Question:

An increase in the price level makes consumers feel less wealthy. How is this situation represented?

Select one:

a. There is a movement to the left along a given aggregate-demand curve.

b. Aggregate demand shifts left.

c. There is a movement to right along a given aggregate-demand curve.

d. Aggregate demand shifts right.

The Chevalier de Mere, a seventeenth century gambler, thought that it paid to bet evens on the event: A : you will get one or more sixes when four unbiased dice are thrown In other words, the Chevalier thought that P(A) > 1/2. (i) (a) Show that the probability of this event occurring is, in fact, 0.5177. (b) The experiment of throwing four unbiased dice is performed 10 times and results in the event A occurring 8 times. (1) Write down an equation which must be satisfied by PL, a lower 95% confidence limit for p = P(A). (2) Verify that pz = 0.493 satisfies this equation. (3) Comment on this value of py relative to the true value of p as specified in part (i)(a). [6] (ii) The experiment of throwing four unbiased dice is performed 1,000 times and results in the event A occurring Y times. (a) Write down a large sample expression for PL, a lower 95% confidence limit for p = P(A). (b) Determine how large Y would have to be for p, to be greater than 1/2. (c) Using the true value of p as specified in part (i), calculate the probability that pz will, in fact, be greater than 1/2. [8] (iii) For the situation where the experiment is performed 10,000 times: (a) repeat part (ii)(b) (b) repeat part (ii)(c) and comment briefly on any difference between your two answers. [6] [Total 20]A woman purchased a government bond on 1 January 2000. The bond pays coupons of 6% pa six monthly in arrears on 30 June and 31 December. The bond is due to be redeemed at 105% at the end of the year 2010. The woman expects to achieve a net yield of 5% pa effective interest on her investment. She pays income tax at the rate of 23% on 1 April for any coupon payments received in the previous year (1 April to 31 March). She also pays capital gains tax on that date at the rate of 40% on any capital gains she realised in the previous year. Calculate the price she paid for the bond. [7]