Proof that stochastic discount factor is positive in complete markets

...the completeness of markets implies that the stochastic discount
factor is strictly positive...

This statement is not quite correct.
Rather, the agent's optimality condition implies that market is complete with respect to the agent's consumption-relevant states, and that the SDF must be strictly positive on those states.
The SDF is, more or less, same as Arrow-Debreu prices on consumption-relevant states, which must be strictly positive. Otherwise equilibrium would not exist. Marginal utility cannot be zero in equilibrium.
(SDF is the Radon-Nikodym derivative of AD prices with respect to the physical measure. SDF is strictly positive if and only if AD prices are.)
For simplicity, assume agent's consumption is $\omega$-contingent, where $\omega$ belongs to a finite set $\Omega$.
Then the FOC
$$
p_t = \mathbb{E}\left[\beta \frac{u'(c_{t+1})}{u'(c_t)} x_{t+1}\right]
$$
becomes
$$
p_t = \sum_{\omega \in \Omega}  \beta \frac{u'(c_{t+1}(\omega))}{u'(c_t (\omega))} \cdot x_{t+1} (\omega) \cdot P(\omega).
$$
The quantity
$$
\beta \frac{u'(c_{t+1}(\omega))}{u'(c_t (\omega))} \cdot P(\omega)
$$
can be viewed as the price of a claim with payoff $1_{\{ \omega' =\omega\}}(\omega')$ (i.e. a digital option that pays 1 if $\omega$ realizes and 0 otherwise).
Such claims are exactly the Arrow-Debreu securities in the market of $\omega$-contingent claims.
(If the payoff $x_{t+1}$ is contingent on, say, state $(\omega, \nu)$, where agent's consumption is invariant with respect to $\nu$, then market is complete only with respect to $\omega$-contingent claims.
Claims whose payoffs depend on $\nu$ cannot be replicated, i.e. market is not complete with respect to such claims.
In the FOC, the $\nu$-coordinate would be integrated out.)
In equilibrium, the FOC becomes the asset pricing equation
$$
p_t = \mathbb{E}\left[\beta \frac{u'(c_{t+1})}{u'(c_t)} p_{t+1}\right].
$$
This means, in the market of AD securities of $\omega$-contingent claims, the (representative) agent holds the portfolio that is the asset itself.


Derive the Demographic Structure in the Steady State

I don't know the paper nor the notation, so I am just guessing here. I gues $N(a,t)$ is the number of agents of age $a$ at time period $t$.
Let's follow the number of age $B$ accross generations:
$$
\begin{align*}
N(B,t) &= e^f N(B, t- B),\\
&= e^{2f} N(B, t - 2 B),\\
&= \ldots,\\
&= e^{f t/B} N(B,0),\\
&= e^{\eta t} N(B, 0).
\end{align*}
$$
Then using this in the definition of $N(a,t)$, we have:
$$
N(a,t) = e^f N(B, t- a) = e^f e^{\eta(t - a)}N(B,0).
$$
Next, I assume that at period $0$ there is a mass of size 1 but nobody lives longer than $T$ periods, so integrating across all ages:
$$
\begin{align*}
&\int_0^T N(a,0) da = 1,\\
\to &\int_0^T e^f e^{-\eta\, a}N(B,0) da = 1,\\
\to &e^f N(B,0) \left[-\frac{e^{-\eta a}}{\eta}\right]^T_0 = 1,\\
\to &e^f N(B, 0) \left[1 -e^{-\eta T}\right] = \eta,\\
\to &e^f N(B, 0) = \frac{\eta }{1 - e^{-\eta T}}
\end{align*}
$$
So subsituting into the expression for $N(a,t)$ gives:
$$
N(a,t) = \eta\frac{e^{-\eta a}}{1 - e^{-\eta T}} e^{\eta t}
$$


Whats the math behind calculating the price of cryptocurrency through supply and demand?

Prices are set the same way as in any other market, which is to say that there is a (continuous, ongoing) process of tâtonnement where (say) buyers find that they cannot purchase at the maximum price they are willing to pay, or sellers find that they cannot sell at the minimum price they are willing to accept, creating pressure to adjust those prices. In some markets, this will eventually lead to relatively stable prices (say, street food), while in others, prices are more volatile, depending on how elastic supply and demand are.

Conceptually speaking, the classic notion of price-setting is that of the Walrasian auctioneer who receives, from each participant in the market, the amount said participant is willing to buy / sell at any given price, and who then proceeds to calculate the equilibrium price, only after which trade will actually take place. Needless to say, like the "invisible hand", this is merely an aid to understanding.


Is there a folk theorem for repeated games on networks?

Yes, there are folk theorems for games on networks, depending on information structure and possible communication. Here are some of the most relevant papers:

Ben-Porath, E., & Kahneman, M. (1996). Communication in repeated
games with private monitoring. Journal of Economic Theory, 70(2),
281-297. - public communication, private monitoring
Renault, J., & Tomala, T. (1998). Repeated proximity games.
International Journal of Game Theory, 27(4), 539-559. - complete information, imperfect monitoring
Tomala, T. (2011). Fault reporting in partially known networks and
folk theorems. Operations research, 59(3), 754-763. - partial knowledge of the network and restricted communication
Laclau, M. (2012). A folk theorem for repeated games played on a
network. Games and Economic Behavior, 76(2), 711-737. - private communication

Thanks @Ubiquitous for basically providing the answer.


Questions about the future of macroeconomic modeling and the role of simultaneous equation systems

Is there future for DSGE?

Well, DSGE stands for dynamic stochastic general equilibrium models. You can’t really model time series appropriately without the dynamic stochastic part, and when it comes to general equilibrium there are economists who think that this approach does not really capture all interesting questions, as in many cases it might be more interesting to see what happens when economy is in transition between equilibria. But I don’t think in mainstream macro DSGE will be gone any time soon.

However, this does not mean that the DSGE models are not being improved or changed. There is a lot of research trying to include more heterogeneity, for example in agents expectations (see this paper) or imperfect information (see here) and I recall seeing at a conference some models that try to add behavioral micro foundations to the DSGE.

I don’t want to make long term forecasts because they are inherently inaccurate- but as I see it DSGE will be here at least for next 10 years and I would not be surprised if it would be longer.

Will DSGE be replaced by agent based models?

Well this is hard to say (assuming you are talking about agent-based computational (ACE) economics - since there can be agents in DSGE as well). So far the research on AEC is mostly very recent so it’s hard to judge the literature. It’s definitely possible they would eventually replace DSGE but on the other hand AEC has its own methodological problems (see here - although also note that the paper is mainly criticism of DSGE but it contains also some useful info on potential pitfalls of AEC). It’s also not impossible that both approaches will be used concurrently in the future.

Does it make sense to use simultaneous equations?

