texts: How did investment go from exogenous to endogenous in the IS/LM model?

texts:
Context: I am currently taking an introductory course to macroeconomics and we are on the topic of Keynesian Economic and the IS/LM model.
Initially we saw that the investment (I) component of aggergate/planned expenditure is considered autonomous expenditure, which I understand to mean it is not dependant on income.
Additionally when we were covering Withdrawals and Injections to the circular flow modelt. Here the textbook said investment(I) is a withdrawal from the circular flow model and withdawrals are exogenous. Exogenous was defined as not directly related to changes on income.
However when introducing the IS/LM model, a video tutorial said we are now going to make investment(I) endogenous to derive it IS curve by defining it as a function of income(Y) and interest rate(i).
My question is how did we get from investment (I) as exogenous investment (I) as to endogenous?I understand we used interest rate(i) to link our financial market with our goods market which makes sense but how does income factor into that after we have already said that investment (I) is autonomous spending/exogenous?
It seems there is something im missing here!


texts: Are interest included in the computation of government debt

texts:
I am completely new to economics and I have troubles understanding how the government debt of countries is computed.
Imagine government of country A issue some 10 years bond of the value of 100 dollars with fixed interest rate of 5%, and government of country B issue some 10 years bond at 10 year of the value of 100 dollars with fixed interest rate of 7%. Is the government debt of the two country going to increase of 100$ each or the difference between the two interest rates is taken into account?


texts: What is the opportunity cost of doing something in your spare time?

texts:
My university is using this textbook. The text clearly states, “Economists use the term opportunity cost to indicate what must be given up to obtain something that is desired.”

This leads me to believe that if you are a salaried worker who makes 50 dollars per hour and works a standard five-day workweek, the opportunity cost of you mowing your lawn during the weekend is 0 dollars. You are giving up your unpaid free time to mow the lawn. When I brought this up in the online discussion I was told by the instructor, "the cost of your free time is estimated using your wage rate."

Is free time = wage rate just the standard convention? This hardly seems appropriate since you aren't giving anything up other than your free time. The situation would be different if you were giving up weekend work to mow your lawn.


texts:
Say I have solved an HJB of the form:

$\rho V(k) = \max_c g(c) + V'(k)(z - c)$

I have calibrated $\rho$ to monthly parameters. I would like to simulate the development of $k$. I start with $k(0)$. However, unlike in discrete-time, I'm not sure what happens next.

Is $k(1) = k(0) + (z-c(0))$, with $k(1)$ being the value of $k$ for the next month? Or do I need to somehow integrate along the lines of $k(1) = \int_0^1 (z-c(t))dt + k(0)$? There's many references on solving these things, but I couldn't find any references on simulating it.


texts: How saving and investment influence growth in the long run?

texts:
Here are 4 points from my class.

  • Because resources are scarce, devoting more resources to
  producing capital requires devoting fewer resources to producing
  goods and services for current consumption.

  • Consequently, the accumulation of capital involves a tradeoff.

  • When governments encourage saving and investment, they also
  encourage growth and in the long run this raises the standard of
  living.

  • A well-functioning and carefully regulated financial market, one
  that quickly and efficiently brings savings and investment together
  with minimal risk and in a transparent way, is a critical ingredient
  in the recipe for economic growth.

I can conclude that saving and investment are good for growth, but I cannot tell exactly why. Can someone make it clearer, maybe with a concrete example?


texts: What is the 'gold standard methodology' in macroeconomics research?

texts:
What is the 'gold standard methodology' in applied macroeconomics research?
In drug discovery research, for example, there are many methodologies, but RCTs are the gold standard, right??...like the ideal methodology with a more trusted result.
Anything like that in macroeconomics??


texts: Why is there a structural deficit/surplus?

texts:
I'm going through Fiscal Policy and I'm reading about Structural Budget and Cyclical Budget. To my understanding, Cyclical Budget is what occurs when automatic fiscal policy is in use. So G and T are equal at full employment, if the economy falls into a recession, the automatic fiscal policy will trigger a cyclical deficit.

What I don't understand is the point of Structural Budget. Why is it run if the economy will return to full employment in the long run automatically? I understand that it gives an extra push but why don't we just let it handle it automatically?


texts: How did Soros make money by shorting the pound? When he sold the pound and made its price to decrease, he had to buy it back again to return the amount he borrowed, but doesn't buying the pound raise its price, so that he should not make any profit?


texts: What happens if the Central Bank does not absorb a BOP deficit/surplus?

texts:
The basic principle of BOP accounting is double entry bookkeeping. In short, every transaction enters twice. As a consequence of this, by definition

$$\text{Current account } (CA) + \text{Capital account } (KA) = \text{Financial account } (FA)$$

Note that this may differ depending on how you classify BOP accounts. Some sources classify it as CA = KA (and do not have an FA), but the principle is the same.

In my definition, the FA includes the official reserve account (OA).

What I don't understand is - if every transaction automatically generates a credit and debit entry, how can it be possible to have:

$$CA + KA \neq (FA \; \backslash \; OA)$$

I know I am wrong to think this, but it seems to me like the 'need' for central bank intervention to absorb a surplus/deficit in the other components violates the definition of double-entry bookkeeping, which implies BOP = 0 at any point in time.
So:

1) Why am I wrong wrt the above?

2) If the OA does not absorb the deficit/surplus from the rest of the BOP, what happens?


texts: Why Keynesians prefer short run measures despite straight long-run Phillips curve?

texts:
I was studying about the Monetarists' and Keynesians' view of the Phillips curve and natural rate theory of Friedman. It seems intuitive to me as to why Friedman argues that using an expansionary monetary policy in the short run will ultimately lead to no increase in output in the long run and will solely put pressure on the prices, thereby increasing inflation. Consequently, it seems that in the short run, monetary policy can't achieve much to change the natural rate of unemployment. The Keynesians too have a straight long-run Phillips curve, but still, they argue for going forward with activist policies in the short run.
The book I am referring (Richard T. Froyen's Macroeconomics: Theories and Policies) is pretty vague on this final part. It just says, " If we don't accept the other propositions of the monetarists - and Keynesians do not- there is a short-run role for stabilization policies, whether monetary or fiscal." I don't understand which assumptions it is talking about and why Keynesians believe, despite the straight long-run Phillips curve, that short-run measures can help stabilize the economy.


texts: How do tech giants manage turnover costs?

texts:
Lately I was struck by different studies concluding median job tenure at Google, Facebook, Amazon, Microsoft and Apple is 1 to 2 years, very low compared to the Bureau of labor statistics which is a little over 4 years average job tenure.

Sources:
DeepTalent
Payscale
Paysa

Turnover is uniformly described in literature as costly and avoidable. Given the fact they have near unlimited power for generous policies, that they let turnover get this high comes as surprising, possibly is a result of a cost calculation.

Is tech giants turnover cheap or unavoidable ? How do they manage turnover costs, generally speaking ?


texts: Why don't economists recommend voluntary childlessness to fight poverty?

texts:
Please see the titled question. Poverty obviously demands pressing  solutions, let alone a stopgap. Dasgupta beneath refers to "the best Desta’s world can do": isn't Voluntary childlessness and Antinatalism more effective and instant? Kids who play and scavenge in garbage, and who live in sewers may argue that it was better never to have been born. Harms of their existences are obvious:

For those who still crave children, why isn't adoption recommended?  I refer only to educating the indigent;  anything involuntary like eugenics  is unethical.

Dasgupta, Partha. Economics: A Very Short Introduction (2007).
p. 159 Bottom

In a moving discourse on the character of poverty at the 2001
Plenary Meeting of the Pontifical Academy of Social Sciences,
Vatican, Justice Nicholas McNally of Zimbabwe urged us all to see
poverty as a sense of fatalism to ever-increasing economic
hardships in a changing, and elsewhere an often progressive, world.
At that same meeting, the political scientist Wilfrido Villacorta
suggested that the term ‘poor’ when applied to countries is perhaps
no longer useful; that countries ought perhaps now to be classified
in accordance with some such term as ‘progressive’, so that we may
ask if they have the institutions, policies, and civic attitudes in place
to enable people to improve their lot. Perhaps the best Becky’s world
can do for Desta’s is to offer financial and technical assistance so as
to promote and support local enterprises – including those

p. 160

involving education and primary health care – that people there are
all too keen to create even as they see from a distance how people
elsewhere have been able to improve their conditions of living. And
perhaps the best Desta’s world can do for Becky’s is to alert it to the
enormous stresses economic growth there has put on Nature. There
is, alas, no magic potion for bringing about economic progress in
either world. [I bolded]

p. 102

Gender inequalities
The considerations I have just outlined can’t on their own explain
the persistence and magnitude of household inequalities in the poor
world. In a notable article, the demographer Pravin Visaria
observed that the female–male ratio in India had shown a decline
since the Indian Census of 1901; worse, it has been considerably less
than 1. According to the most recent census, there are 93 women to
every 100 men in India. In the rich world today, the ratio is 106 to
100. In answering a question the epidemiologist Lincoln Chen
posed in response to Visaria’s finding, namely, ‘Where have the
women gone?’, he and his collaborators collected gender-based
mortality and anthropometric statistics from villages in the Indian
sub-continent and discovered male bias in the allocation of food
and health care in poor households. The suspicion is that parents
not only practise female infanticide, but also withhold postnatal
health care so as to reduce the number of girls in the household. [I bolded]

Economics: The User's Guide. p. 334.

 Inadequate childhood nutrition, lack of learning stimulus and sub-par schools (frequently found in poor neighbourhoods) restrict the development of poor children, diminishing their future prospects. Parents may have some control over how much nutrition and learning stimulus their children get – and some poor parents, to their credit, make great efforts and provide more of those things than do other parents in similar situations – but there is a limit to what they can do. They are by definition under great financial stress. Many of them are totally exhausted from juggling two or three insecure jobs. And most of them had a poor childhood and poor education themselves.


texts:
Out of personal interest I wanted to find out which carbon footprint one bitcoin transaction produces. Following I will present my calculation. The result surprises me and my question is Is this realistic? Did I make mistake?

