Questions and Answers of Venture Capital And The Finance Of Innovation

Which of the following government policies are “automatic stabilizers” for the economy?Unemployment insuranceTemporary tax cuts that Congress passes when bad economic news hitsTemporary spending
We discussed three situations where fiscal policy is most likely to matter (though fiscal policy is best when all three are true):1. When the economy needs a short-run boost2. When the problem
In this question we will look at one of the automatic stabilizers, unemployment insurance. Using the FRED economic database (https://fred.stlouisfed.org/), search for unemployment insurance. You
Let’s examine the U.S. balance of trade (Exports-Imports) as we did in Problem 1, but this time we will do so as a percent of GDP. Using the FRED economic database (https://fred.stlouisfed.org/),
In the chapter, two stories about the deficit are told: “the great place to invest” story and the “foolishly saving too little” story. In the following examples, which is more like the
a. According to Table 1, how many Japanese yen could you get for 1 dollar in May 2017? Use the currency converter on Yahoo! Finance to find out how many yen you could buy for a dollar today. b.
According to the purchasing power parity theorem, what must be approximately equal across countries: the nominal exchange rate or the real exchange rate?
Which international financial institution focuses on the long-run health of developing countries: the IMF or the World Bank? Which one focuses on short-run financial crises in developing
Let’s translate between newspaper jargon about exchange rates and the economic reality of exchange rates. a. Last week, the currency of Frobia was trading one for one with the currency of
a. When the Japanese government slows the rate of money growth, will that tend to strengthen the yen against the dollar or weaken the yen against the dollar? b. When the Japanese government
Practice with the current account: Which of the following tend to raise the value of Country X’s current account? a. Country X sends cash to aid war victims in Country Y. b. Investors
Practice with the capital account: Which of the three categories of the capital account does each belong in? Which of the following tend to raise the value of Country X’s capital account? a. A
Let’s translate “Americans are foolishly saving too little” into a simple GDP story. Recall that GDP = C + I + G + Net exports. GDP is fixed and equal to 100 throughout the story: After all,
Let’s translate “The United States is a great place to invest” into a simple GDP story. Recall that GDP = C + I + G + Net exports. In this story, foreigners build up the U.S. capital stock by
Now that we’ve built up some intuition about exchange rates, let’s apply the principles more thoroughly. In this question, we discuss the U.S.–China exchange rate. Officially, the Chinese
The market for foreign currencies is a lot like the market for apples or cars or fish, so we can use the same intuition—as long as we keep reminding ourselves which way is “up” and which is
Corey, a young entrepreneur, notices that cigarette lighters sell for only $0.50 each in Utah but they sell for $1.00 each in Nevada.a. If Corey wants to make money by buying and selling lighters,
At Christmas, five-year-old Gwen runs a massive trade deficit with her parents: She “exports” only a wrapped candy cane to her parents, but she “imports” a massive number of video games,
A supply and demand model can illustrate the difficulty of keeping a fixed exchange rate: It’s much the same as any other price floor. Consider the following fixed exchange rate. Sparta uses a
Consider two equally wealthy families: one family lives in a relatively poor country and the other lives in a relatively rich country. Which family is more likely to own a mechanical dishwasher? Why?
In our basic model, a rise in money growth causes currency depreciation: We also know from our chapter on Business Fluctuations and the chapter on Monetary Policy that a rise in money growth normally
In Panama, a dollarized country, a Big Mac is about 30% cheaper than in the United States. Why?
Let’s look at the U.S. to U.K. foreign exchange rate using the FRED economic database (https://fred.stlouisfed.org). Search for US/UK Foreign Exchange Rate then change the beginning date to Jan 1,
We have said that services are likely to be cheaper in poorer countries, but is this true for all kinds of services? Can you think of some services that are more likely to sell for similar prices
According to Thomas Jefferson, how are ideas like flames?
In the following cases, will real growth rise, fall, or remain unchanged?Expected inflation = 5%Actual inflation = 7%Expected inflation = 3%Actual inflation = 1%Expected inflation = 6%Actual
a. What does a negative real shock do to inflation: Does it rise, fall, or remain unchanged?b. What does a negative real shock do to spending growth: Does it rise, fall, or remain unchanged?c. What
Are “real shocks” negative shocks, by definition?
When inflation rises, does the Solow growth rate rise, fall, or remain unchanged?
Let’s sum up some basic facts about the link between unemployment rates and recessions. Notice that the shaded bars indicate periods of recession, and wider bars mean longer
Recall that Y = C + I + G + NX. a. If government spending increases then we model that as an increase in:i. v.ii. M.iii. Q.iv. T.b. An increase in G shifts the AD curve:i. inwards.ii.