Yes, it does not just make sense it’s a necessity if you make any analytical model of macroeconomic activity. You need to use simultaneous equations if your system is endogenous to properly describe it and in macroeconomics most variables are well known to be endogenous.

I also don’t see how would this be affected by “today’s realities”. It’s not like let’s say income was endogenous in 90s but stopped being endogenous in 2007 or 2019.

Even ACE tries to model endogenous interactions, so there is implicit simultaneity in them. So that’s not even an issue here. The only reason why ACE models are not technically simultaneous equations models is that most of them don’t include any explicit analytical expression but are performed via Monte Carlo simulations or some set of if then statements or some other computational approach.

You could only say that simultaneous equations don’t make sense in macroeconomics only if you want to claim that either macroeconomics systems are not endogenous or that macroeconomic systems can’t be described by analytical expressions (or both). I think you would have serious trouble finding credible economist that would get behind any of these. I think even most ardent AEC proponents would not dispute that theoretical macro models based on simultaneous equations are useful to get intuition or “deeper knowledge” behind macroeconomic variables and relationships between them.


Fractional reserve banking and bank insolvency

Let's assume (as you do if I understand well) that the bank's only liabilities are deposits, so that the bank's equity valuation is simply the value of assets minus deposits. In order to provide loans the bank will have to hold 10% of those funds as reserves in its central bank account (the account it holds at the central bank, written in central bank money or base money), the the maximum amount the bank could lend out would be 90% of its liabilities + equity.

Then if 100% of the loans defaulted at 100% loss severity, 10% of assets would remain, to be shared between the depositors and the equityholders. By the traditional laws of bankruptcy and claims priority, the equityholders are the first to incur losses, so they would lose all their money (assuming the depositors represent at least 10% of the bank's balance sheet). Depositors would incur the remaining loss. At that point, if the FDIC had previously insured all depositors, it would have to repay them what they had lent to the bank, and the FDIC Deposit Insurance Fund would suffer from the loans' defaults. If you assume no external debt for the bank, then by accounting equality the total loan amount cannot be higher than the equity + deposits. (Assets = Liabilities + Owners' Equity)


Country specific economic recession/financial crisis data?

Several articles use data sets on this issue but I am not sure that all the data sets are freely available.

Valencia & Laeven (2012) use the IMF country reports to create their data set. It covers all IMF member countries since 1970.
EDIT: it is available here, as pointed out by @dismalscience.
Reinhart and Rogoff (2009) have 70 countries since roughly 1900 based on a wide set of sources.
Romer & Romer (2017) construct financial distress index at semi-annual frequency for 24 countries based on the OECD Economic Outlook. It is available since 1967. This data set is freely available and also contains a measure for the depth of the crisis.


Can anyone help me understand the budget constraint of an investor in complete market?

So in an Arrow-Debreu market, there is a price for every asset/claim for every state of the world. The states $s$ refer to this.

For your utility maximization problem, you are maximizing a combination of what you consume, $u(c)$, and the expected profit from your portfolio of claims, which can then be put into future consumption.

$\pi(s)$ describes the profit in state $s$, and that is multiplied by the utility of consumption in that state $s$. In this case, I guess the maximizer does not seem to worry about variance, so maximizing sum of those possible outcomes in all states of the world suffices. Finally, $\beta$ represents the fact that you prefer to consume immediately instead of investing and waiting to see the state of the world.

So the budget constraint can be roughly described as such: whatever you decide to consume now plus the cost of buying claims that will give you money to consume later must equal whatever money you start with plus whatever money you get from buying those cool claims.


Why Constant Returns to Scale Suggests Certain Relation

The result follows from Euler's Theorem on homogenous equations. This theorem states that if a function $f(x,y)$ is homogeneous of degree $\lambda$ then the following holds:

$\lambda f(x,y)= x \frac{\partial f}{\partial x} + y \frac{\partial f}{\partial y}$

A (production) function with constant returns to scale is homogeneous of degree 1 by definition. The definition of constant returns to scale is basically the same as the definition of homogeneity of degree 1. That means $\lambda=1$, which proves the result you need.


What are the specific assumptions of MRS?

Different consumer preferences will lead to different properties of the consumer's willingness to trade one good for another.

For instance, suppose that consumers preferences are linear in the consumption of either good:
$U=\beta_x x + \beta_y y$
where $\beta_x$,$\beta_y$ are positive constants

The marginal utility of $x$ would be $\beta_x$ and the marginal utility of $y$ would be $\beta_y$, and the MRS would be $\frac{\beta_x}{\beta_y}$, also a constant. This tells us the consumer would be willing to trade between $x$ and $y$ at a constant rate.

An alternative would be consumption of each good entering utility in a multiplicative fashion (Cobb Douglas), for instance
$U=xy$. The marginal utility of $x$ would be $y$ and the marginal utility of $y$ would be $x$ and so the MRS would be $\frac{y}{x}$, which indeed would depend on consumption. In this example, the MRS decreases as consumption of $x$ rises. As the consumer enjoys more $x$ he is willing to give up less and less $y$ for another unit of $x$.

So it's not entirely trivial whether the MRS depends on consumption, whether it does or not depends on how you model consumer's preferences.


Why is a solution concept of Bayesian Persuasion a subgame perfect equilibrium?

Here are my thoughts. Because the sender commits to a disclosure policy, how you stipulate off-path beliefs doesn't matter (phrased loosely). That is, the modification to PBE is trivial: any optimal persuasion policy corresponds to a class of optimal persuasion policies in which any belief is assigned to each off-path message.
Moreover, you could also resolve your off-path message beliefs issue by assuming that the cardinality of the message set is so small that no off-path messages are sent. This would correspond to, e.g., there only being two messages available in the canonical prosecutor-judge example from KG.


Proving that Marshallian demand is of the form: $x_i^*(p,I) = \hat{x}_i^*(p)I$ with certain conditions

You have exactly the right idea. For a clearer and more efficient proof, I would suggest the following:

I am not entirely sure what the index $i$ is referring to. A specific good of the bundle? I don't think you need this.
$\hat x (p) $ denotes an optimal bundle for an income equal to $1$, right? It is clearer to write $\hat x (p, 1)$  in order to be consistent with your notation.
The claim which you want to prove is "If $\hat x (p, 1)$  is optimal at an income of 1, then $I \hat x (p, 1)$ is optimal at an income of $I$" . By the way, it is not generally true that every optimal bundle at $I$ is given by $I \hat x (p, 1)$.
To prove the above claim, you only need to note that $I \hat x (p, 1)$ is feasible at $I$ and then argue that it is weakly preferred to every other $y$ that's feasible at $I$. You basically did this in your answer when you noted that the bundle $y / I$ is feasible at an income of 1, and then used optimality of $\hat x (p, 1)$.
As a final remark: Homotheticity is really a property of preferences, not derivatives of utility representations. Indeed, all you need for your argument is that scaling any two bundles by the same positive scalar does not change the preference between then.