Variables

Transaction throughput: $\approx 4\frac{tx}{s}$  source
Bitcoin energy consumption $\approx 8.00GW$ source
Carbon emission per $\approx \frac{0.5kg}{kWh}$ CO2 germany (Not sure if China is lower or higher here, since mining mostly happens in China)

Calculations
Transactions per hour: $4\frac{tx}{s} = 60*4\frac{tx}{m} = 60*60*4\frac{tx}{h} = 14.400\frac{tx}{h}$
Energy Consumption per hour: $8.00GWh = 8 * 10^6kWh$
Energy Consumption per transaction $\frac{8 * 10^6kWh}{14.400tx} \approx 555\frac{kWh}{tx}$
Carbon footprint per transaction $555\frac{kWh}{tx} * \frac{0.5kg}{kWh} \approx 277\frac{kg}{tx}$

If the whole energy used for bitcoin was produced in germany one bitcoin transaction would have a carbon footprint of 277kg. If we take Finland for example with more reneweable energies ($\frac{0.113kg}{kWh}$) it would be 77kg CO2.

For reference: A single flight form Hamburg to Munich (600km, aprox. 1h) is 161kg myclimate. The compensation of 277kg CO2 is roughly $6.50 with atmosfair.


texts: Example on profit function that contains the maximum of a decision and a random variable

texts: I am looking for an example of a profit function that contains the maximum of a decision and a random variable in this form: $\max(d,X)$, where $d$ is a decision variable and $X$ is a random variable. I can find many profit functions with the minimum operations, that is, with a term like $\min(d,X)$, but I cannot find a single application with $\max(d,X)$. Note that the sign in front of the term $\max(d,X)$ must be positive, because $-\max(d,X)=\min(-d,-X)$ and thus I still end up with a minimum operation. In addition, this term must be in a profit function (that can be maximized), not in a cost function (to can be minimized). Does anyone know such an application? Thanks a lot.


texts: Why do we have to normalize the income of consumers when working with an Edgeworth Box in a simple trade model with Pareto optima?

texts:
I was studying microeconomics and I confess I am not the brightest person for maths and sorry if this is very dumb but I get that we CAN normalize the income and I get where it comes from and how it is done, but I don't understand WHY do we have to do that. Can't we still do the maximization problem? I read further and understood that it is to "fix" a line in the box with slope Px/Py (with Py being the normalized price), I still don't understand why. What is the problem of finding the Pareto optimum in a freely moving point? Is it only to represent the budget constraint in the box?
I am probably missing a fundamental calculus/microeconomic fact.


texts: Interest Rate vs. Borrowing Rate - Difference

texts: I have never studied economics so the question might be very basic one and would need understandable answer: I would like to know the difference between Interest Rate term and Borrowing Rate term? As far as I understand the Borrowing Rate means when some company borrows money from the bank to pay for some internal staff needed to do their work (e.g. manufactury to buy some materials to produce their own products). Then company returns the money to the bank but with little additional fee and this additional fee is Borrowing Rate in % unit. Please confirm if this is correct. Even if it is, I still don't know the DIFFERENCE between Borrowing Rate and Interest Rate.


texts: Why use the income approach to approximate GDP if it relies on the value produced by the expenditures approach?

texts:
To preface, I'm taking a macroeconomics class and we're learning about measuring GDP. The textbook says that there are two main ways to measure GDP: the expenditures method and the income method.

The expenditures method can be represented like so:

$GDP = C + I_g + G + X_n$

where $C$ is personal consumption expenditures, $I_g$ is gross private domestic investment, $G$ is government purchases, and $X_n$ is net exports.

The income method is more complicated, and looks like this:

$GDP = I_n - I_f - C_c + s$

Where $I_n$ is the national income, $I_f$ is the net foreign income, $C_c$ is the consumption of fixed capital, and $s$ is the statistical discrepancy.

$s$ is calculated by subtracting the expenditures method from the income method, in order to make them the same.

What is the point of having the income method if it relies on the expenditures method? I get that it would be useful for statistics, but why use both?


texts: Does "I" in Y = C + I + G + X - IM refer to the domestic investment?

texts:
We know the national income identity: $Y = C + I + G + X - IM$.

From many resourses, $I$ refers to domestic investment. For example in this link: https://opentextbc.ca/principlesofeconomics/chapter/23-4-the-national-saving-and-investment-identity/

However, in Mankiw's book, it says that $I= I^d + I^f$, the summation of domestic investment + foreign investment, as shown in

And actually in later pages of Mankiw's book, "I" is referred to domestic investment at many places also.

What does "I" accurately refer to?


texts:
Mankiw's definition and explanation of opportunity cost here is confusing. Since when have explicit costs become part of opportunity cost?
Here is what the guide says:

  The concept of opportunity cost is one of the most important ideas in
  economics. Consider the question, “How much does it cost to go to
  college for a year?” We couldadd up the direct costs like tuition,
  books, school supplies, etc. These are examples of explicit costs,
  i.e., costs that require a money payment. However, these costs are
  small compared to the value of the time it takes to attend class, do
  homework, etc. The amount that the student could have earned if she had
  worked rather than attended school is theimplicit cost of attending
  college. Implicit costs are costs that do not require a money payment.
  The opportunity cost includes both explicit and implicit costs.

Since explicit costs are out of pocket costs, they are not considered as opportunity cost. Am I missing anything here?

EDIT:
Here is another explanation from Keat et al. Managerial Economics.

  Opportunity Cost Versus Out-of-Pocket
  Cost Previous discussions
  pointed out that opportunity cost is one of the most important and
  useful concepts in economic analysis because it highlights the
  consequences of making choices under conditions of scarcity. We can
  now use this term in a more specific way to help explain the concept
  of relevant cost. Opportunity cost, as you recall, is the amount or
  subjective value that is forgone in choosing one activity over the
  next best alternative. This type of cost can be contrasted with
  “out-of-pocket cost.” On occasion, economists refer to opportunity
  cost as indirect cost or implicit cost, and refer to out-of-pocket
  cost as direct cost or explicit cost.


texts: How did the Hunt brothers' cornering the silver market drop gold prices in 1981?

texts: Muro's answer at Money SE discusses the attempt by brothers Nelson Bunker Hunt, William Herbert Hunt and Lamar Hunt to corner the silver mark. But Muro didn't explain the causation. I can't infer why this cornering caused gold prices to drop in 1981.


texts:
When the price level increases in the economy,

we generally know that the value of money decreases.

However, what is the definition of money here?

Is it just currency? Or does it include assets, such as stocks and bonds?

Because if the price rises, due to the interest rate effect people sell their bonds and stocks. So the creditors charge a higher interest rate. Then the means that the value of assets becomes higher right?

Could someone explain this logic clearly? Thank you!


texts: If all firms in an economy are in monopolistic competition with constant elasticity of substitution, can they profit-maximize at $MC=MR=AC$?

texts:
Suppose all firms are monopolistically competitive with constant elasticity of substitution. Can they profit maximize at the quantity point $MC=AC$ (So $P \neq MC$ but $Q$ is set at where $MC=MR=AC$ is established)?

By constant elasticity of substitution, I mean that $\epsilon = -(\partial Q_j/\partial P_i)/(Q_j/P_i)$ is constant for $\forall i \neq j$ where $i,j$ refers to firms, $Q$ refers to quantity, and $P$ refers to price.


texts: What is the average economic value of a human life?

texts:
What is the economic value of a human life?

If there are multiple methods to use in calculating, what are they, which method is preferred, and why?

Considerations/sub-questions on methods

A. Is the calculation purely based on output value (i.e. wages, goods produced, etc.), or are there intangibles that must be included (value of innovations that cause progress for society, NPV of progeny, etc.)?

B. As a result of #1, are there things which reduce economic value in one's life?  For example, when one has gone on unemployment, is one's net economic value negative for that period of time?

C.  Is the economic value of life dependent on one's country/state/locale or the sector one performs in?  For example, is it correct to say the economic value of a life is different in the US than in South Africa (due to average output in real terms?


texts:
A few weeks ago I noticed that several blogs and such were adamantly proposing that the Fed lower rates immediately by 50 bps. They said that the flight to safety -- to long-term government bonds -- had created a liquidity crisis.

I understand what a liquidity crisis is on a personal level and in a business, but I don't understand it in this case.

How did the massive flight to long-term bonds create a liquidity crisis?


texts: Is the arable land a mean of production?

texts:
Wikipedia claims that "capitalism is an economic system and an ideology based on private ownership of the means of production and their operation for profit".

And then, the land used for agriculture is a mean of production? Are the farmers capitalists?


texts:
I am estimating time series for rental price of capital using Hall-Jorgenson method: $$r=\frac{P_k}{P}(i-inf+\delta)$$
here, $r$ is the rental cost of capital, $P_k$ is the price of capital goods (price index for capital goods), $P$ is a deflator, $i$ is nominal interest rate, $inf$ is an inflation rate and $\delta$ is depreciation rate of physical capital stock.

Because inflation rate is high in some periods, the rental cost of capital is negative for these periods; this does not make sense, any little help is welcome!


texts:
I am having difficulties in distinguish them. I kind of understand what is the difference intuitively, but I still fail to put some games in the correct category.

Can you give me two examples of games and show me the difference from a mathematical (notation) point of view?


texts: How do I run a regression with the restriction that one set of parameters are proportional to another?

texts:
I'm running a regression with a set of 3 dummy variables (for four categories of a variable) and these 3 dummies interacted with a continuous variable. I want to impose the restriction that the vector of the coefficients of the interacted dummies is proportional to the coefficients of the dummies, e.g. each interaction term has a coefficient 2x larger than the coefficient on it's non-interacted dummy.

Is it possible to impose these restrictions with a linear regression model? or will I have to use non-linear least squares?

(P.S. the proportionality is a ratio to be estimated, so that would be another free parameter in the model)


texts:
Let say the electorate consists of three segments of voters: 1, 2, and 3 with corresponding weak preference relations defined over the candidates. Let the preferences be given by --

Segment 1: Biden > Warren > Sanders; Biden > Sanders.

Segment 2: Warren > Sanders > Biden; Warren > Biden.

Segment 3: Sanders > Biden > Waren; Sanders > Warren.

Question: Derive the preference relation of the electorate, decided by majority rule. As a preferences of the electorate as a whole rational? Why or why not.