During the Great Depression, which of the following were mostly aggregate demand shocks and which were mostly negative real shocks? The fall in the growth rate of moneyThe fall in farm
Complete the following sentences: With a real shock, when real growth is worse than usual, inflation is _______________ than usual. With an aggregate demand shock, when real growth is worse
In the following cases, will real growth rise, fall, or remain unchanged?Expected inflation = 5%Actual inflation = 7%Expected inflation = 3%Actual inflation = 1%Expected inflation = 6%Actual
Are “real shocks” negative shocks, by definition?
When inflation rises, does the Solow growth rate rise, fall, or remain unchanged?
Let’s sum up some basic facts about the link between unemployment rates and recessions. Notice that the shaded bars indicate periods of recession, and wider bars mean longer
Using the FRED economic database (https://fred.stlouisfed.org/), let’s compare employment in manufacturing and construction. First, find manufacturing employment and then click Edit Graph and Add
Overall, labor force participation rates have been declining in the U.S. economy but not for every demographic. Let’s examine the labor force participation rates of teenagers and older people.
Using the FRED economic database (https://fred.stlouisfed.org/), find the “Youth Unemployment Rate in the United States” then click Edit Graph and Add Line and find the “Youth Unemployment Rate
Let’s examine the labor force participation rates of teenagers. Using the FRED economic database (https://fred.stlouisfed.org/), search for “Labor force participation rate 16 to 19 years.”
Goldin and Katz looked for the link between birth control and women’s labor force participation by examining the difference between states that acted early to make birth control legal and states
If you have to pick a country to lose your job in, and you know you’re going to be out of work for one year, which country offers the highest one-year average replacement rate? Which offers the
Let’s see how many jobs have to be destroyed for one net job to be created. As noted in the text, millions of jobs are created and destroyed every month. Suppose that 5 million jobs are
About how big is the difference in labor force participation rates between countries with the highest implicit tax rate on older men compared to countries with the lowest implicit tax rate? Round to
Let’s look at how the unemployment rate changes during and after a typical recession. Does the unemployment rate tend to reach its peak during the recession, or does it usually reach its peak
Let’s connect the minimum wage model back to the supply and demand model of the chapter on Price Ceilings and Price Floors. Is a minimum wage a price ceiling or a price floor? Does it create a
If we count “discouraged workers” as unemployed when calculating the unemployment rate, does the rate more than double, less than double, or remain unchanged?
Let’s compare 10-year corporate bonds and 10-year government bonds (called Treasuries). Go to the FRED economic database (https://fred.stlouisfed.org/) and search for “10 year corporate bond high
One type of debt that you may be familiar with is student loan debt. Using the FRED economic database (https://fred.stlouisfed.org/), search for student loans, then click on “Student Loans Owned
Let’s take a look at financial intermediation and the financial crisis of 2007–2009. Using the FRED economic database (https://fred.stlouisfed.org/), search for “all sectors total loans”; you
Sometimes, in supply and demand models, it’s not clear who “supplies” and who “demands.” For instance, in the labor market, it is individual workers (not firms) who supply labor. In the
Consider three countries: Jovenia (average age: 25), Mittelaltistan (average age: 45), and Decrepetia (average age: 75). Based on the lifecycle theory, which of these countries will probably
The typical savings supply curve has a positive slope. If a nation’s saving supply curve had a perfectly vertical slope, what would that mean?a. People in this country save the same amount no
Change the production function used in the chapter to reflect the contribution of labor in the production process. As with capital, labor also has diminishing returns, so let Y = Now suppose
After World War II, a lot of France’s capital stock was destroyed, but it had educated workers and a market-oriented economy. Do you think the war’s destruction increased or decreased the
Which three countries on the list are good examples of “conditional convergence?”ChinaIrelandArgentinaNorth KoreaGreece
What is a patent?
What is more important for explaining the standard of living in the rich countries: capital or ideas?
Many people say that if people save too much, the economy will be hurt. They often refer to the fact that consumer spending is two-thirds of GDP to make this point. This is sometimes called the
Which countries are likely to grow faster: Countries doing “cutting-edge” growth or those doing “catch-up” growth?
In the Soviet Union, especially in the early decades under Lenin and Stalin, the official doctrine was Communism, and the use of incentives was considered a form of treason. One important exception
In the 1998 Minnesota gubernatorial election, there were three main candidates: Norm Coleman (the Republican), Jesse “The Body” Ventura (an Independent), and Hubert Humphrey III (the Democrat).
Using the FRED economic database (https://fred.stlouisfed.org/), let’s compare the GDP of the state of California with that of some countries, in this case, France and Canada. Because France’s
Let’s convert into words. Institutions create _______, which in turn affect the amount of _______, _______, and _______ in a country, which, combined with the right kind of _______ generates
India and China come up a lot in this chapter. You might wonder why so much time is spent talking about just two countries out of more than 180 on the planet. But what fraction of humans live in
About what percentage of the world’s population lives in countries richer than Italy? What percentage lives in countries poorer than India?
About how many babies die before the age of 5 in Nigeria versus Argentina? What is the difference in GDP per person in those two countries?