What effect has the 30% increase in money supply from Feb-June of 2020 had?

I pretty much agree with the answer that Brian provided except for:

As for the effect of monetary aggregates, there are any number of reasons to expect that their changes will have no observable linkage to activity.

This is not a conventional view hold by mainstream economists, although to Brian's credit he points that out by saying:

Nevertheless, some economists still attach significance to monetary aggregates, one of them will have to offer an explanation.

Even though using 'some' as a synonym for mainstream of the profession is a bit strange.
Mainstream View on Significance of Money Supply:
The conventional view is that changes in money supply actually matter for what the inflation is. For example, this holds true for virtually all general equilibrium macro models presented in Advanced Macroeconomics from Romer which is classic graduate macro textbook. You will find the same views expressed in virtually any undergraduate macro textbook as well. However, there are two caveats:

As shown by Krugman (1998) in his influential paper its not just money supply what matters. It is also the expectations of money supply that matters! Any expansion of money supply that is precieved as being only temporary and promptly reversed will have only limited impact on inflation and inflation expectations at the best.
There are certain situations, a prominent example of such situation would be when interest rates are at zero lower bound (ZLB),  where inflation becomes unresponsive to money supply. The reason for this is that at zero lower bound peoples willingness to hold cash becomes infinite as money themselves carry implicit zero nominal interest and hence if central bank would try to push for negative interest rates people would just soak up all the extra cash by hoarding it.

However, even despite the above caveats mainstream economists generally do believe that money supply affects inflation because ZLB is not a 'normal'state for an economy to be in - at least not historically. Moreover, also even though peoples expectations of money supply expansion can be fickle and central banks that are know as 'inflation fighters' might initially not have enough credibility in their commitment to permanently increase money supply, this obstacle is very situational and it is agreed by conventional economists that if central bank is really committed to monetary expansion the expectations eventually adjust.
For example, in 2019 the IGM forum- which is arguably the best poll for discovering what top mainstream economists think as it interviews a cross-section of top mainstream economists of diverse political beliefs, gender and age showed that in response to Q: "Countries that borrow in their own currency can finance as much real government spending as they want by creating money?" which is arguably a proxy to whether M matters for inflation, as the biggest problem with increases in M is that it leads to inflation,  26% disagreed, 57% strongly disagreed and 7% had no opinion and once the responses were weighted by confidence 24% disagreed and 76% strongly disagreed.
Furthermore, of course just because mainstream economists claim there is a relationship that does not mean there has to be one - that would be fallacy of arguing from authority, but my point here is to represent the conventional/mainstream view. Of course, mainstream academia is also not a monolith I am sure that there are mainstream economists who might hold different views but I believe it is fair to say that if they exist they are in minority.

View of the Bank of Canada (BOC) on Money Aggregates:
Furthermore, Brian misrepresents the official view of Canadian central bank presented on their website. However, I do not want to insinuate he does that on purpose because I think he is valuable user and even though I disagree with him here I actually hold him in high regard and I am sure he would never do that purposefully, rather I believe its due to erroneous assumption that absence of the series is evidence for their views on role of money supply which is fallacy.
In fact the same page that Brian provided link to BOC states:

For further discussion of uncertainty as well as the information and analysis used to inform monetary policy decisions at the Bank of Canada, see Jenkins and Longworth1 (2002) and Macklem2 (2002).

Hence the website does not offer all details. Now if you open both of those papers you will see that actually money supply matters:
For example in Macklem, Tiff, "Information and Analysis for Monetary Policy: Coming to a Decision." Bank of Canada Review, Summer 2002: 11-18 we will find:

The economic model used in the staff projection
focuses on the links from interest rates to spending by
households and firms. Information on various holdings
of money and credit provide yet another view of what consumers and firms are doing and planning to do. In
order to spend, consumers and firms need money or
credit, so the evolution of the monetary and credit
aggregates provides clues to spending plans. In practice, these aggregates are also affected by portfolio
shifts and other purely financial developments, so, as
with other high-frequency indicators, the challenge
for the staff is to separate the genuine signals about
economic activity and inflation from volatility related
to other factors. Regular contact with financial institutions provides useful insight into the particular developments that appear to be affecting the growth of
money and credit at the time. Information is also
obtained on credit spreads in bond markets and on
any changes in the conditions under which banks are
lending to businesses and households as indicators of
changes in credit quality and availability.
The staff in the Bank’s Department of Monetary and
Financial Analysis assemble this information to provide an overall view from the financial side of the
economy on the outlook for output growth and inflation, as well as on the risks surrounding this outlook.
Based on this analysis, they also make a recommendation to the Governing Council on the setting of the target overnight interest rate at the next fixed announcement date.

Next in Jenkins, Paul and David Longworth, "Monetary Policy and Uncertainty."Bank of Canada Review, Summer 2002: 3-10.

Second, it [The BOC] examines data on monetary and credit
aggregates, as well as information on credit spreads
and overall credit conditions. The purpose is to assess
the behaviour of financial intermediaries, the financial
conditions of households and of the business sector,
and the implications for demand and inflation pressures in the economy.

The emphasis and comments in [] are mine.
Hence unambiguously BOC takes monetary aggregates into account and believes they have some impact on  inflation. Or to be more precise it at least shows that they claim to do that (nobody can of course see what is in their heads).
We can only conjecture why BOC does not list money supply separately on the website but mentioned it in the papers. My best guess is that BOC does not list it because money supply is generally less useful for short-term forecasting, certainly not as useful as augmented New Keynesian Philips curve for example (which is based on output gap that is listed there).  However, forecasting ability of a aggregate has no implications for underlying relationships. Even nonsense variables can be useful for forecasting because they happen to co-vary with the variable you want to forecast in some way and vice versa - this is well accepted in literature on forecasting.
For example, according to Economic Forecasting and Policy from Carnot, Koen and Tissot certain types of forecasting models are built:

... models are based solely on the statistical properties of the series under consideration, irrespective of any interpretation or causal relationships informed by economic theory...

The authors also state that such models can often provide relatively better forecasts than the structural (i.e. theory/underlying economic relationship based) models. Also you will find this caveat in pretty much any text on forecasting even outside economic profession.  Hence whether money supply is used for forecasting or not in itself tells us nothing about what the actual relationship is or whether institution using such forecasts thinks what the actual relationship is (also note forecasting should not be confused with empiricism or statistical estimation of some empirical models).
However,  it is actually a common mistake that even many very intelligent people make all the time to assume that if there is some fundamental relationship between two variables they should be good at forecasting or vice versa. Nonetheless, any such assertions are simply just a fallacy and as a consequence one cannot generally judge underlying economic relationship simply from forecasting models central banks/professional forecasters use let alone from the variables they use for forecasting.