For this question, I feel like it would not be possible to derive a preference relation of the entire electorate because it seems that no one candidate is strongly/weakly preferred. Therefore, it would seem that the preferences of the entire electorate would not be rational because it does not satisfy the transitive and completeness principles. Would I be correct in thinking this way and that a net preferece relation may not be derived? Any help would be greatly appreciated. Thank you.


texts: Why are inventions inevitably correlated with imperfect competition?

texts:
Romer (1990) elaborates the incompatibility of nonrival inputs with constant returns to scale: If a production function depends on rival and nonrival inputs and both inputs are productive, then the production function cannot be constant returns to scale.
Romer then uses the Euler's Theorem to show that non-constant returns to scale are not compatible with perfect competition. Formally: $$F(A,X)<A \cdot \frac{\partial F(A,X)}{\partial A}+X \cdot \frac{\partial F(A,X)}{\partial X}$$ where $F(A,X)$ is an increasing return production function and $X$ and $A$ are the input factors. Romer: "If all inputs were paid their value marginal product, the firm would suffer losses." Intuitively, with increasing returns to scale one firm is able to produce every quantitiy at lower costs alone than many firms together. So the economy tends towards monopoly. Romer credits Arrow (1962) amongst others with this insight.

What Arrow said though is that in order to have incentive to innovate, inventions must be appropriable, e.g. monopoly right. This leads to textbook welfare loss through market power. Nonexcludable commodities must be made excludable otherwise nobody has incentives to invent them. Intuitively, if perfect competition would prevail after invention, the inventor would not be able to recoup the positive costs of the invention. So there would never be incentive to invent in the first place.

Both authors show how a property of certain commodities is not compatible with perfect competition. However, Romer uses nonrivalry but Arrow nonexcludability. In Romer's case a technological feature of the production function leads to imperfect competition and in Arrow's case it's an incentive problem, independent of the production function.

How are Romer's and Arrow's insight the same? For me, the consequence might be the same but the reasons leading to imperfect competition are different. I am still not able to grasp the incompatibility of inventions and perfect competition. Why are inventions (R&D) inevitably correlated with imperfect competition?

EDIT: Also, note that Arrow refers to the sector producing the invention whereas Romer's source of imperfect competition stems from using the invention (I am not yet familiar with the Romer model to actually confirm that). Furthermore, Romer's problem can be solved by using increasing return production functions but Arrow's incentive problem cannot be solved this way.


texts: How does the trade problem in Ricardian model of int'l trade work?

texts:
Sorry if this question seems fragmented; I have minimal background in economics, I just grabbed some notes and began studying.

The scenario is given as: "Suppose Germany needs to make a 1 billion dollar payment to France. Keyesians thought that there is no general equilibrium effect; the burden to Germany is just 1 billion. However, if consumption is home-biased, then relative demand for French goods will increase, which deteriorate the terms of trade for Germany. This in turn will imply the burden for Germany is more than 1 billion dollars."

I'm not understanding the bold parts:

Does Ricardian theory place a number on how much more the burden is in excess of 1 billion?
Does worse mean a decrease? Ie export prices down, import prices up.
How does home-biased consumption result in higher demand for French goods? Is it saying consumption is home-biased for BOTH countries (Germans prefer German goods, French prefer French goods)? And/or is it saying EVERYONE will demand French goods (both German and French households will increase demand for French goods)? They tried to explain using the formula given previously in the notes:
$$
\theta(\tilde{z})w^*L^*=(1-\theta(\tilde{z}))wL
$$
Where $\theta(\tilde{z})$ is the proportion of home country's income spend on good $z$, $w$ is wage, $L$ is labour amount and the asterisk denotes the foreign country.
They said if home-bias exists then $\theta(z)^*>\theta(z)$ but doesn't go on to explain what that means for the equation. Plus the * is confusing because this is true in either Germany or France's perspective, so I'm not sure who's perspective to use for the equation.


texts: Difference between unemployment rate between ILO and bureau of labor statistics

texts: Why there are differences between the unemployment rate of the US between the data of the bureau of labor statistics and the ILO (international labor organization). Have they different definitions of labor force? Or is it because they are conducted by the different organizations?


texts: Has anyone studied how people's indifference curves can change?

texts:
I'm wondering if anyone has looked at how people's indifference curves can change, whether systematically due to experimental manipulations, or if they just vary due to noise.

I thought about this because of a study I did in which I got violations of transitivity when we generate two options from one indifference curve. For example, let's assume we have these three choices

A[25,50]
B[50,25]
C[45,30]

and a participant is indifferent to the choice sets {A,B} and {B,C}. However, when we present the choices {A,C}, they end up preferring A over C. By indifference curves we mean the line in a 2-dimensional attribute space where any two options are equally preferable. Possibly any study that has looked at violations of transitivity from choices generated from a single indifference curve can address this, but I haven't found anything like that yet.

I think maybe the reason I haven't found anything is that I'm mostly only familiar with the literature in psychology, whereas this seems like an issue what would have been investigated in economics. That is why I am asking about it here.


texts: Budget constraint in Radner Sequential Trade Equilibria

texts:
Suppose that $q$ is a k-tuple vector of prices for the k assets whose quantities are given by the k-tuple $\theta$. I have just read that in the Radner Sequential Trade Equilibrium (not sure if this goes by another name), where the trading of assets occurs in period t=0 (as opposed to t=1), the period-zero budget can be expressed as $q*\theta$, where $*$ denotes the inner product, and that this budget is non-positive.

I feel like I must be misunderstanding something about this particular setting, because I have no idea how a budget could possibly be non-positive, as opposed to non-negative.

Can someone give me some intuition for what's happening here?


texts: Transition Matrix: Discrete -> Continuous Time

texts:
I have the code corresponding to Tauchen (1986) (Python equivalent of this), which generates a discrete approximation of a discrete time AR(1) process.

For example, if you set up grid size as 3, it gives you a vector of productivities

[A_1, A_2, A_3,]

and a matrix of transition probabilities

A_11, A_12, A_13
A_21, A_22, A_23
A_31, A_32, A_33

Where row i, column j gives you the probability of transitioning from i to j, and it satisfies that the sum of each row is approximately one.

I am wondering how I can transform this to a continuous time equivalent of the transition matrix; a set of poisson probabilities controlling the flow rates between the states.

All I remember in this regard is that we can get the linear approximation to the poisson probabilities using

$$Prob(i \to j) = \lim_{\Delta\to0} \exp(-\lambda_{ij}\Delta) \approx 1-\lambda_{ij}\Delta  $$

But I can't see how that helps me transforming that former matrix to the $\lambda$s... I'm looking forward to any suggestion.


texts: Is the locus of consumption in Ramsey growth model a vertical line?

texts: In almost all documents I have read on the internet, the locus of consumption where $C_{t} = C_{t+1}$ seems to be a vertical line as shown below. However, my teacher said it could well be not a vertical line. I really don't know why it should be different. Thank you for all your help.


texts:
I should consider a following modification of IS-LM model:
IS curve is standard: Y = C(Y-T) + I(r) + G
In LM curve the demand for money depends now on after tax income: M/P = L(r, Y-T)
Price level is fixed in the short run
I need to solve for tax multiplier.
What I have done is that I took the full differential of two equations and got the following:

dY = C'(Y-T)dY - C'(Y - T) + I'dr + dG

1/pdM - M/p^2 * dP = Lr * dr + Ly * dy - Lt dT

Lr, Ly, Lt are partial derivatives
Next the book gives a hint to use Cramer's rule to solve for tax multiplier, but I am not sure how I can do it. Because to me it seems that I have 2 equations and 3 unknown variables


texts: Are there Recent Studies of Price Elasticity of Demand for Housing in England?

texts:
To address what is widely perceived as under-supply of housing in England resulting in high costs of housing, the UK government has set a target of 300,000 new homes annually (the target relates to England only because housing policy in Wales, Scotland and Northern Ireland is the responsibility of their devolved administrations).  I am interested in assessing the effect that achieving that target over a period of years would have on the cost of housing (for both buyers and renters).
Are there any recent (say last 10 years) academic studies of the own-price elasticity of demand for housing in England (or for the whole of the UK)?


texts: Necessary conditions for the existence of a competitive equilibirum

texts:
I got that in an exchange economy, conditions as preferences being continuous, strictly convex and strongly monotone and $\sum_i \omega_i\gg 0$ are sufficient conditions for the existence of a Walrasian (or competitive) equlibirum.

Are there necessary conditions for the existence of an equilibrium?


texts: Yield curve and cash rate (multiple choice)

texts:
I'm working on this supposed to be a simple multiple choice question:
The yield curve indicates?

A. the relationship between existing short, medium and longer term interest rates, independent of expectations about future interest rates.

B. the relationship between the existing cash rate and the expected level of cash rate in the future

C. expectations about future levels of medium and longer term interest rates

D. among other things, expectations about the future levels of the cash rate and hence about future monetary policy

I believe all the answer could be correct, but I'm leaning toward A because the yield curve could be seen as a "snapshot" of short, med and long term rates. Hence, although the expectation of future cash rate or monetary policy does affect short and long term rate, the existing yield curve should already capture these expectations. But A could be wrong because of the word "independent" alone.


texts: How did Switzerland manage to balance its budget?

texts: Why switzerland managed to balance its budget after financial crisis? Why they had a surplus after 2008? I am not able to find comprehensive source for this type of information.


texts: Why is the velocity of money in an economy affected by the frequency in which the worker is paid (like weekly, bi-weekly, monthly, etc.)?

texts:
I don't have any economics background, and was going though a course on Macroeconomics. I was solving the practice question here: https://mru.org/practice-questions/causes-inflation-practice-questions?sid=2719557

The last question says:

The velocity of money is affected by which of the following? *

a. How quickly the treasury prints new money.

b. If a consumer makes purchases with large bills or smaller bills.

c. If workers are paid weekly, bi-weekly, or monthly.

d. If a consumer uses a payment plan to purchase something or pays outright.

The answer is c. I cannot understand why does the frequency of payment matters. Also, if c is correct, why is option d wrong?


texts:
I'm trying to compare the results of Christiano Fitzgerald bandpass filter with wavelets. I'm familiar with wavelet decompositions in general, but I'm rather new with Christiano Fitzgerald (CF).

So far, I have understood that CF is able to decompose the series to trend and cycles and it is also able to decompose the signal in specific time frames as wavelets do. However wavelets operate with a pyramid algorithm where the first level decomposes the signal to mother and father and it finds the 2-4 frequency and the trend. Then, it picks these results and it decomposes them again to find 4-8 and so on.

