of lattes: Arya 60; Bran 10; Tegan 20; Taylor 30; Sarah 30; and Zedd 60. The government sets the vale of its currency, the pound, so that £1 purchases one latte. Call the price paid to the yoga instructor by each yoga student £Y.

a) Suppose that the price £Y of a yoga lesson is £5.50. Who would rather teach yoga? Who would rather draw lattes?

b) Suppose the price of a yoga lesson is £10. Who would rather teach yoga? Who would rather draw lattes?

c) Suppose the price of a yoga lesson is £15. Who would rather teach yoga? Who would rather draw lattes?

d) With the price of yoga lessons along the vertical axis and the quantity of yoga students taught on the horizontal axis, draw the supply curve for yoga lessons for the economy.


4) (20 minutes—if you are not through after 20 minutes, skip to the next question): Suppose that you find yourself the subject of some bizarre psychology experiment. You are seated in a locked room with a sociology or an anthropology major, and you have ten minutes to persuade him or her that it is broadly and on balance a good thing that we here today have a mixed and market-heavy economy rather than a centrally-planned economy like Stalin’s Russia, Mao’s China, Castro’s Cuba, or (shudder) Kim Jong Un’s North Korea. If you succeed, you win $1000. If you fail, you get nothing.

Write down, in order of importance, the things you would say to try to convince your experiment partner that it is broadly and on balance a good thing that we here today have a mixed and market-heavy economy.


20140227 Sample Midterm I Econ 2 Spring 2014 UC Berkeley.pdf


Econ 2: Spring 2014: UC Berkeley: Week 6: When We Can't Make the Market Work Optimally... II