In this question we will adjust the is-lm curve seen in class slightly. in particular, we will assume that taxes are taken as a percentage of income rather than as a lump sum. then we have c = a + b(1 − τ )y where τ is the percentage (between 0 and 1) of income the government collects in taxes (so that 1 − τ is left to the consumer). assume that investment is a linear function of the interest rate i = e − fr and government spending is fixed at g = g¯ a. derive the is curve (solve for r as a function of y and parameters) b. which parameters affect the slope of the is curve and which affect the intercept? now let: a = 500, b = 0.8, τ = 0.25, e = 5000, f = 300, g¯ = 2500 c. what is the is curve with these numbers? d. what is output if the interest rate is 10%? what if it is 5%? 15%? assume money demand is given by: md p = 2y − 1000r and that the price level is fixed at p = 1 and the money supply at ms = 10, 000

Joe said “your speech was really great, i loved it.” his criticism lacks which component of effective feedback? a) he did not recognize his ethical obligations b) he did not focus on behavior c) he did not stress the positive d) he did not offer any specifics

At a student café, there are equal numbers of two types of customers with the following values. the café owner cannot distinguish between the two types of students because many students without early classes arrive early anyway (i. e., she cannot price-discriminate). students with early classes students without early classes coffee 70 60 banana 51 101 the marginal cost of coffee is 10 and the marginal cost of a banana is 40. the café owner is considering three pricing strategies: 1. mixed bundling: price bundle of coffee and a banana for 161, or just a coffee for 70. 2. price separately: offer coffee at 60, price a banana at 101. 3. bundle only: coffee and a banana for 121. do not offer goods separately. assume that if the price of an item or bundle is no more than exactly equal to a student's willingness to pay, then the student will purchase the item or bundle. for simplicity, assume there is just one student with an early class, and one student without an early class. price strategy revenue from pricing strategy cost from pricing strategy profit from pricing strategy 1. mixed bundling $ $ $ 2. price separately $ $ $ 3. bundle only $ $ $ pricing strategy yields the highest profit for the café owner.

What impact might an economic downturn have on a borrower’s fixed-rate mortgage? a. it might cause a borrower’s payments to go up. b. it might cause a borrower’s payments to go down. c. it has no impact because a fixed-rate mortgage cannot change. d. it has no impact because the economy does not affect interest rates.