# Consider the following simple

Consider the following simple monetary policy rule:

In the following questions, you are asked to gather data on inflation and short-run output to feed into this policy rule. A good resource for the data you will need is the FRED database of the St. Louis Fed, available at research.stlouisfed.org/fred2/.
(a) Pick some reasonable values for the parameters of this policy rule, and explain why you chose these values.
(b) Obtain data on the CPI inflation rate for the most recent 12-month period possible (you may include food and energy in your CPI calculation or not €” your choice). Discuss briefly this value of the inflation rate.
(c) Create an estimate of á»¸t for the U.S. economy. Explain how to construct this estimate, and discuss its value. You may find it helpful to use the series GDPPOT from the FRED database.
(d) Use these data and the monetary policy rule you specified above to see what fed funds rate the policy rule indicates. How does this compare to the current fed funds rate?
(e) If the rates are different, why do you think that is the case? What would you recommend to the Fed, based on your calculation?

# Consider the following simple

(a) Suppose that we know that Task 2 is done only in the United States because logistical problems or tariffs make it infeasible to do it in Mexico. Then Tasks 2 and 3 are done in the United States, while Task 1 is done in Mexico. Suppose we know that R = 1.2. Use the labor market clearing conditions for Mexico to find the Mexican wages, then use the labor-market clearing conditions for the United States to find the U.S. wages. Show that the wages you have computed satisfy the zero-profit condition (to a reasonable approximation), so you have indeed computed a full equilibrium.
(b) For the equilibrium you have just completed, verify that it would be cheaper to conduct Task 2 in Mexico rather than the United States, so if radio manufacturers were able to offshore it, they would do so.
(c) Now, suppose that it becomes feasible to do Task 2 in Mexico. Then Task 3 is done in the United States, while Tasks 1 and 2 are done in Mexico. Suppose we know that R = 1.63. Use the labor-market clearing conditions for the United States to find the U.S. wages then use the labor-market clearing conditions for Mexico to find the U.S. wages. Show that the wages you have computed satisfy the zero-profit condition (to a reasonable approximation), so you have indeed computed a full equilibrium.
(d) What is the effect of the off shoring of Task 2 on wage inequality in the two countries? What is the effect on the skilled-unskilled employment ratio?
(e) Who benefits from the offshoring of Task 2? Who is hurt by it? Why? Analyze in detail.

# Consider the following simple

1. Consider the following simple situation:

“The initial distribution of resources is just. Suppose a large number of people are willing to pay 10 cents directly to LeBron James in addition to the standard ticket price in order to watch him play basketball. Suppose one million people do this during the course of the season and James will acquire additional personal wealth of \$100,000. As a consequence of the volunteer actions of James and his one million fans, a new distribution of resources has emerged.”

1.1 How would you view a redistributive tax scheme that taxes James’ additional personal wealth of \$100,000?

1.2 What would be Nozick’s view on such a redistributive tax scheme above? Explain briefly.

1.3 What would be Rawls’ view on such a redistributive tax scheme above? Explain briefly.

1.4 How would you change your view if you learned that the initial distribution of resources was not just? How would Nozick change his view? How about Rawls? Explain briefly.

# Consider the following simple

Consider the following simple linear regression model without an intercept, y=ß1x+u, with the assumption E(uIx)=0. Also assume that E(x)=0

a.) Show that E(y)=0 and using this as well as E(x)=0 show that the covariance between x and y is given by E(xy) and that the variance of x is gi…