The documentation of mFilter in R states the following for CF:

  Arguments:

  type: the filter type, "asymmetric", asymmetric Christiano-Fitzgerald
  filter (default), "symmetric", symmetric Christiano-Fitzgerald
  filter "fixed", fixed length Christiano Fitzgerald filter,
  "baxter-king", Baxter-King fixed length symmetric filter,
  "trigonometric", trigonometric regression filter.
  pl: minimum period of oscillation of desired component $(pl<=2)$.
  pu: maximum period of oscillation of desired component $(2<=pl<pu<infinity)$.
  root: logical, FALSE if no unit root in time series (default), TRUE if unit root in time series. The root option has no
  effect if
  type is "baxter-king" or "trigonometric".
  drift: logical, FALSE if no drift in time series (default), TRUE if drift in time series.
  nfix: sets fixed lead/lag length or order of the filter with "baxter-king" and "fixed". The nfix option sets the order of the
  filter by $2*nfix+1$. The default is $nfix=1$.
  theta: moving average coefficients for time series model: $x(t) = mu + root*x(t-1) + theta(1)*e(t) + theta(2)*e(t-1) + . . .$ ,
  where $e(t)$ is a white noise.

Are the arguments pl and pu responsible for the level of decomposition? For example, if I pick $pl = 2$ and $pu = 4$, it will go for 2-4 days/weeks etc and if I go for $pl = 32$ and $pu = 64$ it will decomposes for 32-64 days/weeks/months etc or am I missing something?

Thank you in advance


texts: Problem to find steady state when I assume Y=1

texts:
I am trying to do a DSGE model in Matlab, I have all the steady state equations on paper and pencil but I fail to find values for all variables.
Indeed, since I have constant return to scale,   I have then tried to assume Y=1 to simplify the calculations. But it leads me to a problem:
My market clearing equation is okay: all sums to 1 at steady state.
However the production function does not equal to 1. It's because I have used other equations to determine N, N prime and wages. I used these equations to determine N, N ', w and w':

I have tried to use the production function, make Y=1, and since I know K I can express N in function of N '.

Where Y=A=1 and K is known
But then I fail at finding on paper and pencil a value for N, N prime and w and w'
Do you have an idea how can I assume Y=1 and still have the market clearing and the production function equal to 1 ? Do you recommand me another way to solve my steady states ?


texts: Does Nash Equilibrium predict the existence of vaccine reluctance?

texts:
I was listening to a lecture on Nash Equilibrium, which stated that a Nash Equilibrium by definition occurs at a point that no players in the game have an incentive to change their strategy - everyone is playing their best response to everyone else. It occurred to me, though: it seems to me that 100% vaccination rate is not a Nash Equilibrium because herd immunity for a good vaccine would likely occur far earlier than that - once herd immunity is achieved, unvaccinated people would have far less incentive to change their strategy and get vaccinated.
Am I missing something, or does Nash Equilibrium occur at exactly the point where herd immunity is achieved - no one regrets their decision or wishes that they chose a different strategy, and no one has an incentive to change their strategy? (For any actual biologists reading, yes, I do realize that I'm being very simplistic about how vaccines and herd immunity actually works).
That being said, if I'm right about this, does game theory predict that some people would be reluctant to get the vaccine simply because they're "freeloading" (for lack of a better term) on people who already got the vaccine?


texts: Do German Goverment bonds usually include (or included) a condition that the debt will not be serviced in case of trade imbalance?

texts:
Today the Spiegel ran an article on a proposal to end the Euro Debt Crisis.
That article made the claim given in the title

Syriza will eine sogenannte Wachstumsklausel für jene Schulden einführen, die nach dem Schuldenschnitt übrigbleiben. Im Falle Deutschlands handelte es sich damals um eine "Außenhandels-Einnahmen-Klausel", der zufolge der jährliche Schuldendienst drei Prozent der Exporteinnahmen nicht übersteigen durfte. Für die Gläubiger Deutschlands hieß es also: Kauft deutsche Produkte, wenn ihr euer Geld zurückwollt.
Syriza wants to establish a so called growth-clause for the debt left after the haircut. In the case of Germany there was the "Außenhandels-Einnahmen-Klausel" (Foreign-trade profit condition) which states that the amount of serviced debt is not allowed to be higher than 103% of export profit.
For the debtee that meant: If you want your money back you have to buy German products.

As the article mentions the London Debt Agreement of 1953 I assume that the statments given in the past tense refer to that agreement. However the term Außenhandels-Einnahmen-Klausel does not appear in those documents and on a cursory overview actually doesn't seem to include those conditions.
The only google hits for that exact term are that very article.
And the proposal also doesn't mentions foreign trade or export.
So, has this clause existed or even still exists today?


texts:
On this presentation, the last slide is titled "Non Separable Utility", and the preferences given are

$$ \frac{\left(c^\gamma (1-n)^{1-\gamma}\right)^{1-\sigma}}{1-\sigma}$$

However, I can log-transform them as

$$ \log\left[ c^{\gamma(1-\sigma)} (1-n)^{(1-\gamma)(1-\sigma)} (1-\sigma)^{-1}\right]$$

which are clearly separable. Did I miss something?


texts: Macroeconomics: Aggregate Demand, Equilibrium Dynamics and Expenditure Multipliers

texts:
I am having a hard time with the following economic questions (See attached). Here is my approach:

Note about the curves: The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to increase government purchases as fiscal policy to reduce the burden of this recession.

How much does aggregate demand need to increase to reach long-run equilibrium?

A: 100 billion
Because that's the AD1-AS equilibrium to AD1-LRAS line
MPC =.75 (and thus MPS = .25)

How much do government purchases need to increase to shift aggregate demand by the amount you found in part 1)?

My logic:
The expenditure multiplier = 1/MPS = 1/(.25) =4

Delta Y from 1) is 100 billion

Therefore, 4X= 100 (x = government purchases) leading to x = 25
Suppose the MPC is 0.6. To restore the economy to its long-run equilibrium, aggregate demand must be increased by i) ___________ and government purchases must be increased by ii) ________________

Delta Y is the same as 1), so it's 100 billion for i)

MPS changes to .6, so the multiplier is 1/.4 = 2.5, 100/2.5 = 40 billion in government purchases to restore long-run equilibrium.

So then, how are my answers wrong according to the program?


texts: Effect of a quantity tax in perfectly competitive market (Intermediate microeconomics)

texts:
Been stuck on this past paper question for quite some time. Doing my head in and going around in circles trying lots of different approaches...
Perfectly competitive market.
$C() = (0.5)y^2 + 40 + 2450.$
where, $$ denotes the firm’s output. The market price, $p = 140$.
I have worked out optimal output to be $y=100$; long-run optimal output to be $y=70$; and long-run price to be $110$. (Unsure about these as do not have answers).
Question: 'In the long-run equilibrium, what are the implications of the
government imposing a tax per unit on the good?'
Looking for an algebraic and graphical explanation. Thinking that price will increase, firms will exit industry, output will fall. Some sort of deadweight loss, with producer surplus/ consumer surplus falling? Not exactly sure how to represent this, especially considering it is 'long-run'.
Thank you very much.


texts: Why did the Greek GDP grow so fast between 2002 and 2004?

texts: Here is the history of the Greek GDP. In 2004 year it was 239.7\$ billion, but in 2002 it was 157.7\$ billion. It grew by approximately 50%. How did it grow so fast?


texts: Bonds with embedded options pricing via binomial model

texts:
Notation:

t - time; G(t) - zero-coupon yield curve; $r$, $r_d$, $r_u$ - interest rates.

The task is to find market price of a bond for today, while knowing the price of a number of other bonds.

Nelson-sigel model provides interest rate curve G(t). The next thing to do is to calibrate interest rate binomial tree using G(t). Also are known bond cash flow, par value and today market price.

The problem is how to do it properly. The start yield is given by G($t_1$), where $t_1$=0.25 (step for binomial model).

$100=\frac{1}{2}(\frac{G(t_2 )}{1+G(t_1)} +\frac{G(t_2 )+100}{(1+G(t_1))*(1+r_u )} + \frac{G(t_2 )}{1+G(t_1)} +\frac{G(t_2 )+100}{(1+G(t_1))*(1+r_d )})$

$r_u= r_d*exp(2*σ)$

$t_2 = 2*t_1$

These conditions provide $r_d$, $r_u$ for the second step of i.r. tree.

Is the next set of conditions for $r_{dd},r_{du},r_{uu}$  correct?

$100= \frac{1}{4} (\frac{G(t_3)}{1+G(t_1)}+\frac{G(t_3)}{(1+G(t_1))(1+r_d)}+\frac{(G(t_3)+100)}{(1+G(t_1))(1+r_d)(1+r_{dd})}) + \frac{1}{4}(\frac{G(t_3)}{1+G(t_1)}+\frac{G(t_3)}{(1+G(t_1))(1+r_d)}+\frac{(G(t_3)+100)}{(1+G(t_1))(1+r_d)(1+r_{ud})}) + \frac{1}{4}(\frac{G(t_3)}{1+G(t_1)}+\frac{G(t_3)}{(1+G(t_1))(1+r_u)}+\frac{(G(t_3)+100)}{(1+G(t_1))(1+r_u)(1+r_{ud})}) + \frac{1}{4}(\frac{G(t_3)}{1+G(t_1)}+\frac{G(t_3)}{(1+G(t_1))(1+r_u)}+\frac{(G(t_3)+100)}{(1+G(t_1))(1+r_u)(1+r_{uu})})$

$r_{du}= exp(2*σ) r_{dd}$

$r_{uu}= exp(2*σ) r_{ud}=exp(4*σ) r_{dd}$

$t_3=3*t_1$

Is there an easy way to define $r_{uuu}$, $r_{uuuu}$ and other interest rates (yields), so it would be possible to do it programmatically?

What are the ways to correctly determine σ?

I'm heavily relying on ideas used in this presentation:

http://faculty.cbpa.drake.edu/root/Auvergne/DESS%20Analyst%20Binomial.ppt


texts:
I have some money in Euros but living in USA. Today they are going to decide if the Greece will stay in Euro-zone.

I was wondering what will happen to Euro if Greece leave the EU. Or what is expected to happen?

I'm planning to exchange the Euros in August. Is it a good idea or should I do it right now or just keep the Euros?


texts: Does Bad Money Drive Good Money Out Of Circulation

texts:
I have heard the saying, "Bad money drives good money out of circulation," (Gresham's Law) many times.

I'm wondering if it's true, what it really means. What's good money? What's bad money?

And if this is true, what evidence do we have and do we know why this happens?


texts: How to auction shared item with a roommate?

texts:
My roommate and I split the cost of a game console a year ago (~$400) but he is now moving out.

We were wondering how to fairly auction the console given the situation:

We both paid an equal price of $200+
Right now half the market price of the console is \$175
We both would prefer having the console than being paid for it
He will be splitting the price with his new roommate whereas I will be paying by myself

With regular bidding, as my roommate representing both him and his next roommate and me myself, is he at an advantage because he has double the market power? If yes, how can we fix that problem?