First, to give a little more background to 123's answer, a production set $Y$ is the set of all feasible production values. With $y \in Y$, $y$ is a vector in $\mathbb{R}^L$, where positive elements indicate outputs, negative values indicate inputs. The inputs you put in that get you outputs can be expressed with either a transformation or production function.

123 is right when stating the formal microeconomic axiom:

  If that $y \in Y$ and $y \geq 0$, then $y = 0$.

However, no free lunch axiom needs more than merely "passing through the origin."

The first image shows a production set (two dimensions) that satisfies no free lunch. The second image shows a production set that does not, even though it passes through the origin.

(yes this image is a bad rendition of the one from Mas-Colell)

Interestingly though, the author has not tagged this with a microeconomics tag, but with a macro and financial econ tag. The closest thing I can thing of to a no free lunch axiom here is some sort of transversality condition. For example, in simple money market models with borrowing with households, you might have a condition that you have to pay off all debt eventually (or just pay the interest for the rest of your life). So that would look something like,

$$\lim_{t \rightarrow \infty} \frac{b_t}{(1+r)^t} = 0$$

where $b$ is the amount of borrowing in a period. I do not hear conditions like these called "no free lunch" however. Something more like "no ponzi scheme condition" or "borrowing constraints" (snoree) are more apt.


Does there exist a mathematical formalization of Hayek's ideas about information and the price system?

Eric Maskin has a paper called “Friedrich von Hayek and Mechanism Design”, which tries to connect some of Hayek’s ideas to the (formal) theory of mechanism design. This paper, and the references therein, might interest you.


Criticism of "Modern Political Economics" by Varoufakis, Halevi, Theocarakis

Neoclassical economics or rational analysis should always be a starting point for an analysis of how a given system or model works.

However, that is all it is - a starting point. You cannot use a model that is solely rational to predict or infer much about how the real world works, because humans are not rational. That is why rational economics are critized, but do not match up with observed behavior.

Therefore, any real critique has to show how rational economics do match up with observed behavior.


How do I change the base year from multiple years to one with monthly data?

One possible approach

Take the average of the original values for the 12 months of 2009. Call this "the original 2009 average"
Divide all the original values by "the original 2009 average"
Multiply by 100
Round


A study plan to understand game theory papers

Probably a more general response than you're hoping for, but I recently asked a (well-published) econ prof at my university which classes he'd recommend prior to doing research. He said he usually recommends to the PhD students he advises that they take real analysis and probability at a graduate level.


Deriving average productivity from a CES production function

This is the solution to your difficulty. By the way, which text are you following?


"Income tax" for corporations means "profit tax". The 1.500 euros is never called "income" but "Revenue", or "Net Revenue", or "Net Sales turnover" or something similar. But never "income" -"income" is equivalent to "profit", for companies or professionals. (*)

"Profits" are calculated as "Net Revenues minus tax-deductible expenses".

"Net Revenues" means revenues without taking into account any Sales tax (like the V.A.T is).  This is what the "net" signifies here.

So the tax rate will be applied to the 500 euros in your example.

--

(*) When a professional says "my income is 20.000 EUR" he means "revenues minus professional expenses". When filing a tax-return, he will be taxed on the 20.000 EUR, minus any "living-expenses" tax deductions provisioned for natural persons (like maybe health care etc).

When a person that only works as an employee states "my income is 20.000 EUR", then he has not deducted any expenses from his wages, because it is considered that this person has no professional expenses, only "living" expenses.


Explaining mixed strategies for one-shot games

Ariel Rubinstein tends to be insightful regarding these kinds of questions.

He addresses the interpretation of mixed strategies in section 3 of this paper.

A few possible interpretations aside from deliberate randomization:

Purification: A mixed strategy is a plan of action based on information not specified in the model.
A fictitious long run story.
Population averages, so imagine the player's being pulled from some population distribution where different types play different pure strategies. The  population distribution is the mixed strategy distribution.

An interesting quote regarding player $i$'s mixed strategy reflecting uncertainty among $-i$'s regarding what $i$ will do:

  Mixed strategy can alternatively be viewed as the belief held by all other
  players concerning a player's actions. A mixed strategy equilibrium is then an
  n-tuple of common knowledge expectations, which has the property that all the
  actions to which a strictly positive probability is assigned are optimal, given the
  beliefs. A player's behavior may be perceived by all the other players as
  the outcome of a random device even though this is not the case. Adopting this
  interpretation requires the reassessment of much of applied game theory. In
  particular, it implies that an equilibrium does not lead to a prediction (statistical
  or otherwise) of the players' behavior. Any player i's action which is a best
  response given his expectation about the other players' behavior (the other
  n - 1 strategies) is consistent as a prediction for i's action (this might include
  actions which are outside the support of the mixed strategy). This renders
  meaningless any comparative statics or welfare analysis of the mixed strategy
  equilibrium and brings into question the enormous economic literature which
  utilizes mixed strategy equilibrium.


Does learning economics lead to richness?

First things first, we must dispel the misconception that you will find in economics some magic formula to "beating the stock market" or some other way to make easy money. I explain why why here.

Learning economics can help you to become more wealthy in several prosaic ways:

In the same way that learning to be a doctor or lawyer can make you rich. If you have useful skills then people will pay you to use your skills to help them. Professional economists are employed in the government, academia, and the private sector and are generally well-paid.
Learning economics will also teach you to be a more logical and systematic thinker, which is likely to make you better at all kinds of intellectual tasks—including those not directly connected to economics. Again, this is likely to improve your future earnings potential.
Many ordinary people do truly stupid things with their money. Economics will not generally teach you about these things (better to read about personal finance, as Arthur Tarasov suggested), but it will teach you to be more savvy in matters of money and help you to avoid the pitfalls.

Note that none of these three things are specific to economics. You would do just as well to learn medicine and read a beginner's guide to investing. Some advice in my capacity as an 'old guy' rather than an economist: if you want to become rich then find a career that pays good money and that you will enjoy and work hard at it.

Final remark: If you really want to learn economics then reading Adam Smith is probably a pretty bad way to start. That is like trying to learn English by reading Shakespeare. Much better to start with a modern introduction to the subject (I am fond of "Intermediate Microeconomics: A Modern Approach" by Hal Varian).


Question 1 That's a reasonable way to think about it,but maybe missing out on a bit of nuance.  Realize that at any given price, the supply curve indicates how much WILL be supplied.  You are correct that if the price drops, the supplier will no longer be willing to supply that quantity of a good.  But likewise, if price increase, the supply will seek to supply a greater quantity.

