An Investment Firm in Lithuania
Order ID 53563633773 Type Essay Writer Level Masters Style APA Sources/References 4 Perfect Number of Pages to Order 5-10 Pages Description/Paper Instructions
An Investment Firm in Lithuania
You are working at an investment firm that has many investments in Lithuania. You have been asked to do a simple simulation showing the potential effects of Lithuania building a high-speed rail network, and what will happen if there is worldwide pressure on interest rates. All amounts are in millions of Litas. (The Lita is the Lithuanian currency. For this example use the exchange rate you compute, not the actual exchange rate). Government spending is projected to rise by 50 percent due to construction of the high-speed rail network
This is the status quo scenario
Total Output is equal to 5,000
Government spending is equal to 1,000
Tax revenue is equal to 1,000
Consumption is equal to 250+0.75*(Y-T);
The level of investment is 1,000-50r;
Net Exports are 500-500ε,
the world real interest rate is five percent
Assume that there are three political parties in Lithuania and each think that building the high speed rail network will have different effects on the economy. They have hired you as a consultant (moonlighting from your investment firm) to do an analysis showing what happens if their beliefs end up being true.
- THE LIBERAL PARTY believes that increasing government spending to build the high speed rail network will increase both G and GDP. That is G, will increase to 1,500 and GDP will increase by 500 too. Compare what happens to the economy if the Liberal party is correct. How do private savings, public savings, national savings, Net exports, and the exchange rate change from the status quo? (10 points)
- THE CONSERVATIVE PARTY believes that building a high speed rail network will put people to work (thus increasing G), but that it will ultimately be useless (there will be no overall wealth created), so GDP will be unchanged. The conservatives are also concerned that the government taking on new debt will be a bad sign to Lithuania’s creditors, and that borrowing the money for the high-speed rail system will cause the interest rate to rise 20 percent. Under this scenario, how do private savings, public savings, national savings, Net exports, and the exchange rate change from the status quo? (8 points)
- THE LIBERTARIAN PARTY believes that taking tax money and using it to build a high-speed rail network does nothing more than take money from one group of people (taxpayers) and give it to another group of people (the construction industry) and that there is no productive economic impact. How do private savings, public savings, national savings, Net exports, and the exchange rate change from the status quo? (8 points)
- Please compare situations a, b, and c. Who do you think is correct, and why?
(8 points)
- The Libertarians use a microeconomics explanation about taxation to argue that the economy will be helped most by simply reducing taxes, even if people only save the money that they don’t spend on taxes (C is not affected). They say that this phenomenon is assumed away by most macro-economists. What are they referring to? (2 points)
2.) Why can’t the Federal Reserve directly control the money supply? What changes in behavior on the part of people or banks can make it harder for an increase in the monetary base to increase M2? (8 points)
3.) The country of Luxembourg is a small, open economy. Suddenly, a change in world fashions makes the exports of Luxembourg very un-popular. Explain what happens to savings, investment, net exports, the interest rate, and the exchange rate. (6 points)
4) Assume that the country of Iran is a small, open economy. George W. Bush’s inclusion of Iran as a member of “the Axis of Evil,” however, has complicated trade with Iran. Assume that every good coming out of Iran is subject to a “Terrorism Tariff” that makes every quantity of exports effectively more expensive to any nation that buys them. As a result, the willingness to pay by the international community for every quantity of exports from Iran is lower. Explain what happens to savings, investment, net exports, the interest rate, and the exchange rate. (6 points)
5.) What are your predictions for the US economy over the next two years? Use the macroeconomic models you have learned to present a reasoned answer. Explain your assumptions clearly.
Please also address what could happen if the Fed proceeds with a third round of quantitative easing. Please answer the scenarios that could occur, then state which scenario you think is most likely to occur, and state your reasons. (20 points)
6) What is the difference between the Federal Funds Rate and the Discount Rate? Please give the difference by providing an explanation of each rate and their purposes? (9 points)
7.) Assume that the GDP deflator was 100 in 2008, 97.5 in 2009, and 96.8 in 2010. How much would a salary offer of $80,000 in 2010 have been worth in 2008? (3 points)
8) If the CPI value for 1960 was 0.5 and 2.5 in 2010, and a GMC four-door sedan cost $2,500 and $20,000 in 2010, what conclusions can you draw? (hint: Be careful what you say!)
Please answer the next five questions as “True,” “False,” or “Uncertain.” “Uncertain” indicates that the statement may or many not be true (not that the respondent is uncertain). Feel free to provide a justification for your answer in the space provided, if you think that will be helpful.
9.) An increase in interest rates will cause a decrease in Aggregate Demand, and a slow- down in the economy. (2 points)
10.) A decrease in interest rates will cause an increase in Aggregate Demand, and an expansion in the economy. (2 points)
11.) If the economy is not expanding, and the world interest rate is exogenous, an increase in the money supply will only cause an increase in current prices. (2 points)
12.) The Consumer Price Index has difficulty accounting for changes in technology such as the developments in computers, while the chain-weighted GDP deflator does not. (2 points)
13.) In the US, over the last 50 years, the Consumption component of gross domestic product has been more volatile than the Investment component (2 points)
14) All else held equal, higher budget deficits should be associated with higher trade deficits.
-BONUS-
4.) What would a family who made $200,000 in 1995 make today? Use the 2012 index value for “today.” (4 points)
When should the Fed have increased the money supply according to this table? (4 points) Provide a detailed answer of how could they have increased the money supply. (12 points)
If gasoline had gone up at only the rate of inflation, how much would it have cost per gallon in 1994? Assume the price of gasoline today is $4.00 per gallon. (4 points)
RUBRIC
QUALITY OF RESPONSE NO RESPONSE POOR / UNSATISFACTORY SATISFACTORY GOOD EXCELLENT Content (worth a maximum of 50% of the total points) Zero points: Student failed to submit the final paper. 20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. 30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. Elements of the required response may also be lacking. 40 points out of 50: The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples. The answer is complete. 50 points: The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples. No aspects of the required answer are missing. Use of Sources (worth a maximum of 20% of the total points). Zero points: Student failed to include citations and/or references. Or the student failed to submit a final paper. 5 out 20 points: Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. 10 out 20 points: References to scholarly sources are occasionally given; many statements seem unsubstantiated. Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. 15 out 20 points: Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented. APA 6th Edition is used with only a few minor errors. There are minor errors in reference and/or citations. And/or there is some use of questionable sources. 20 points: Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented. APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. Grammar (worth maximum of 20% of total points) Zero points: Student failed to submit the final paper. 5 points out of 20: The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors 10 points out 20: The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors 15 points out of 20: The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. 20 points: The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. Structure of the Paper (worth 10% of total points) Zero points: Student failed to submit the final paper. 3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. 5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. They can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements. The student also significantly writes too large or too short of and paper 7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. 10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper. GET THIS PROJECT NOW BY CLICKING ON THIS LINK TO PLACE THE ORDER
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