How easy is it to spot a bubble? Go to the FRED economic database (https://fred.stlouisfed.org/) and search for NASDAQ. You should find the NASDAQ Composite Index. Graph it and click Max to show all
If greenhouse gas emissions are not cut, climate change could have very large future costs. Let’s assume that there are 100 equally sized countries in the world and that cutting greenhouse gas
Using the FRED Economic database (https://fred.stlouisfed.org/) find the median weekly earnings of high school graduates (no college) who are 25 years of age or over. Click Edit Graph then Add Line
Calculate the values of these areas in dollars. How much of the deadweight loss is due to the overproduction of steel by higher-cost U.S. steel producers, and how much is due to the underconsumption
If investors in the Hollywood Stock Market were too optimistic on average, would the dots tend to cluster above the red diagonal line or below it? How can you tell?
In Figure, what is the total revenue raised by the tax, in dollars? What is the deadweight loss from the tax, in dollars?
In our chapter on Competition and the Invisible Hand, we quoted the Austrian economist Joseph Schumpeter who said that in the textbooks the most important fact about competition was that price was
Suppose that Uber created a way to advertise to riders. For example, riders might watch an advertisement as their car approaches. What do you predict would be the impact on the price of an Uber ride.
Fit each of the following examples into one of these reasons for trade: division of knowledge or comparative advantage.a. Two recently abandoned cats, Bingo and Tuppy, need to quickly learn how to
In the chapter, you saw how to create a production possibilities frontier for the United States and Mexico. Let’s take a look at how to combine these PPFs to make one PPF for the U.S.–Mexico
Your roommate just bought a TomTom Spark GDP fitness watch for $130. She would have been willing to pay $250 for a device that could improve her morning runs by measuring the speed, distance, and
When the price of Apple MacBooks goes down, what probably happens to the demand for laptops featuring Microsoft Windows?
The Federal Reserve Economic Data (FRED) database is available at https://fred.stlouisfed.org/. Go to FRED and search for data on crude oil prices. You will find several series; click on one of them,
a. Suppose you’d like to do five different things, each of which requires exactly one orange. Complete the following table, ranking your highest-valued orange-related activity (1) to your
Guess whether the demand for cigarettes is elastic or inelastic. Explain your reasoning.
Suppose that 200,000 Uber trips are taken every day in New York City and suppose that the elasticity of demand for an Uber trip is –0.5. If the price increased by 10% how many Uber trips would be
A movie theatre owner runs an experiment. She decreases prices 2% and discovers that ticket sales increased by 5%. Also, she increases prices by 1% and discovers that sales decrease by 2%. What
Using the FRED economic database (https://fred.stlouisfed.org/) let’s compare expenditures on cell phones with the price of phones. Unfortunately, as is often the case, it’s difficult to find
Go to the FRED Economic Database (https://fred.stlouisfed.org/) and find tobacco taxes in Texas. In what year (1991–2016) would you guess Texas raised the sales tax on tobacco?
This chapter emphasized the ability of an orderly system to emerge without someone explicitly designing the entire system. How does the evolution of language illustrate a type of spontaneous order?
How does a free market eliminate a shortage?
Go to the FRED economic database (https://fred.stlouisfed.org/) and search for “percent hourly paid minimum wage.”a. In 2015, what percent of hourly workers were paid the minimum wage or less?b.
A “black market” is a place where people make illegal trades in goods and services. For instance, during the Soviet era, it was common for American tourists to take a few extra pairs of Levi’s
The city of Mumbai in India imposed rent controls on apartments in 1947. Despite inflation and changes in land value, allowable rents have hardly increased since that time! Use what you know about
In our Uber example, we said that after a spike in demand around Madison Square Garden, the number of Uber rides increased by more than 75% in the surrounding area, but when it starts to rain, Uber
In the following cases, the markets are in equilibrium, but there are externalities. In each case, determine whether there is an external benefit or cost and estimate its size. Finally, decide
Many people will tell you that, whenever possible, you should always buy U.S.-made goods. Some will go further and tell you to spend your money on goods produced in your own state whenever possible.
a. This would raise productivity, since they are currently (by assumption) just redistributing income, not producing output. b. They would probably earn less, not more. c. Lobbyists in
At 5PM there are 1,000 cars on a highway slowly moving towards home. Adding another car to the highway slows everyone down slightly, increasing the time it takes each person/car to get home by four
It's common to think that reducing pollution is necessarily costly because to reduce pollution we need to tax firms who will then produce less. But can you think of ways in which pollution might not
a. When selling e-books, music on iTunes, and downloadable software, the marginal cost of producing and selling one more unit of output is essentially zero: MC = 0. Let’s think about a monopoly in
a. What’s the rule: Monopolists charge a higher markup when demand is highly elastic or when it’s highly inelastic?b. What’s the rule: Monopolists charge a higher markup when customers have

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