Outcome:

Thank you for your answers. While the chosen answer seemed the best way to do this, we both felt it involved too much strategy and would have resulted in envy from one of us. We instead went with the Divide and Choose method, which worked out fairly for both of us.


texts: Competition between utilities like ports

texts:
I was reading about the frequent congestion in US ports and the resulting effect on the US economy. I feel there are unique features to this setting. When ports face congestion, they levy charges, and these are transferred on to the buyers by the shippers. On top of this, costs of delayed reception of goods are also borne by the retailers only. The only 'catch' for ports arises if the congestion is so high that firms shift to air transport or reroute through a farther port and incur road transport expenses.

Are there papers which model the economic interactions like competition between ports, or the interactions between firms, ports and labour unions?


texts: Dynamic of 10 year UST given supply shock of the bonds that the Fed will buy into

texts:
It looks like the US government are gonna issue a lot of bonds in the near future. Basic demand/supply implies that this will lower the price of those bonds i.e higher yields. At the same time it seems that the world is looking desperealty for dollars.

Hence where are all these dollars gonna come from if not the Fed? i.e the Fed buy all the bonds in order to one finance the deficit and two keep yields down.

What would be the long term effect of this kind of behavior?


texts: Does the US Federal Government keep public records of annual service payments on external (foreign-owned) public debt?

texts:
I'm doing some research on international debt policy, and I'd like to be able to compare some statistics I've compiled of external public debt in HIPC (heavily indebted and poor countries) with the same or analogous statistics for a wealthier OECD nation, namely the United States.
The World Bank Databank provides comprehensive data regarding annual debt service payments on external public and publicly guaranteed debt. As I understand it based on the methodologies outlined in the World Bank 2020 International Debt Statistics Handbook, this means both principal and interest payments on debt that is 1) an obligation of a public sector debtor OR a private sector debtor guaranteed for repayment from a public sector entity, and 2) is owed to a foreign entity. But here's the rub - these statistics are only available for low- and middle-income countries. I have searched high and low for comparable statistics from international organizations' datasets (OECD, IMF, etc.) but I just can't seem to find a metric of actual payments on external public debt for the US (not a debt service schedule, IIP, etc.).
The only source I have found that actually disaggregates US debt repayment based on domestic vs. foreign creditors is the BEA's Government Current Receipts and Expenditures datatable: https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey. However, this datatable (as far as I can tell) does not mention any principal repayments on foreign-held debt. What am I missing here? Is the assumption that principal payments are essentially meaningless because the US Treasury expects to be able to perpetually 'roll over' its debt obligations (i.e. sell more securities to pay off the first debt and subsequently re-incurring a second debt the same or similar amount)? Lastly - is there a more detailed dataset available somewhere of US external debt statistics that includes repayment information?


texts:
A Homothetic Utility is where
$$
\forall x,y, \forall a \in \mathbb{R}_+: \ u(ax,ay)=au(x,y)
$$ (or its monotonic transformation).
A linear Homothetic utility is defined as $$
\forall x,y, \forall a \in \mathbb{R}_+: \ u(ax+b,ay+c)=au(x+b,y+c)
$$
where $b,c$ are constants.
This preference has very similar property as the homothetic preference. In fact, if we simply translate the coordinate system in the direction of (b,c), then the preference becomes homothetic.
Are there any works covering this property? I've checked a lot of theory papers in homothetic preference but found no luck.

Homothetic Preferences by James DOW· and Sergio Ribeiro da Costa
WERLANG
Homothetic and weakly homothetic preferences by J.C. Candeal, E.
Indurain
Linear-homothetic  preferences, by B Datta, H Dixon


texts: How does the core relate to strong equilibrium?

texts:
An allocation is in the core if there's no coalition that blocks it.

A strong equilibrium (Aumann, 1959) is a Nash equilibrium in which no coalition, taking the actions of its complements as given, can cooperatively deviate in a way that benefits all members of the coalition.

How are these distinct? I usually don't think of the core as a solution concept, but I'm struggling to disentangle it from strong equilibrium.


texts: What would be the "text-book" result of governement taking on massive debt immediately before a significant recession

texts:
Supposing, (entirely hypothetically, of course ;) ), that the UK government had taken on massive future debts (by spontaneously giving 2-3% of GDP to its citizens, in GBP, say.) immediately before a significant recession.

What would be the simplistic prediction of the impact on:

Interest Rates
Inflation

over the following, say, 20 years?

Obviously such situations are incredibly complex and there are numerous ways that the outcomes could be changed. But I want to get a feel for what the "base line" or "default" expectation might be.


texts: Effect of Modified Utility Function on Initial and End Values of Capital, Labor and Production

texts:
I am trying to model a transition path of an economy exposed to a permanent shock to government spending on dynare via matlab.

We start with these model equations (standard dynare code format).

c(+1) = c* beta*(1+alpha*k^(alpha-1)-delta);
y = k(-1)^alpha;
k = (y-c)+(1-delta)*k(-1)-g;

Where alpha, beta are constants, g is exogenous (the shock), and c, y, k are consumption, production, and capital respectively.

We then want to change our utility function to

$$U = \sum_{t=0}^{\infty} \beta^t \frac{C_t^{1-\sigma}}{1-\sigma}$$

Note that the first equation in the model is basically an Euler Equation, so only that will change if the utility model changes.

I get that the derivative of modified $U$ at time $t$ is $b^t*C_t^{-\sigma}$, which when put into the Euler Equation makes the dynare model

c(+1)^(-sigma) = c^(-sigma)*beta*(1+alpha*k^(alpha-1)-delta);

But if I do this, then the steady state values of K and thus Y and C do not change because the two cs become 1 when divided out at steady state…which I feel is somehow wrong.


texts: Essential difference between Neo-Classical and Neo-Liberal economical philosophies

texts:
From what I learned about Neo-Classical and Neo-Liberal economical philosophies in different sources such as documentary series or Wiki site articles I understand both are "neo" versions of Classical and Liberal economy, and that all four are branches of capitalism,

but how would you explain the essence of difference (if there is one), between Neo-Classical and Neo-Liberal?


texts: Trade-off between determenistic and random alternatives in a one-shot game

texts:
I wonder how to analyze the following problem.

Suppose we play a one-shot game. We have two options. We can either get $x$ dollars or win $y$ dollars with probability 50% (or, probably, win nothing with the same chances). What is the minimal value that the game-designer should assign to $y$ to make you to choose the second option?

The game is one-shot. It means there is no way to play it several times. It works for me in the following way:

if $x$ is 50 cents, I'm ready for \$1 at $y$;
if $x$ is \$100 dollars, \$300 will be enough.
if $x$ is \$100M, I won't choose the second option.

I suppose the decision depends on your income, your tendency to risk and so on. So what factors are essential for rational decision? And how to compute $y(x)$?


texts:
Here's the Sims(2002) paper

How does one deduce equation (39) from that paper?

Any help would be appreciated.


texts: Did any recipients of the economics Nobel prize receive their prize for work that was primarily or substantially empirical (rather than theoretical) in nature?


texts: Estimating CES utility (not production) function parameters

texts:
The CES utility function has the form
\begin{equation}
u(x_1,\dots,x_n)=\left[\sum_{i=1}^n\alpha_ix_i^\rho\right]^{1/\rho},
\end{equation}
where $\alpha_i$ is the consumption share parameter and $\sigma=\frac{1}{1-\rho}$ is the elasticity of substitution.

I'm interested in estimating the $\alpha_i$'s and $\sigma$. Since we do not directly observe utility levels, I think we can instead use data to estimate the Marshallian demand functions implied by the utility function:
\begin{equation}
  x_i(p_1,\dots,p_n,M)=\frac{M(\alpha_i/p_i)^\sigma}{\sum_{j=1}^n\alpha_j^\sigma p_j^{1-\sigma}},\quad i=1,\dots,n.
\end{equation}
Clearly, the function is highly nonlinear in the parameters of interest. So a nonlinear estimation procedure would be required.

Say we have data consumption $x_i$, prices $p_i$ and income $M$. How do we go about estimating the parameters $\alpha_i$'s and $\sigma$?

I can find a lot of papers on estimating the CES production function, but I don't find them helpful since I don't observe the dependent variable ($u$). Given that the CES utility is a common functional form used in the literature, I suspect its estimation must be somewhere in the literature.

I managed to find the nonlinear least squares estimation in Stata, but I don't know how susceptible such a procedure is to misspecification and how much confidence one should put on the statistics (e.g. t-stat or p-value) produced by the program.

Any pointer to the papers/textbook chapters on the topic, as well as statistical packages that implement the estimation procedure will be greatly appreciated.


texts: How does Austrian Economics define Labour Productivity?

texts:
Is there a specific Austrian definition in accordance to the concept of Labour Productivity?

If Labour Productivity is too broad of a term, then I will qualify to be speaking about it in context of this video which speaks about Labour Productivity comparing Canada to the United States.

  If Canada's Labour Productivity matched that of the United States
  between the years 1988 and 2008, how would our [Canadians] lives be different?

  Real GDP - $8,500 higher

  Personal Disposable Income - $7,500 higher

  Corporate Profits - 40% higher

  Federal Government Revenues - 31% higher


texts: How to derive and draw phase diagrams: Ramsey-Cass Koopmans model

texts:
I am confused by how to construct phase diagrams. For instance, I have been given the following two equations from the Ramsey model:

\begin{align*}
\frac{\dot C}{C}=&\frac{1}{\gamma} (F_K(K) - \delta -\theta)\\
\\
\dot K =& F(K)= C- \delta K
\end{align*}

But I do not get how to get from those equations to the standard phase diagram of the Ramsey model, with a C-K axis, and what looks like a downwards facing parabola for the equation of motion for k. I've looked through various online lecture notes for the model, and I'm usually okay with the algebraic manipulations. I can just never understand how it relates to the phase diagram picture. An intuitive explanation, or an perhaps reference to an introduction to phase diagrams which would explain it would be very much appreciated!


texts: Basic Reason of Why the Money Supply Needs to Increase?

texts:
Hello, all. So I am trying to gain a thorough understanding of why the Fed, or any other Central Bank, needs to keep pumping money into the economy as it grows.  My question is not asking why inflation happens, but rather focuses on the money supply. I grasp how increasing the money supply tends to increase inflation, and how, on the other hand, the Real GDP increasing tends to decrease inflation (all this is bundled up in the MV = PY equation) and other higher-level economic concepts, but why does the money supply need to increase at all in the first place?

