1. Define a Prisoner's Dilemma (cooperation problem).

2. Define an Assurance Game (coordination problem).

3. Consider a scenario where two individuals (the row player and the column player) have to make a decision (A or B) in a strategic environment, and we are capturing the preferences of these individuals by the matrix below.

	A	B
A	20,20
B		7,7

As we can see, the efficient outcome is for both players to play A.

1. Choose numbers for A,B and B,A so that this game is a Prisoner's Dilemma.
2. Choose numbers for A,B and B,A so that this game is an Assurance Game.

4. Can communication between the two players solve these two problems?

5. Write down all the examples of a Prisoner's Dilemma we discussed in class, explain why they are a Prisoner's Dilemma, and describe some of the possible solutions.

6. Write down all the examples of an Assurance Game we discussed in class, explain why they are a Prisoner's Dilemma, and describe some of the possible solutions.

7. What does GDP measure?

8. Why is total GDP a poor measure of the wealth of the average citizen of a country?

9. What is a better measure? Explain.

10. This better measure, however, is not perfect. Name one of its most important limitations.

11. What are the main determinants of long-run economic growth?

12. Explain the main functions of money.

13. Explain why a society that does not use money would not experience inflation.

14. What is the cause of long-run hyperinflation? Explain.