Question 2 Yes, this is false. A change in price results in a movement along the supply curve and so increases/decreases the quantity supplied.  Supply itself is changed, meaning a shift of the whole supply curve, when faced with a shock, such a technological change.


Which countries impose family income taxation?

I have finally found this: OECD (2005), Taxing Working Families A little old, but mostly accurate still.


NBA stars create more money (ticket prices, jersey sales, merchandising, branding). However, only few basketball players play in the NBA, the 99% of basketball players are amateurs. But all the doctors earn realitively well.


How are PPP, nominal exchange rates and inflation related?

Let $P$ denote the price in the home country, $E$ represent units
of domestic currency used to buy one unit of foreign currency, and
$P^{*}$ represent the price level in the foreign country. Now, PPP
implies that:
$$
P=EP^{*}
$$
 In other words, prices when expressed in the same currency are equalized
across countries. Log-differentiate and take changes and obtain:
$$
\hat{P}=\hat{E}+\hat{P}^{*}
$$
 where hats denote changes. Rearrange, and find that:
$$
\hat{E}=\hat{P}-\hat{P}^{*}
$$
In other words, the changes in exchange rate inform one of relative changes
in price levels (inflation). This is what is know as relative PPP


It appears that you suspect that the regressor "price" is endogenous, i.e. correlated with the error term, and that you consider what kind of instrument to use in order to tackle endogeneity.

You think a possible instrument could be revenues or profits, because they are correlated with the price. Say, Revenues, denoted by $R$. But

$$R_{ij} = P_{ij}\cdot D_{ij} = P_{ij}\cdot(A + aP_{ij} + bY_{ij} + cN_{ij} + e_{ij})$$

and so Revenues are a function of the error term, therefore they will certainly be correlated with it, and same goes for profits (and this should be obvious since both depend on quantity and therefore on the error term).

In order to find an admissible instrument, you must first conclude about what are the variables that may be included in the error term, and are correlate with price. This will help you to search for admissible instruments.

PS: I cannot see the connection of the tax mentioned with the issue of instrumental variables estimation.


I do not understand your attempt very well.

Assuming that the monopolist cannot directly price discriminate (i.e. charge different prices to old and new consumers in the same period), then in the second period it is optimal to offer a price of 50 and sell to everyone, regardless of whether the old guy bought or not.

Knowing this, the old guy would buy in the first period iff the price gives him a total surplus of 50 (which he can get by waiting). Hence, the initial price should be 150.

If, on the other hand, the old guy has a value of only 20, then in the second period the monopoly price would still be 50. Hence, the old guy has no surplus from waiting and the monopolist should charge 40 to him in the first period.


Human Capital and Investment into Children

You ask for studies which I don't have, but I can think of a few reasons:

Diminishing returns - if a child has a decent home and parental support you can give them a good education at reasonable cost. To get a child from a broken home to the same point requires much more intervention - and cost.
Moral hazard - there are many hard-working families just above the breadline. The parents go to great lengths to ensure their children have a decent home. It may be that they get no support for all this effort - but if they simply stop making an effort, the child then gets massive support from school.
Need for high achievers - for society to achieve (cure cancer, explore space, win wars, etc.) there is a need for high achievers. If the education system focuses entirely on getting under-achieving children up to average, this comes at the cost of high achievers.

I'm from the UK, where there is an extensive welfare system and extra investment in education in deprived areas, called the Pupil premium. Although, not nearly as much as suggested by the paper you reference.

Many people do not support the pupil premium. There is a large "squeezed middle" in the UK, not poor enough for extra support, not rich enough for private schools, and this group sees extra support for deprived areas as unfair.


If an economy has capital that is less than the golden rule level of capital, can we reach the golden rule without increasing the savings rate?

Yes the answer should be C. I have attached an image showing the variation with time of the variables $y$(per capita output), $c$(per capita consumption) and $i$(per capita investment). I am assuming at $t=t_0$ the savings rate is increased.

The consumption per capita initially will fall because the savings rate has increased. Eventually it must go above the initial per capita consumption because of the Golden Rule condition.

Cheers!


Impact of a reduction of distortions in a flat consumption tax

There is theoretical work on the matter in general. In fact, many standard models of optimal consumption taxation will typically yield a distortion that is increasing and convex in the rate of taxation. This means that increasing a tax on a good from 5% to 6% results in higher distortion than increasing it from 2% to 3%. Following this logic, it is better to tax many goods at a low rate than to tax few goods at a high rate, as the distortion would be smaller. This means that removing the exemptions (taxing goods with a currently lower rate of taxation than the rest) is better than increasing the tax rate on previously taxed goods (since they have a currently higher rate than the exempt goods). To conclude, it means that the distortion from taxing exempt goods, which would mean going from 0% to e.g. 20%  (assumed current VAT in Australia) is lower than going from 20% (current tax rate on non-exempt goods) to 40%, or so.

For a reference, see for example slide 30 (and a few before) in this slide set I found online. Its from Mankiw's Microeconomic Principles.

This however does not take into account any "fairness" considerations or welfare implications for the case of households not being able to afford enough food as a result. So the standard theory may not apply in cases where taxing food at all may lead to starvation, as starvation is not considered. However this is likely not the case anyway for such a rich economy as Australia that has other means of providing welfare (incl. food) to the needy.


What is the logic of Bagehot's policy of high interest rate?

We need to distinguish between a crisis and a normally functioning financial system. During a crisis, there is an unwillingness to lend  against collateral at any price (interest rate). Financial firms are liquidity constrained, and they assume that the entities that want to borrow are similarly constrained. Being able to fund positions in securities at any price is a huge relief, since that means you are not forced to sell (at a distressed price).

As an example, imagine that a financial firm needs to borrow at 12% interest to finance a position in corporate bonds. If that borrowing is done for a month at that rate, the total interest cost would be 1%. This is probably going to be much less costly than being forced to sell the position; a loss of 20% would not be unusual in such a situation.

Furthermore, the crisis lending is done by the central bank to financial firms facing financing issues; it is not aimed at the broad public. During the Financial Crisis, lending programs were aimed at banks and security markets, not non-financial entities.

The level of short-term rates does not really matter that much; once the markets return to normal, you will be able to fund your positions at a much better rate. Having to pay a high rate of overnight interest for a week on a long-term security is not a big deal.

The argument for lender-of-last-resort operations at a high level of interest is that you do not want this facility to be a regular source of financing for the financial system.


Term for the phenomenon when an undesirable but competitive strategy dominates

A game outcome that is Pareto optimal or Pareto efficient is one where no one player can be made better off without making at least one player worse off. So a Nash equilibrium can easily be Pareto sub-optimal (or Pareto inefficient), which means that it is possible to one player can be made better off without making at least one player worse off. However, "The interesting thing about the prisoner’s dilemma is that all options are Pareto optimal except for the unique equilibrium, which is for both to defect."