I am essentially asking what would be wrong with keeping it the same as the economy grows or contracts.
The colorful analogy found here helped me understand it a bit more, but I am still thoroughly confused.


texts: How to calculate the minimun of Average Fixed Cost knowing the Average Fixed Cost

texts: Given the Average Fixed Cost, how does one calculate its minimum?


texts: Why don't we give social security in such a way that previous optimal bundle is once agin the optimal budle?

texts: In this the budget line has shifted inwards due to increase in the price of goods. And then we provide social security such that the past optimal bundle becomes affordable but is not optimal. So why don't we provide social security in a way that the budget line becomes same as the past one ( or to say provide social security in a way that price will virtually become same as past price) , so the past optimal bundle is again optimal?


texts:
I'm trying to understand GDP and what it means.
Say that there are two US software companies, Foo Inc and Bar Inc. Foo Inc produces software and charges Bar \$1 million for its usage, while Bar Inc produces its own software product and charges Foo Inc the same amount of \$1 million.
While money did change hands, the profits of both companies remained the same, as they both incurred the same amount in revenue and expenses.
Would the national GDP increase by \$2 million because of these transactions?


texts: Can not achieving complete factor price equalisation be good for world trade?

texts:
I am just wondering whether not achieving FPE is good for world trade. My reason being that is that international trade keeps expanding until complete FPE is achieved, according to the Heckscher-Ohlin model. This means more trading so global economic growth keeps increasing so having positive chain reaction effect on the world right? I am thinking in the real-world as clearly some of the assumptions of the HO model do not hold in the real-world.

Edit: any links to good reading materials on this topic?


texts: Could the inflation following the Gold Rush have been avoided, are we any "wiser" on inflation now?

texts:
Quoting Milton Friedman on the inflationary period shortly following the American Gold Rush in California:

  "Because there was more gold, they had to pay a little more gold to
  buy goods and services. The prices of things in terms of gold went
  up."

Question: Is the Gold Rush period's inflation an example of a fundamental economic axiom, something to which we have little to no control over? Or could it have been avoided with modern fiscal policies?

Example: One example that comes to mind is how much money was printed during Quantitative Easing 1-3. Despite the sheer amount of money printed, we didn't undergo inflation, because the QE money never made it to circulation. One could argue that as we avoided inflation, that is evidence of our current cleverness, but at the same time I also see this example as cautionary tale: "Don't let ANY money get into the hands of the public, or we will be doomed to repeat the Gold Rush."

You may feel free to follow up with my example above, or provide your own examples.


texts:
I once read an argument by the libertarian economist Thomas Sowell against the conventional wisdom that rising income is bad because most statistics which show rising income inequality do not account for individuals moving between income bands over time.

His argument went something like this. Consider the average professional at the beginning of their career, for example a junior doctor ( the argument also seems to apply to non-professionals but in a less extreme way). They won’t be in the top income bracket when they begin working but over the course of their career they almost certainly will at some point. For this reason income inequality is not as significant an indicator of the actual economic situation for many individuals as it does not track how the incomes of individuals change, and often increase, over time. Furthermore, income inequality statistics don’t count people who don’t work, which includes a large number of wealthy pensioners. Therefore rising income inequality can even be thought of as a positive thing as it affords young people the opportunity to earn more, and thus actual leads to less actual inequality of wealth.

I couldn’t find a link to his exact words unfortunately but I suspect that he was making the point from the point of view to defend free-market capitalism.

My question is simply is is argument correct, and if not why not?

I am a physics student, so I’m possibly just not familiar with the most technical economic theory that might explain this, but I can’t figure out why this fact (that people move between income brackets over time) is basically never addressed either in political discourse ( eg the Labour Party are always talking about income inequality but I’ve never heard the Conservatives give as eloquent a response as Sowell) or the popular literature that I’ve read ( eg newspapers on the right and left, and books by modern economists such as Ha joon Chang and David pilling).


texts: What would happen in Venezuela if the currency exchange control is removed overnight?

texts:
What would happen in Venezuela if the government all of a sudden starts offering currency exchange by the prices of the free market?

To my knowledge, the main reason for the government in Venezuela to have currency exchange controls is that they don't want everybody to start buying less volatile currency in order to protect their savings from inflation. What would lead in turn to the government losing all of its reserve currency.

Would that hypothesis hold true in such situation?


texts: What is the difference between "Social Choice Theory", "Public Choice Theory", and "Collective decision-making?

texts: I need to know the difference between Social Choice, Public Choice and collective decision-making. Also, Is public choice, social choice the same as collective choice? Thank you


texts: In US gov treasury auction, can the highest bidder force high prices for all others

texts:
In US treasury auction (for bonds and notes), my understanding is that the highest bidder's price (and rate) is applied for all the buyers.

Assume a buyer 'A' who plans to buy a smaller number of bond shares. Let two other players 'B' and 'C' invest heavily compared to 'A. Let 'B' and 'C' be competitors of 'A'.

Is it possible for 'A' to invest low but bid high thus play spoilsport for 'B' and 'C'?


texts: What are the determinants of the natural rate of interest and how market rate converges to it?

texts: I'd like to know how is determined the natural/neutral rate of interest. Moreover, how the market rate can converge to it ? If you have some references it would be great !


texts: Does the amount of inward investments affect inflation?

texts:
I understand that inflation has an impact on the foreign direct investment. But can the opposite be true? The amount of foreign direct investment has an impact on the inflation of the country that receives the investment?

Thanks


texts:
Does every point on the PPC have the same real output value? If not, then what point on the PPC does the long-run aggregate supply represent? LRAS is supposed to be vertical on the real GDP if the economy is producing efficiently, but every point on the PPC efficient. Every article I've read so far doesn't give a clear answer to this.

Long-run Aggregate Supply on Khan Academy:

The LRAS represents a point on a country’s PPC, translated into the AD-AS model. Every point on the PPC represents the maximum sustainable capacity for production in an economy. This value of real GDP represents the economy’s maximum sustainable capacity given its current stock of resources.

Aggregate Supply - Boundless Economics:

In the long-run only capital, labor, and technology impact the aggregate supply curve because at this point everything in the economy is assumed to be used optimally.

Aggregate Supply - Investopedia

In the long run, however, aggregate supply is not affected by the price level and is driven only by improvements in productivity and efficiency.

In a Khan Academy exercise, it says that both points on the example PPC is worth $6 billion, but I don't know whether this is true for all cases.

I really don't understand what I'm missing or if the LRAS is all theoretical anyway and this is just a pointless question.
Thanks in advance!


texts: Is it possible that all countries become developed and rich?

texts: In economics, we are taught that, or needs are infinite and resources are fixed. And each needs and resources have some associated value.. At global level, we know, there are some rich as well as some poor countries.. But, I want to know, is it possible that, poorer countries will become rich as well as rich countries also become richer.. ?  If yes, then how is it possible, since resources are fixed.. .


texts: Decision Theory Question: Existence and uniqueness of the certainty equivalent of p

texts:
Let $X = (x_*,x^*)$ be an interval in the real line and denote by $\Delta(X)$ the set of simple probability distributions on $X$. Consider a preference relation $\succcurlyeq$ on $\Delta(X)$ that satisfies the axioms of expected utility theory. If $\succcurlyeq$ displays monotonicity with respect to first order stochastic dominance and risk aversion then for all $p \in \Delta(X)$ the certainty equivalent of $p$ exists and is unique.

Sketch of the proof:

1) We define the certainty equivalent of lottery $p$: $CE_p \sim \int_{X}u(x)p(x)dx$

2) We know that if $p$ FOSD $q$ then $p\succcurlyeq q$

3) Because of risk aversion: $\int_{X}u(x)p(x)dx \leq u(\int_{X}xp(x)dx) =u(p)$

4) We want to show that $\exists$ a lottery, call it $s$ such that $CE_p \sim s$; in this respect (from 3 above) we know that $p \succcurlyeq s$; We then pick a particular lottery $q$ such that $p \succcurlyeq q$

5) Since by assumption $\succcurlyeq$ on $\Delta(X)$ satisfies the axioms of expected utility theorem (in particular continuity) there exists a unique $\alpha$ such that  $\alpha p + (1-\alpha) q \sim s$ ( see MWG p. 177). We therefore proved that $\exists$ a compound lottery $s$ that is the certainty equivalent of lottery $p$.

QUESTION: Am I missing any detail in the proof?


texts: Examples of how economists come up with a production function for a firm?

texts:
I am a young man studying economics on his own. In every microeconomics text I find, they teach you what a production function is, but they never show examples (or practice problems) on how one comes up with a production function of a firm on his/her own. Even in practice problems, a production function is already given. I can never find practice problems that help you practice finding an actual production function (ex: A firm has 3 ovens, 2 computers, 10 special extractors, and 15 workers in an olive oil plant. Find the production function for this firm).

I personally want to see how an economist makes up his/her own production function of a firm he/she is observing. I know this takes some sort of mathematical ability. I personally am not that good at modeling real life situations into functions yet (I am practicing that as well). This is why I want to practice this particular skill.

Can anyone please show me examples of this? Does anyone have any good websites or books that show great examples of this, along with practice problems? I have found nothing in almost every book/website I've found. Please help. Thank you.


texts: Why does Samuelson say common stocks are better than bonds and preferred stocks during inflation?

texts:
I’m reading the first edition of Paul Samuelson’s Economics (1948). In Chapter 6, “Business Organization and Income,” after describing bonds, preferred stocks, and common stocks, he writes:

  To test his understanding of these three forms of securities, the
  reader should make sure that he understands why common stocks
  are better investments in time of inflation than the other two. (p. 124)

I can’t get a grip on the question, in some part because I don’t know what it means and in another part because I don’t know what background assumptions we are supposed to make. Does it mean: if one wants to buy a security from a profitable company during inflation, which should one buy?

Even then I’m not sure how to proceed merely on the assumption that the economy is seeing some generic increase in prices. I’m looking for some help interpreting the logic Samuelson is trying to get at.


texts: Looking for a term that explains market participants that lie about their participation to gain access to said market

texts:
I'm Looking for a term that explains the behavior of a market participants that will lie or exaggerate how much or what they offer in order to gain access to a market that would otherwise be inaccessible.

This is simular to the concept "bait and switch" but the goal here isn't adverse-deception, its to overcome a barrier of entry.

