Using the AD and Solow Growth Figure Shown, Suppose Point

question 48

Essay

Using the AD and Solow Growth figure shown, suppose Point A refers to the economy's long run equilibrium, and that Point A is also where the economy is at present. How will the economy be affected under the following scenarios? Illustrate your answers using graphs. (Treat each scenario as independent of the others.) SCENARIO 1 a. A reliable forecast is released that indicates that a recession is forthcoming. Consumers react to this forecast. b. Uncertainty amplifies the shock in (a). SCENARIO 2 a. The federal government begins a new subsidized training program (across the nation) for workers to enhance their consumer skills. b. In response to the above shock, workers engage in intertemporal substitution.

Recognize the importance of "consideration" and its role in forming a valid contract.

Understand the implications of unilateral contracts and the necessity of performance for contract formation.

Distinguish between implied-in-law contracts (quasi-contracts) and actual contracts.

Identify the differing requirements and implications of bilateral and unilateral contracts.

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Definitions:

Premium

The amount paid in excess of a standard cost or the face value of a financial instrument, often associated with insurance policies, bonds, and options.

Carrying Value

The book value of assets and liabilities as represented in the financial statements, excluding the market value.

Callable Bonds

Bonds that are subject to redemption (buy back) at a stated dollar amount prior to maturity at the option of the issuer.

Common Stock

Shares of ownership in a corporation, giving holders voting rights and a portion of the company's profits through dividends.