When you say non-linear cost function, I assume you aren't referring to the firm's production having non-linear costs, but judging by your example, you rather mean the firm's output prices having weird optimal bundle pricing.

From the abstract of the linked article (Hanson and Martin, 1990):

  " Bundle pricing is a widespread phenomenon. However, despite its importance as a pricing tool, surprisingly little is known about how to find optimal bundle prices. "

So this may be a good place for you to start. For an article that is a little more recent/available online, you could look at extensions of the original work in this area, such as bundle pricing for homogeneous items (Grigoriev et.al., no date), or this article correlated valuations for the items (Chen and Ni, 2017).


You might want to try the Indian Government's open data website https://data.gov.in/

I am not sure if all your requirement will be met, but this is a good place to begin your research.

To find the data you require, you might want to use the "search box" on the header.When I searched for "retail milk price" (keywords), I could find several datasets for different timeframes.


Empiric evidence of abundance and post-scarcity either transition to it?

Okay I have done some research.

Possibly, abundance could be available soon along these lines:

organic food - abundance of edible insects and clean meat from meat breweries
housing - abundant through abandoned rural areas and 3D printed homes, water and good air possible available there as well
education - given you are okay with self-education Internet provides enough free/cheap learning resources


What's the definition of social welfare in a procurement auction?

You need to add $x_0 v_0$ to your social welfare, where $v_0$ is the value the seller assigns to keeping the good and $x_0=1$ in that case. Then, the efficient (social-welfare-maximizing) allocation is that the highest-value buyer gets the good if her value is above $v_0$ - otherwise it is efficient that the seller keeps the good.
Similarly, in a procurement auction, we have one buyer who values the good to be procured at $v_0$ and $n$ sellers who can produce the good at private cost $c_i$. Social welfare is then
$$\sum_{i=1}^n x_i (v_0 - c_i),$$
and, hence, it is efficient to let the lowest-cost firm produce the good given its cost is below $v_0$ - otherwise it is efficient that the good is not produced.
For sufficiently high values $v_0$, you can also define it as $\sum_{i=1}^n x_i (- c_i).$


Will China's GDP be greater than the USA's and Europe's combined?

Of course this is is possible. China is a very large economy currently and it is likely quite a way away from reaching its production frontier. It has lots of room to grow.

A lot can happen in 65 years and any forecasting this far into the future will be subject to a high degree of error. Don't forget that the US and Europe are dynamic as well. The current world economic climate may be in China's favour now but in 65 years who knows. Maybe everything we will need can be 3D printed an large scale manufacturing won't exist.

It is hard to look at The Next 100 years. It attempts to speculate on what can happen. *Spoiler*, the author does not expect the 21st century to be China's.


"Saddle point stability" refers to dynamical systems, (usually systems of difference or differential equations), where the system has a fixed point, and there exists a single trajectory that leads to the fixed point.

It follows that from a mathematical point of view these systems are in reality unstable.

A 2 X 2 system is the standard example because one can construct intuitive two-dimensional phase diagrams to understand the properties and the behavior of the system over time.

For natural sciences, unstable systems are useless as models -the tiniest deviation, if not corrected, would lead to corner solution (elimination or explosion of the system).

But saddle-path stable systems have found important uses in economics, because this feature of theirs accommodates purposeful behavior. Assume that an economic system described by a set of difference equations was properly stable in the full mathematical sense. That would imply that no matter where we started, automatically the system would tend to its fixed point/long-run equilibrium. But this means that no matter what the economic agents did and how they interact, the system would settle in equilibrium... this does not sound very convincing once we accept that agents try to optimize their situation (in terms of utility, wealth, etc).

But if the system is "saddle-path stable", then agents track the trajectory followed, and if it appears to deviate from the one that leads to the fixed point, they purposefully change their own behavior in order to go back to the desired trajectory, since corner solutions are not optimal.

The standard example here is the basic growth model.


What is the difference between a bank's Treasury department and ALCO?

Someone could write a book about this question which still wouldn't cover all considerations. However from a high-level perspective, I would say that TR handles a lot of cross-functionialities with a main focus on risk mitigation, like especially

liquidity risk
FX risk
counterparty risk
interest rate risk

and most of the times TR also covers the pricing for financial assets (loans, bonds, tender, etc.) on a national bank / central bank level.
Whereas ALCO focuses more on structuring assets & liabilities, ensuring the fulfillment of regulatory figures like core capital ratio, etc.
So they earlier or later will have a lot if interfaces but still their very own tasks and responsibilities.
Side Note: I work in treasury myself (corporate side) and used to work for banks close to 10 years as well


What happens to an MBS if all the underlying mortgages are fully paid back by the borrowers much before the maturity date?

Depends on the structure.

In the US, most residential MBS are pass-through, so the MBS is prepaid.
In Canada, MBS are (or at least were) mostly packaged into non-passthrough structures, so MBS cash flows follow fixed coupon schedule. There are prepayment penalties which are used to absorb the cash flows.
My understanding is that European pfandebriefe markets use a collateral pool, which absorbs prepayments.


Is there a "name" for price leadership oligopoly?

Oligopolistic competition through both quantity and price can be regarded as Stackelberg competition, provided that there is a leader firm that moves first (commits) and other players move subsequently with some information on what the leader has committed herself to. It thus describes the dynamic form of the classic Cournot and Bertrand competition.

Some explanatory background info:
Stackelberg first published his sequential move games in 1934 under the title 'Marktform und Gleichgewicht (Market Structure and Equilibrium)" (I unfortunately could not find a pdf of the paper, not even in German). And it seems that this sequential nature was indeed ground-breaking, in this case. At this point Cournot and Bertrand competition were already well known concepts, but game theory was not an established field yet ('Theory of economic games and behavior' for instance was only published in 1944). This first model apparently focussed on competition in quantity. But as this paper shows, price competition was not an unknown concept to him, either (the paper is in German but there is a English summary on page 139).


Is the arable land a mean of production?

Yes.

Anyone who utilizes their privately owned property or assets as a means of production for the sake of profit is a capitalist.

In this case the farmer's capital  is the land which they use for agricultural production.


Who was the inventor of Utility function?

Not to be too obvious about it, but couldn't you just say Jeremy Bentham? The calculus of choosing bundles that maximizes pleasure specified a very simple utility function in words.


The reason you bring forward belongs to technological directed change, which is regarded one of the main explanations for wage growth differentials. Keep in mind it's not exactly the way you're phrasing it: The growth in tech companies rewards people who are skilled well for their kind of jobs (as opposed to "wealthy people").