For example, participant X wants to penetrate a market but monopoly protections prohibit entry. X can enter the market under the pretense of selling a different product and finds a way to disguise their new product to steal market share from the monopoly.

Another example, Company Y wants to start manufacturing widgets, but suppliers only contract with companies who are a part of the big widget alliance. Big Widget alliance only accepts companies who produce at a certain quantity. Y then pretends to have a certain output to gain access to the market.

Another example (but might be a different concept), is when participant Z is known as a gizmo buyer but they actually are in the market exclusively to sell gizmos.


texts:
I need advice on whether on my supply logic is correct.

Question 1: Any point on the supply curve indicates the minimum price that a producer must receive in order to supply a specific quantity of output. True or false?

I think, it is true because, if the price increases the quantity supplied would be differ.  Thus, it is indeed the minimum price.

Question2: An increase in price results in an increase in supply but not an increase in the quantity supplied.

I think, it is false because price causes a movement along the supply curve.  However, if the price of complementary good-in-production increase, the supply will increase, but this will also lead to an increase in quantity supplied, unless the demand decreases due to other factors.


texts: Why do you typically have to pay for use of the washing machines while other amenities are free?

texts:
I'm looking at apartments and noticed that many offer amenities such as gyms, pools, saunas and hot tubs which are "free" to use by tenants (paid for by the condo fees). However, I noticed that while most of them also have laundry rooms, tenants must pay to use the machines (at the machine, on a per-wash basis).

The washing machines are an outlier in the sense that they are the only facility on the premises that cost extra to use; everything else (tennis court, barbecues, pool and gym) is free.

Why is it that washing machines seem to be treated differently?

I thought about it for a bit, here are a few of my hypotheses so far (but I don't have data to support any of it):

I can't imagine that washing machines cost much more to operate than a pool, gym, tennis court or sauna - maybe I'm wrong - but considering that the aforementioned are all included I don't think the landlords left the machines out of the included amenities because it would have been too expensive to include them. (Or too expensive to include them instead of some of the other aforementioned amenities)

Clearly, "because they can" is true, if they can make money off the machine they'll opt to do so, but they also could save money by not having a pool and gym to maintain yet they do it because they seem like good incentives to live there. Are the machines not included simply because they aren't very convincing incentives for potential customers? Either because

people underestimate the cost to use the machines (therefore would not see free use as a big incentive)
it's the norm here (North America) for machines to require payment for use and since it's not a "sexy" topic of conversation the laundry rooms are simply left out of sales discussions (making it hard to advertise it as an incentive). A landlord wouldn't gain much by giving the customer more than they expected in this case, so they don't.

I'm asking because, personally, I'd rather have free use of those machines than free access to a pool and sauna I'd never use and I'm wondering why no one seems to offer free washing machines for tenants.


texts: Optimal spending over several periods with log utility and uncertain lifetime

texts:
If someone has probability p(n) of being alive after n periods and p(n) is known with p(n) = 0 for n >= m, and if he has log utility of consumption, and his utilities are additive over time, and interest rates and inflation are zero, can one derive the fraction of wealth he should consume in each period? I think that the amount of wealth he sets aside for a period is proportional to the probability he will be alive then but have not proven it.

I have solved the two-period case. If he starts with one unit of wealth, and he has probability p of living to a second period, and no probability of living after that, and he has log utility of spending, then his total utility is

U(x) = log(x) + p*log(1-x)

U'(x) = 1/x - p/(1-x)

Setting U'(x) = 0 gives

p*x = 1-x

So

x = 1/(1+p)

which makes sense. If p = 1 he is guaranteed to be alive in the 2nd time period, and he splits consumption equally between the two time periods. If p = 0 he spends all his wealth in the first period.


texts:
What is the relationship between GDP and CPI(consumer price index)? My thinking is that if the CPI increases, this means that the market basket cost has increased, therefore, the consumer spending has increased. If the consumer spending increases, then GDP increases. However, depending on the consumer preferences, CPI can either underestimate or overestimate the cost of living. So from here, I cannot draw consequences about how CPI affects GDP or vice versa. Can someone please explain this? Is my thinking correct? Can there be any additions to these?

Any help would be appreciated!

Thanks in advance!


texts: What happens if money supply grows more slowly than inflation?

texts:
I'm thinking the case of Argentina. In 2016, prices raised about 40% but according to the central bank of Argentina, money supply grew only 30%. Is this going to have an effect in 2017?
What could we expect to happen in general when money supply grows slower than inflation for a given period?

Thank you in advance.


texts: What statistical concepts are used in introductory econometrics?

texts:
I am an undergraduate taking an upper-year introductory course in econometrics. I have taken calculus but I am not familiar with mathematical statistics.

What are the basic concepts from statistics that I can read up on in preparation for the course? I am familiar with the idea of distributions but my knowledge is very limited.


texts:
I am extremely stuck on trying to think of an instrument for the location of FDI within a country. The instrument must be correlated with foreign firms, but not correlated with domestically-owned firms.

Note: there is no Government policy I can exploit.

Any suggestions, papers, anything at all would be greatly appreciated.

My dependent variable is the log of house price, and my regressors of interest are
1) the log of distance to FDI 2) the log of job creation at the particular firm.

Isolating the impact of FDI on house prices will be difficult, given the presence of domestically-owned investments in close proximity.


texts: Does salary contribute to GDP under the expenditure approach?

texts:
The question really confuses me. On one hand, we can consider the wages as purchasing services from employees. On the other hand, the salary is also part of the cost of the products, thus it isn't "final services".
Consider the following scenarios:

Firefighters' salary

Yes, it contributes to GDP under the expenditure approach

Salary for the employees in a private firm

No, it doesn't

A tycoon pays the salary for a personal guard directly.

Yes
Am I correct to say so? Can anyone explain this to me? Any help is appreciated. Thanks.


texts: If Trickle Down Economics Works, Then Shouldn't "Trickle Up" Economics Work as Well?

texts: A lot of controversy in economics on the political stage comes from trickle down economics and whether it even works or not. The idea is that if we give sufficient tax cuts to corporations, they'll use that money to expand and create more jobs and just overall bettering the economy for everyone. My question is, why can't that work the other way around? If you give the working class just as much in tax cuts, they'll eventually spend that money to where it does end up at an American corporation. And in my opinion, this way is more capitalist, because the consumers decide what businesses get what percentage of their tax cut, instead of just multiplying the corporation's wealth.


texts: What is the name and the mathematical model of this effect

texts:
Consider the case when some economic variable affects some another (for example, interest rate affects price index) because it involves human decisions. The effect is not immediate and would take some time to begin. I am searching for the name of this delayed effect and the formula or mathematical or statistical model behind.

I am not economist, I just thought I would find an answer in economics realm


texts: Black-Litterman---in what way are expected returns hard to estimate?

texts:
In the Wikipedia article about the Black-Litterman model, it states that the motivation
behind model is that "it is difficult to come up with reasonable estimates of expected returns." Why is it that expected returns are difficult to estimate, whereas the covariances are not?


texts: Type of good that can be owned but not consumed when used

texts:
I'm an econ noob so apologizes if this is a dumb question.

I'm trying to find if there is categorization of a good that can be owned but is not consumed when used. Tools are an example of this. A hammer is owned and can be used repeatedly without diminishing it (I'm ignoring that it can break over long use). This is compared to a something that is owned but is consumed, like food or lumber or something that is public and is not consumed when used, like a park.

The reason I'm interested in these goods is I want to determine what it means to fairly share goods of this type. I'm hoping knowing the what this type of good is called will help me search for work around it.


texts: How does foreign trade work in a planned economy?

texts: I know that in a planned economy all economic processes are ruled by the state and that there are disadvantages such as too much bureaucracy and that sometimes deals are not always met with demand... But how is foreign trade ran in a planned economy and are there any advantages or disadvantages in such? And how do exporters deal and go ahead in a planned economy?


texts: Basic New Keynesian Model - Price and Wage Level after shock

texts:
I'm currently solving a new Keynesian model with government spending. It's the basic model version, with constant returns to scale on the only production factor work.

Everything has worked out fine in terms of solving the model with Dynare, the only thing that I don't understand is the output regarding P(Price level, not inflation) and W(Wages, not in real terms).

After the gov. spending shock hits, all variables move back into their steady state i.e. the impulse response functions return to zero as time goes on. This also is the case for >real

The only variables that do not return to their steady state are P and W(nominal). They both spike upwards as the shock hits and then return to a state even higher than that, as the shock fades out.

Why is this the case, what is the economic intuition behind it?


texts: How much to earn to break-even throughout life

texts:
Firstly, my apologies if this isn't the right forum for this - I couldn't spot a better one!

We are all born, pay taxes and die.

Depending on where we live, those taxes will (hopefully) be used to pay for our medical care when we are born, our education, maybe our college fees, health care during our lives and perhaps social care when we get too old to look after ourselves. Not to mention defending our country (armed forces) and keeping the streets safe (police).

Some of us will be fortunate enough to earn lots of money, pay tax on that money and still be able to pay for their own healthcare, their children's education and their own care when they get old. These people are likely to pay much more in taxes than they will ever receive back in benefits from the state.

Others won't be so fortunate, maybe they'll have periods of unemployment, maybe they have long-term (or just expensive) medical problems, or maybe they just won't pay much tax because they don't earn much in the first place.

In summary - some people will, over the course of their life, contribute far more in taxes than they will receive back in benefits. Others will receive much more in benefits than they ever contribute.

There must be a break-even income where a persons' overall, lifetime, tax contribution matches the total of all the benefits he receives.

So, assuming a typical working life of 45-50 years and an average life expectancy what should my average salary be over that period to eventual break-even? to be neither a net-contributor nor a net-consumer?

For the purposes of this question, I'm assuming UK rates of taxation and benefits although if there are figures for other countries I'd be happy to have those too! I'm also just asking about financial contributions/costs, not considering the relative social contributions of different types of jobs (i.e. nurses compared to stock-brokers etc)

UPDATE - I think I've found most of the answer at this link .


texts: Is it an international norm to have excise or tariff to be balanced or reversed when exporting goods?

texts:
It's an accepted international norm to charge VAT on import and rebate VAT on export, such that goods from different countries can be competed on a level playing field.
However, is it the same with other kinds of taxes on goods, such as excises and tariffs? The questions specifically are:

Is it a norm to have the excise of a product rebated when exported, such that the country can remain competitive on the international market while inhibiting domestic usage?
Is it a norm for a country to reverse charge a tariff when exporting goods produced domestically, if a tariff will normally be imposed on importing the equivalent product arriving in other countries? A hypothetical example is that, a country which charges 5% tariff on the import price on electronic products subsidies (1 / 1.05) of the export price to domestic producers exporting their product, such that domestic producers and international producers compete on the same basis either within or outside the country.
Is it a norm for a country to subsidy the tariff when goods are exporting to another country which will charge tariff? A hypothetical example is that, country B charges 10% tariff on agricultural products produced and shipped from country A, and country A responds by rebating the tariff paid by local producers when they ship the products to country B.


texts: Is there an economically sound way to decide between buying media or a streaming subscription?

texts:
How can a consumer (like myself) decide on whether they should pay for a music streaming service based on economic reasoning?

