Homework answers / question archive / The Biden Administration proposed a sweeping program of student loan forgiveness- at least $10,000 for each borrower

The Biden Administration proposed a sweeping program of student loan forgiveness- at least $10,000 for each borrower

Economics

Share With

---

1. The Biden Administration proposed a sweeping program of student loan forgiveness- at least $10,000 for each borrower. Some in congress are calling for a cancellation of up to $50,000. Essentially, this amounts to a bailout of borrowers who have taken on excess debt. Using what you’ve learned in this class, why might that not be such a good idea? Be sure to describe the sorts of incentives this would create for both current and future borrowers.

 

 

2. For the purpose of this exercise, assume that velocity is stable. If the Fed wants to keep inflation growing at about 2%, and the economy grew about 6% during Q1 of 2021, then what would the growth in the money supply need to be in order for the Fed to hit its inflation target? And what does the substantially higher rate of money growth say about

the likelihood of future inflation?

 

 

3. See picture of page 2.

1. For each restaurant calculate profits during this difficult month.

b.) Which restaurant, if any, earned a profit                                  

c.) Which restaurants were able to remain in business in the short run? Which were forced to shut down entirely? Why?

 

 

 

4. The global microchip shortage is causing significant price increases for both new and used vehicles (and for a wide variety of other consumer products). Does this necessarily mean that the revenues earned by chip manufacturers will be up? Why or why not?

 

 

5. Throughout the 1970’s and 1980s, ecologist Paul Ehrlich and economist Julian Simon were engaged in a heated debate regarding the future of the planet. Their respective positions can roughly be summed up by the following quotes:

 

Ehrlich: “Too many cars, too many factories, too much detergent, too much pesticides, multiplying contrails, inadequate sewage treatment plants, too little water, too much carbon dioxide – all can be traded easily to too many people.”

 

Simon: “Adding more people causes more problems. But people are also the means to solve these problems. The main fuel to speed the world’s progress is our stock of knowledge, the brakes are our lack of imagination and unsound social regulation of these activities. The ultimate resource is people- especially skilled, spirited, and hopeful young people endowed with liberty- who will exert their wills and imaginations for their own benefits, and so inevitability they will benefit the rest of us as well”.

 

Evaluate each of their positions in the context of the Solow growth model.

 

 

6. Have recently inflationary pressures in the US made the dollar stronger or weaker relative to other currencies? How might this impact the willingness of other countries to invest in American debt?

 

 

7. The “fight for 15” is a major political issue at the moment. Is the minimum wage an example of a price floor or a price ceiling? What are the supply and demand impacts of a minimum wage?

 

 

8. Bobby McPherin is planning to release a new version of his old hit song, “Don’t worry. Be happy”. The new lyrics will go like this: “Don’t worry ‘bout the inflation rate. You own a house now, so celebrate. Don’t worry. Be happy”.

 

Catchy, no? But is it good advice? Should we worry about inflation? If so, why? Hint: a very bad answer to this question will say something like, “Inflation is bad! Inflation means that stuff gets more expensive. We don’t like It when things get more expensive”. The first statement is true. The second is not. Explain.

 

 

9. Increasingly, online retailers are taking advantage of user location data in order to charge different prices to different classes of consumers. Booking site HotelTonight, for example shows different discounted hotel rates to users based on their zip codes. Some people view this as sleazy business practice, yet some economists will say that this is not only a normal business practice – it might be good for consumers in the long run. Using the tools of economics, how might you defend this pricing strategy? What conditions would need to hold in order to make this sort of price discrimination successful?

 

 

 

 

 

10. See picture below.