Card and DiNardo have a nice summary article on the issue:

  The recent rise in wage inequality is usually attributed to skill-biased technical change (SBTC), associated with new computer technologies. We review the evidence for this hypothesis, focusing on the implica- tions of SBTC for overall wage inequality and for changes in wage differentials between groups. A key problem for the SBTC hypothesis is that wage inequality stabilized in the 1990s despite continuing ad- vances in computer technology; SBTC also fails to explain the evo- lution of other dimensions of wage inequality, including the gender and racial wage gaps and the age gradient in the return to education.


Construct utility function for a risk-averse agent

If $-|x-a|$ represents the monetary payoff associated with the policy choice $a$, then $u(a) =-\left(|x-a|^\gamma\right)$ is risk averse for $\gamma > 1$, and risk loving for $0<\gamma < 1$.


DSGE Model Solutions as a Vector Time-Series process. Examples?

After much reading, here's the conclusion I got.

VAR models can be seen as State-Space models/representations.

Usually DSGE linearised solutions have a State-Space representation, with more restrictions than a regular VAR model would have. In fact, there are papers(I remember one from spanos testing the Smets and Wouters model) showing DSGE solutions don't pass the specification tests we usually do to the data.

For example, instead of assuming that the residuals follow a normal multivariate distribution, they show we would be better to assume a student-t multivariate distribution. Of course, the problem is that most textbooks dealing with multivariate time series - if I remember correctly lutkephöl is one of them - also assume normal distributions. But at least, the time series VAR analysis can be made robust, while I've never seen DSGE model estimations using student-t distributions instead of normal ones.

P.S.: this is more like a note to self, from my self studying the subject. If anyone knows more, be free to share.


How to find the points on a budget line?

You generally set the price of "all other goods" to \$1, as "all other goods" is usually measured as "dollars worth of all other goods." Then the maximum quantity of all other goods is just the available income. Then to find the quantity of other goods Hulk buys, just find out how much money is available after he vists the gym 20 times.


Quantity supplied & demanded equation with tax

The government revenue is going to be 1500 euros.
The tax shifts the supply or the demand curve vertically depending on wether the tax is charged to the consumer or the producer (turns out it doesn't really matter at the end you get the same government revenue).

Here you can find a graph representing the situation if the consumer is charged the tax.

https://www.desmos.com/calculator/8unflceczk

The demand curve shifts from the $Q^{D}=120-P$ (red line) to $Q^{D,tax}=120-(P+25)$ (green line). The supply curve is unchanged (blue line).

The new equilibrium quantity is 60 (instead of 76.667 in the case with no tax), and the revenue is equal to the unit tax times the quantity $25\times60=1500$, which is equal to the area of the orange rectangle.


Currency Devaluation and the causes of the Tequila Crisis

The Mexican government has a complicated history of currency intervention, which can be read about in a detailed timeline here.

However, in 1994 the devaluation was caused by the end of government intervention. Up until that date the Mexican government had a set range of USD values that the peso could float within, so a sort of flexible peg to the USD. In December of 1994 the government decided to allow the peso to float freely and the peso was devalued naturally through market forces.


Can anyone help me understand the Motrtensen-Pissarides model?

To get things started:
The reservation wage is the wage that makes the worker indifferent between taking a job and getting V_e and not taking a job and getting V_u. To find it, solve for the value of w that makes V_e = V_u.
Solving the entire model is not possible given the info you provided. You need the block that describes the firms.
My sense is that it would be most useful for you to read about the MP model and then post more specific questions based on a complete model. A good reference is Romer's Advanced Macro book.


lower deficit means more export, so more foreign currency is coming into the country. Part of this goes to buy bonds. More demand means higher bond prices. People in the countr might feel richer too, because there is more exports, so more income to them. They might buy more bonds too.


(i) I think your idea makes sense. Under the null, $[X,Z]$ is orthogonal to $\varepsilon$. Under the alternative, $X$ is correlated with $\varepsilon$. (ii) Your statement that it's "basically a test of whether the OLS residual are orthogonal to $Z$" is exactly what I think. (iii) Your thought about the power depending on the relevance of $Z$ also makes sense. If $Z$ is irrelevant, then the moment restrictions $E[Z_i' (y_i - \alpha - X_i \beta)] = 0$ hold for any $\beta$ (due to the uncorrelatedness of $Z_i$ and $X_i$) so the OLS residuals should appear to be uncorrelated with the instruments although the OLS estimator is inconsistent. I think this test is closely related with standard methods explained below, although I have not done any derivation in this regard.

(iv) As you would be aware, there are textbook methods to test endogeneity. Stata implements some. See help ivregress postestimation. You will see estat endogenous there. There, for the 2SLS estimation, OLS and 2SLS can be compared; or $y$ is regressed on $[X,\hat{\eta}]$, after which the statistical significance of $\hat\eta$ is tested.


Is there any article or paper that describes what Thomas Sargent thinks of New Keynesian economics/models?

This journal article (Oct 29-2011,) has parts from a telephone conversation of the journalist with Sargent:

http://www.nytimes.com/2011/10/30/your-money/thomas-sargent-nobel-winner-rejects-philosophical-slogans.html

Although none of it mentions "New-Keynsian", there are some interesting points, like

  "Professor Sargent said he felt insulted by people who call him
  “non-Keynesian” or “right wing,” terms that, he said, are based on a
  misunderstanding of his thinking... He’s a Democrat, he said, “a fiscally conservative, socially liberal Democrat,” adding, “I
  think that budget constraints are really central.”"

On Keynes?

  "The “non-Keynesian” label irks him particularly. “That’s just off
  base,” he said. “Keynes was a very good economist. He was brilliant.
  He had wonderful insights. His work has inspired me many times.”"

So are we to believe that Sargent is a "Keynesian"?

  "Today, Professor Sargent says that in some ways he actually is a
  Keynesian, but he qualified that claim, too. “I’m happy to say I am a
  Harrison-Kreps-Keynesian,” he said, citing work by two scholars at
  Stanford, J. Michael Harrison and David M. Kreps. They developed a
  theory of speculative investor behavior and stock-bubble formation
  that subtly modifies rational expectations “in a beautiful way” and
  “captures Keynes’s argument, makes it rigorous, and pushes it
  further,” he said."


Unique features of Property & Urban Economics

There are many different models used in this field, depending on the question being asked. For example, commercial and residential properties have very different needs. That said, there is a key model which can be the framework for a broad analysis:

The monocentric model

The key model in urban economics is the monocentric model, which is a derivation of the rural land price theory and has industry concentrated in the central business district (CBD). Start with closed model (a city in isolation). Then look at the open model (allow for movement between cities) and competition between cities (inter - regional equilibrium). Density and distribution of population and sectors. Interaction with the labour market – why wages are higher in larger ‘skilled’ cities but real wages are not.

This model has extensions which can help explain why some industries choose to operate outside of the CBD.

