Economics Assignments Assignment No. 1 1. Please write a brief but complete answer to the following questions: 1. 2. #. &.

How is economics like a science? Wh is economics a !social" science? Wh $o economists sometimes offer conflicting a$%ice to polic makers? 'houl$ an economic mo$el $escribe realit e(actl ?

2. )iscuss each of the following statements from the stan$points of equit an$ efficienc . 1. 2. !*%er one in societ shoul$ be guarantee$ the best health care possible." !When workers are lai$ off+ the shoul$ be able to collect unemplo ment benefits until the fin$ a new ,ob."

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-lassif each of the following statements as positi%e or normati%e. *(plain. 1. 2. #. &. 3. 'ociet faces a short.run tra$eoff between inflation an$ unemplo ment. /n a market+ when quantit supplie$ e(cee$s quantit $eman$e$+ price ten$s to fall. When $etermining ta( rates+ the go%ernment shoul$ take into account the income nee$s of in$i%i$uals. 0he 1e$eral 2eser%e shoul$ re$uce the rate of growth of mone . 4ower ta( rates encourage more work an$ more sa%ing.

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-lassif the following topics as relating to microeconomics or macroeconomics. 1. 2. #. &. 3. A famil 5s $ecision about how much income to spen$ on foo$. 0he effect of go%ernment regulations on auto emissions. 0he impact of higher public sa%ing on economic growth. A monopolist5s $ecision about how man units to sell. 0he relationship between the inflation rate an$ the unemplo ment rate.

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'0A0A e(ercise: After rea$ing the paper b 6wartne an$ Haworth+ !*mplo er -osts an$ )iscrimination: 0he -ase of 7aseball" use the file )ataset1.$ta+ to $o the following. 1

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-reate summar statistics for the three %ariables 7alack&8+ 7lack32 an$ Won. -reate a graph with Won on the %ertical a(is an$ 7lack&8 on the hori9ontal a(is. 2un a simple regression with Won as the $epen$ent %ariable an$ 7lack&8 as the in$epen$ent %ariable. a. What percent of the total %ariation in the %ariable Won is e(plaine$ b 7lack&8? b. What is the impact of an a$$itional black pla er ear on the percentage of games won? What woul$ be the impact of a one.stan$ar$ $e%iation change in a$$itional black pla er ears on the percentage of games won? What woul$ be the pre$icte$ percentage of games won for a team that remaine$ all white? c. 0est the null h pothesis that 7lack&8 has a 9ero effect on the percentage of games won using a 3: le%el of significance.

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A$$ the pre$icte$ regression line to the graph ou $rew earlier.

Assignment No. 2 1. ;sing an /nternet mapping page <an e(ample is mapquest.com=+ create a map of our neighborhoo$ an$ answer the following questions: 1. 2. #. How is the map like a mo$el? What are the limitation s of the map? -oul$ ou use this map to $etermine change in ele%ation in our neighborhoo$? )istance from one place to another? 0raffic spee$? What $o our answers suggest about what to consi$er when using a map or a mo$el?

2. !0he *conomic 2eport of the Presi$ent" contains statistical information about the econom as well as the -ouncil of *conomic A$%isers5 anal sis of current polic issues. 1in$ a recent cop of this annual report at the librar or %isit http:>>w#.access.gpo.go%>eop> an$ rea$ a chapter about an issue that interests ou. 'ummari9e the economic problem at han$ an$ $escribe the council5s recommen$e$ polic . #. Woul$ ou e(pect economists to $isagree less about public polic as time goes on? Wh or wh not? -an their $ifferences be completel eliminate$? Wh or wh not? &. Please write brief but complete answers. 1. 2. #. &. 3. What is the basic economic problem? What three problems must an economic s stem sol%e? How $oes capitalism sol%e these three problems? How $i$ 'o%iet.st le socialism sol%e these three problems? -an ou think of an reason inherent in a centrall planne$ econom <so%iet.st le socialism= that woul$ make inno%ation $ifficult? -an ou think of an reason inherent in a capitalist countr that woul$ foster inno%ation?

