ECON

ECON 2010

Please complete the assignment and write your answers in much detail as possible .

Your answers must be typed neatly in a Microsoft Word document

(Times New Roman Font, 12pt, Single Spaced with 1 inch margin all around).

You must adhere to the page limits. Your answers MUST BE written as clearly as possible.

DO NOT violate the honor code. DO NOT engage in plagiarism . Plagiarism is an UNACCEPTABLE violation of the honor code .

If you want to know what plagiarism is and how to avoid it then get started by visiting

http://www.plagiarism.org/plagiarism-101/what-is-plagiarism

No hardcopy submission will be accepted .

Please make sure that you submit by the deadline mentioned above.

No late submissions will be accepted .

Read the following materials to answers the questions below.

· Chapter Topic - First Principles (Available in the e-book on Launchpad. Study materials and lecture notes are available on Elearn)

· Chapter Topic - Economic Models: Trade-offs and Trade (Available in the e-book on Launchpad. Study materials and lecture notes are available on Elearn)

· Chapter Topic - Supply and Demand (Available in the e-book on Launchpad. Study materials and lecture notes are available on Elearn)

· Chapter Topic – International Trade (Available in the e-book on Launchpad. Study materials and lecture notes are available on Elearn)

· Chapter Topic – Macroeconomics: The Big Picture (Available in the e-book on Launchpad. Study materials and lecture notes are available on Elearn)

· Chapter Topic – GDP and CPI: Tracking the Macroeconomy (Available in the e-book on Launchpad. Study materials and lecture notes are available on Elearn)

· Chapter Topic – Unemployment and Inflation (Available in the e-book on Launchpad. Study materials and lecture notes are available on Elearn)

· Chapter Topic – Aggregate Demand and Aggregate Supply (Available in the e-book on Launchpad. Study materials and lecture notes are available on Elearn)

· Chapter Topic – Saving, Investment Spending and Financial System (Available in the e-book on Launchpad. Study materials and lecture notes are available on Elearn)

Answer the questions below in as much detail as possible. All answers must be typed neatly (See the directions above) .

1. Think about an open economy that trades freely with the rest of the world. There are no barriers to trade and no frictions. In other words, there are no tariffs and taxes and no regulatory impediments to trade. Also assume that the world prices are MORE than the domestic prices. What will happen to the exports of the country if the government decides to cut income taxes significantly? (Hint: think about the shifts that will happen to aggregate demand because of changes in the domestic income taxes and how those shifts are going to close or widen the gap between the domestic and international prices.) You are highly encouraged to provide graphical support to your answers. (Limit: 2 pages; Ideally, between 1 - 1.5 pages)

2. Think about an open economy that trades freely with the rest of the world. There are no barriers to trade and no frictions. In other words, there are no tariffs and taxes and no regulatory impediments to trade. Also assume that the world prices are LESS than the domestic prices. What will happen to the exports/imports of the country if the government decides to allow importation of new capital goods and technologies that will raise productivity significantly ? (Hint: think about the shifts that will happen to aggregate supply because of changes in the domestic income taxes and how those shifts are going to close or widen the gap between the domestic and international prices.) You are highly encouraged to provide graphical support to your answers. (Limit: 2 pages; Ideally, between 1 - 1.5 pages)

3. Discuss how the financial system brings together the borrowers and savers. Discuss the concept of loanable funds. How do the demand and supply of loanable funds determine the equilibrium interest rate in the market? How is that rate of interest expected to behave if the government runs a large budget deficit? Describe the precise pathways. You are highly encouraged to provide graphical support to your answers. (Limit: 2 pages; Ideally, between 1 - 1.5 pages)

4. What are the key differences between GNP and GDP? Are they expected to be the same or not? What information does the difference between GDP and GNP convey to you? How will the GDP and GNP of Japan and the USA are expected to change if Toyota decides to make additional investments in Tennessee and Ford invests heavily in China? (Limit: 2 pages; Ideally, between 1 - 1.5 pages)