Assumptions:

The budget allows paying for a € 10/Month music subscription with what practically is a near infinite amount of songs.
For 90% of the music, previews or ad-supported versions can be streamed for free. The streams do not offer a high-quality listening experience, but they are good enough to discover and prelisten
The user would, without a subscription, buy 10 albums a year for € 9 each.
The purchased albums can be played infinitely and passed on to family members.
The user listens to music 1 hour a day when listening to purchased albums, 1,5 a day when paying for streaming
80% of the time the user listens to music they listened to before or will listen to again

The numbers are just examples, but key is that streaming services offer near infinite libraries, whereas purchased personal libraries are always limited to a budget.


texts: Optimization: Dynamic Programming vs Kuhn-Tucker

texts:
Considering the standard utility maximization of representative household which lives forever, one may use dynamic programming and Kuhn-Tucker in case of discrete time. For instance, one would like to solve,

max $\Sigma^∞_tU(C(t),N(t))$
 subject  to $P(t)C(t)+Q(t)B(t)<B(t−1)+W(t)N(t)+D(t)$

where $C(t)$ is consumption, $B$ is the bond, $Q$ is the bond price, $D(t)$ is a dividend, and $N(t)$ is the amount of labor.

Does the interpretation differ when one use Dynamic programming or Kuhn-Tucker?
Will it be something like this: In DP all the paths are optimized along t, but in Kuhn-Tucker only the path at time t is optimized.

If so, how you can make the above statement?


texts: How does buying bonds reduce bond yield?

texts: I read that Japan rapidly increased the printing of Yen and used the money to buy government bonds. How did this action reduce the yields of their government bonds and prevent them from having a debt crisis like Greece?


texts:
I was reading about the Iran's economy and Iranian rial. I have read the news regarding the lift of sanctions from Ira, which had allowed the purchase of Iranian rial in America.
I was having query whether the current political scenario going to help the in boosting Iranian economy?
Will the current politics will provide an economy growth to the Iran?
If any answer I would appreciate your response.


texts:
I had a homework problem regarding calculating a discounted present value. My solution is:

15000 * (1+.08)^1 + 15000 * (1+.08)^2 = $33 696

The question is this:

  Laura has an undergraduate degree in economics and has been working as
  a utility rate analyst at the local electricity utility. If she
  continues on her present career path, the present value of her
  lifetime earnings is \$250,000. If she takes two years off and gets an
  MA degree in economics, the present value of her lifetime earnings is
  \$275,000. The annual cost of an MA degree in economics is \$15,000
  and the interest rate is 8%. Assume that school fees are paid at the
  beginning of the year.

  a.) Calculate the discounted (present value) cost of Laura's graduate
  degree in economics. (2 points)

The given solution is this:

Answer: $28, 889

I don't understand the logic of this question. To me, it seems the present value cost would be the cost of what I would pay if I was accounting for the interest of the tuition.


texts: What's a good alternative to Romer's Advanced Macroeconomics?

texts:
I am not liking Romer's Advanced Macroeconomics. I feel like it demands a stronger intuitive knowledge of economics than I currently possess, and on the other hand, it is not as theoretically strong and deep.

While I am trying to increase my intuition ... is there an alternative that covers roughly the same as Romer's book, but actually goes in-depth with all of the issues at a deep theoretical level, rather than just treat it intuitvely?


texts: Find the optimal demand functions for capital and labour for this firm

texts:
I'm trying to solve this question which states:

Suppose that a profit maximizing producer has a production function described by Q = K^3/4 L^1/4 and faces the general isocost line (TC = rK + wL).

Find the optimal demand functions for capital and labor for this firm.

Here's what I've done and know:

I've solved for the MP1(labor) and MP2(capital):
MP1 = 1/4 (K^3/4 * L^-3/4 )
MP2 = 3/4 (K^-1/4 * L^1/4 )

I also know that MP1 / MP2 = w / r.

Can someone point out a suggestion to solve for K and L, the optimal demand functions?

Thanks


texts: Market with substitutes: Response of prices and quantities

texts:
The demand function for theater tickets is $D_t(p_t,p_c)$, where $p_t$ stands for the price of theater tickets and $p_c$ stands for the price of cinema tickets. Supply of theater tickets is described by $S_t(p_t)$. I want to determine how the equilibrium price and quantity of theater tickets changes if the price of movie tickets changes from $p_c$ to $p'_c$. I just have to solve the equations
$$
D_t(p_t,p_c) = S_t(p_t)
$$
and
$$
D_t(p'_t,p'_c) = S_t(p'_t)
$$
right?


texts:
If a government decides to recapitalize banks then will that come under government expenditure and show up in GDP or will it be a transfer payment and stay outside the GDP? and why?
In short, Is the capital infusion done in the banks by the federal government falls under transfer payments or govt expenditure? and why would it be so?

Thank you!


texts: Where to get historical intraday trading data from?

texts:
I have started to learn about trading and would like to play around with historical data. I therefor need a dataset, that provides intraday values, not only opening, high and low prices for a specific day and time. I would like to query a web service, db, whatever like this:

getPrice($isin, $date, $time)

Unfortunately I can't find anything or maybe I am just using the wrong search words on google. Yahoo Finance, etc. only provides opening, high and low data which is not sufficient for my need. Specifically I am looking for historical SMI futures data:

http://www.eurexchange.com/exchange-en/products/idx/smi/SMI--Futures/19444

Product ISIN CH0008616432

Underlying ISIN CH0009980894

I already had a look at:

www.xignite.com
www.quandl.com

which looked promising, but again they do not provide intraday values.


texts: What determines a new cryptocurrency's initial value?

texts:
I understand that a cryptocurrency has no intrinisc value, and that therefore its value is determined strictly by market forces, i.e. supply and demand.

I "get" (more or less) that this is how it works for cryptocurrencies that are already "up and running", but what I don't get is how a cryptocurrency's market gets started. I mean, there are over 800 cryptocurrencies already, with a couple dozen pretty well-known, right? So apparently starting one isn't very difficult. But when someone starts a cryptocurrency, how does his first (and his second, third, etc.) "coin" acquire any value in terms of traditional money? I mean, I understand that the first transaction gets the cryptocurrency's "market" going, but that transaction is internal to the currency, right? It does not establish a value relative to a traditional currency.

I also don't get who would enter into that first transaction anyway. If some person tells me "Hey I started a new cryptocurrency, so far I've mined 1 unit of it. Can I use it to buy a can of beer from you?", why would I ever say yes, given that there is no way to determine what is a reasonable "starting value" for his currency?

(I did read up on a bit ICO's, but I don't quite get that either. OK, some "company" proposes to create a bitcurrency, and investors can buy into it prior to its creation. Does that mean they buy a certain number of the yet-to-be-created currency? In that case, again I don't understand what possible basis there could be for assinging a specific value.)


texts: Why does capital initially reduce and then rise with an anticipated future decrease in taxes in the RCK model?

texts:
Consider the version of the RCK model where there is a government that runs a constant balanced budget.

  At $t_0$, the economy is in steady state, with constant tax $T_{old} > 0$
  Then, at $t_1$, it is announced that at some later moment in time ($t_2$), but not right now, tax will be permanently reduced to $T_{new} < T_{old}$.

  Draw a graph of changes in the phase diagram that characterizes the dynamics of the economy, and heuristic graphs of the time paths of the following variables:

  consumption per effective worker
  capital per effective worker
  marginal return on capital per effective worker ($r_t$)

The memo gave the following:

Why do the time paths of capital and the real interest rate look like that?


texts: How startup early valuation influence later funding stages?

texts:
Let's suppose that a startup raise his seed round with a 100k funding for 10% equity. The startup has a pre-money valuation of 1M.

Let's say that the startup, after 1 year, raise a Series A round. Does the valuation of the startup in the seed round has any impact on the pre-money valuation at the series A?

My understanding is that in principle there is no correlation. Am I right? Is there perhaps a sort of psychological effect by which it's not feasible to value the startup 5, 10 or 100 times more than the previous round? (the time scale of 1 year is arbitrary here)


texts: How to check whether the production function below is neoclassical or not

texts:
Say I'm given the production function of the form

\begin{equation*}
Y= F(K,L,A) = (\alpha K^{\epsilon} + (1 - \alpha)Y^{\epsilon})^{\frac{1}{\epsilon}}
\end{equation*}

Where $\epsilon, \alpha \in (0,1)$.

Now I need to check three things:

That marginal products are positive and they are decreasing
Inada conditions are satisfied
Essentiality
Linear homogeneity

The conditions 2 and 4 imply the condition 3 so no need to check for that. When taking derivatives with respect to $K$ I see that

\begin{equation*}
F_K = \alpha  K^{\epsilon -1}(\alpha K^{\epsilon} + (1 - \alpha)Y^{\epsilon})^{\frac{1 - \epsilon}{\epsilon}} >0
\end{equation*}

Which is positive. Now I need to show that $F_{KK}< 0$. See:

\begin{equation*}
F_{KK} = \alpha (\epsilon -1) K^{\epsilon -2}(\alpha K^{\epsilon} + (1 - \alpha)Y^{\epsilon})^{\frac{1 - \epsilon}{\epsilon}} + \alpha^2 K^{2\epsilon -2} \frac{1- \epsilon}{\epsilon} (\alpha K^{\epsilon} + (1- \alpha) L^{\epsilon})^{\frac{1}{\epsilon}-2}
\end{equation*}

However I couldn't find a way to decide on the sign of this expression. Any help would be appreciated. Thanks.


texts: Is it possible to have a modern economy without a central bank?

texts:
Many mainstream economists say that such thing is impossible. Is there some specific reason why the financial system needs a central bank?

In this video http://m.youtube.com/watch?v=BcuAOdXD0Go, Krugman says at 03:00 it's impossible to leave the central bank out of the equation today. Why is this?