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Wh $o most economists oppose tra$e restrictions? '0A0A e(ercises: 1. 6o to the web site of the 1e$eral 2eser%e 7ank of 'aint 4ouis an$ look for the 12*) $atabase <www.stls.frb.org=. )ownloa$ the series of quarterl $ata for ;' real gross $omestic pro$uct in chaine$ 1@@? $ollars form1@3A:1 to 2AA1:1. 2. Plot the series against time. #. -ompute the series of log 6)P an$ $o a time plot for it. -ompare this graph to the pre%ious one. &. )ecompose the series into tren$ an$ c cle using a linear $eterministic tren$ mo$el+ i.e. run the following regression: t B C D Et D Ft. Now use our estimates an$ fitte$ %alues to fin$ the tren$ an$ the c cle of the original series. <NG0*: )efine the tren$ as the fitte$ %alues of the regression abo%e <a D bt= #

where a an$ b are the G4' estimates for C an$ E+ an$ $efine the c cle as minus the tren$.=

3. Plot in the same graph the tren$ <pre$icte$ %alues an$ the original $ata against time. ?. Plot the c cle against time. What can ou sa about the stationarit of the c cle <$etren$e$= series?

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Assignment No. # 1. Please write brief but complete answers. 1. 2. #. &. What is a competiti%e market? 7riefl $escribe the t pes of markets other than perfectl competiti%e markets. What is the $eman$ cur%e? Wh $oes it slope $ownwar$? )efine the equilibrium of a market. )escribe the forces that mo%e a market towar$ its equilibrium. )escribe the role of prices in market economies.

2. )uring the 1@@As+ technological a$%ance re$uce$ the cost of computer chips. How $o ou think this affecte$ the market for computers? 1or computer software? 1or t pewriters? #. '0A0A e(ercise: 0o $o this e(ercise ou shoul$ ha%e rea$ the paper b 2omer an$ 2omer publishe$ in the A*2. 1. )ownloa$ the $ata file+ inflation.(ls or inflation.$ta. 2. Plot both series against time+ i.e. $o two plots: in the first one+ graph e(pecte$ inflation against time an$+ in the secon$ one+ plot actual inflation against time. #. 0est the h pothesis that the sur%e $ata for inflation e(pectations is rational. /n or$er to $o this+ follow the steps below: i. 2un the following regression using simple G4': Ht B C D EHet D Ft where Ht stan$s for actual inflation an$ Het stam$s for the sur%e e(pecte$ inflation. ii. 0est the h pothesis that aBA <where a is the estimate for the intercept=. iii. 0est the h pothesis that bB1+ where b is the estimate for E. i%. Notice that if ou re,ect the h pothesis abo%e+ ou can conclu$e <in a rough sense= that the sur%e is not rational. What $o ou conclu$e from our tests abo%e? &. '0A0A e(ercise. 0o $o this e(ercise ou shoul$ ha%e rea$ the article b -umb an$ Iishkin in J/I1. 1. )ownloa$ the $ata set /nt.(ls or /nt.$ta. 2. 1in$ the e( post real interest rate series for the ;'. /n other wor$s+ fin$: eprr;' B i;' . H;' where i;' stan$s for the nominal interest rate in the ;'. Gnce ou ha%e the series plot it+ together with the inflation series+ in a graph against time. #. 1in$ the e( post real interest rate series for 6erman . /n other wor$s+ fin$: eprr6 B i6 . H6 where i6 stan$s for the nominal interest rate+ H6 stan$s for the inflation rate+ eprr6 for the e( 3

post real interest rate. Gnce ou get the series plot it together with the 6erman inflation series in a graph against time. &. 2egress the ;' e( post interest rate <eprr;' = on: a. 0he nominal interest rate <it;'= b. A time tren$ <t= c. 0he three lagge$ inflation %ariables: ;sinflK1+ ;sinflK2+ ;sinflK#. /n other wor$s+ run the following regression using G4': eprrt;' B C D Eit;' D Lt D M1Ht.1;' D M2Ht.2;' D M#Ht.#;' D Ft. 'how the estimates an$ stan$ar$ errors for each of the coefficients. 3. 1in$ the fitte$ %alues from the pre%ious regression <part &= an$ call the pre$icte$ %alues !prr;'". ?. 2egress 6erman e( post real interest rates <eprr6= on prr;' an$ a constant+ i.e.+ run the following regression: eprr6 B % D N prr;' D F. 8. 0est the null h pothesis that %BA <from regression estimates in part ?= O. 0est the null h pothesis that N B 1 <from regression estimates in part ?= @. Notice that testing for % B A an$ N B 1 is equi%alent to test for the equali9ation of real rates in the ;' an$ 6erman . Woul$ ou conclu$e+ from our results abo%e+ that the are equali9e$?