There Is an Election Coming Up AIf the Conservatives Can Move First,what Will Be the Outcome

question 74

Short Answer

There is an election coming up.Conservatives are currently in government,and will be able to raise more money for the next election campaign if they keep interest rates and unemployment low.Conservatives can persuade firms whether or not to raise prices;Liberals can persuade the Bank whether or not to increase interest rates.The amount of money raised by each party and the resulting inflation and unemployment rates are given below.
$$\begin{array} { l l l } & \text { Raise prices } & \text { Don't raise prices } \\\hline \text { Conservative strategy } & \text { Outcome A } & \text { Outcome B } \\\text { Raise } r & \text { Cons.: \$40 } & \text { Cons.: \$80 } \\& \text { Libs.: \$60 } & \text { Libs.: \$20 } \\& \pi = 8 \% & \pi = 0 \% \\u = 8 \% & u = 6 \% \\\text { Liberal strategy } & & \\& \text { Outcome C } & \text { Outcome D } \\\text { Don't raise } r & \text { Cons.: \$20 } & \text { Cons.: \$60 } \\& \text { Libs.: \$80 } & \text { Libs.: \$40 } \\& \pi = 12 \% & \pi = 4 \% \\u = 9 \% & u = 8 \%\end{array}$$
a.If the Conservatives can move first,what will be the outcome of this game?
b.Now suppose the Liberals move first.What will be the outcome?
c.Suppose the roles are reversed and Liberals can influence prices,while Conservatives influence the money supply.What is the outcome if Liberals move first? If Conservatives move first?

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Definitions:

Adolescents

Young people in the transitional stage of physical and psychological development that generally occurs during the period from puberty to legal adulthood.

Protective Factors

Conditions or attributes in individuals, families, communities, or the larger society that help people deal more effectively with stressful events and mitigate or eliminate risk.

Adolescents

Individuals in the transitional stage of human growth and development between childhood and adulthood.

Youth Participation

The engagement of young people in decision-making processes and activities, aimed at empowering them and giving them a voice in society.