There are some special considerations often used for analysis of property:

Spacial externalities

Cities offer advantages and disadvantages. Amenities are more available (both publicly and privately provided) but there are also negative externalities such as congestion, pollution and cost of living.

Development and speculation

Speculation has a large role in the property market. There are many external factors which encourage such speculation. For example, zoning limits supply of available land very quickly. With good population growth forecasts, it is very easy to anticipate demand growth for land.

Public policy and government intervention.

In many economies, it is a highly regulated industry for a few reasons. Often times it is highly politicised (housing affordability is very important for many voters), policy decisions in this sector have direct and salient impacts in the day to day lives of residents. Think: rent control, public housing, zoning.

Wikipedia on real-estate is pretty well resourced. Included in there (among others) is information on:

Demand for housing
Supply of housing
Real estate financing

In such a diverse field, there are many other factors to consider. The importance these variables are vary dependent on the type of analysis required.


It makes more sense to use the USD as an intermediary currency.  If you know the central South African and Nigerian exchanges rates are for example

$14.38\; ZAR = 1\; USD$
$364 \, NGN = 1\, USD$

then by division $\frac{14.38}{364}$ or $\frac{364}{14.38}$

$0.0395\,  ZAR \approx 1 \, NGN$
$25.3 \, NGN \approx 1 \, ZAR$


Those are some good starting points but I would refrain from using them as the end result. There are some fatal logical jumps in your example.

Moving house: A good one to use. If I were to guess, I think the ratio should have decreased due to tech. For example, we don't have those huge t.v. nowadays. No desktops for the most part. However, be careful about how wealth plays a role. Also, people moving into cities of California would be very different than of Colorado.

I think a better indicator would be the consumption category of GDP. Especially durable goods. You can find detailed numbers by year, state, category on the official website.

I hope that helps.

References:
https://www.bea.gov/data/by-place-us
https://de.wikipedia.org/wiki/Bruttoinlandsprodukt


Why are break-even and shut down points based on average cost?

When you are finding the break even point, you are looking for a price-point.

The price is essentially the average (and marginal) revenue. Suppose price of good $x$ is $p$.

Revenue = $p * x$.

Average Revenue = Revenue / $x$ = $p$.

So what you are really doing when looking for p is to set Average Revenue = Average Cost.

At that point, you will also have the fact that Revenue  = Cost. So your logic carries through. You still break even at the point where revenues exactly cover costs.

To see this, note Average Costs = Costs / $x$.

So Average Costs = Average Revenue $\iff$ Costs / $x$ = Revenue / $x$  $\iff$  Costs = Revenue

The interpretation when focusing on average costs is only slightly different. When talking about averages, we're just talking about prices and costs per unit. So you break even at the point where your revenue per unit equals your cost per unit. It is necessarily implied that you also break even where your total revenue equals your total cost.


Why must there be an equilibrium in the money market?

In your textbook, it says that given a certain money supply, the interest rate must increase if the demand for money increases.

The money supply is determined by the central bank, which can buy bonds (which takes bonds out of circulation and increases the supply of money in circulation), or sell bonds (putting bonds in circulation but decreasing the supply of money in circulation). It can also, as in your example, do nothing.

If the demand for money increases, then market participants are willing to either "buy" more money at a given price (where the "price" of money is the interest rate), or pay a higher price for a given amount of money. This is true of all goods— and so long as demand isn't either perfectly elastic or perfectly inelastic, both are true.

So since in your example the money supply is fixed (i.e., the supply curve is perfectly inelastic), if the demand for money increases, the interest rate will increase. The interest rate increasing as a result of increased demand for money isn't dependent on the central bank doing anything, it's dependent on the central bank doing nothing.

In practice, central banks usually target a particular interest rate. When they do so, they can't directly observe the demand for money, but they can observe the equilibrium price (i.e., the interest rate). So what they do is engage in open-market operations— buying [or selling] bonds to increase [or decrease] the supply of money, in turn decreasing [or increasing] the interest rate until it is close to their target.


What are the benefits to the overall economy and consumer of horizontal integration?

Horizontal integration may lead to lower costs by profiting from economies of scale. If the market demand for a product is spread over many enterprises, the costs will be generally higher because there will be more fixed costs in total. Instead, if there was a single company, fixed costs would be comparatively smaller.

The effect on the overall economy would be good. Lower costs mean more money for the company and/or lower prices for consumers. The effect on the consumers is not clear.


Let $P$ be the CPI of the Home country, $P^*$ the CPI of the Foreign country, $P_H$ and $P_F$ the price of Home and Foreign intermediate goods expressed in domestic currency, and $P^*_H$ and $P^*_F$ be the price of Home and Foreign intermediate goods expressed in foreign currency.

The log-linear version of the real exchange rate is given by

\begin{gather}
\hat{Q}_t = \hat{S}_t + \hat{P}^*_t - \hat{P}_t
\end{gather}

We know that the CPI of home and foreign country (log-linear versions) are given by

\begin{gather}
\hat{P}_t = a\hat{P}_{H,t} + (1-a)\hat{P}_{F,t} \quad \quad \hat{P}^*_t = a\hat{P}^*_{F,t} + (1-a)\hat{P}^*_{H,t}
\end{gather}

We only need to substitute this in the log-linear version of the real exchange rate:

\begin{gather}
\hat{Q}_t = \hat{S}_t + \hat{P}^*_t - \hat{P}_t \\
= \hat{S}_t + a\hat{P}^*_{F,t} + (1-a)\hat{P}^*_{H,t} - a\hat{P}_{H,t} - (1-a)\hat{P}_{F,t} \\
= \hat{S}_t - a(\hat{P}^*_{H,t} - \hat{P}^*_{F,t}) + \hat{P}^*_{H,t} + a(\hat{P}_{F,t}-\hat{P}_{H,t}) - \hat{P}_{F,t} \\
= \hat{S}_t - a\hat{T}^*_t + \hat{P}^*_{H,t} + a\hat{T}_t - \hat{P}_{F,t} \\
= \hat{S}_t + \hat{P}^*_{H,t} - \hat{P}_{F,t} + a(\hat{T}_t - \hat{T}^*_t)\\
= \hat{P}_{H,t} - \hat{P}_{F,t} + a(\hat{T}_t - \hat{T}^*_t) \quad \text{given that the law of one price holds}\\
= -\hat{T}_t + a(\hat{T}_t - \hat{T}^*_t)\\
= -\hat{T}_t + 2a\hat{T}_t \quad \text{given that the law of one price holds, $\hat{T}^*_t = -\hat{T}_t$}\\
\hat{Q}_t = (2a-1)\hat{T}_t
\end{gather}


How does the monopoly's deadweight loss affect market surplus and the economic pie?

Consider the following two examples:

There is a consumer who is willing to pay 50 dollars for a good. (Reservation price is 50.) There is a seller who is willing to sell for 30 dollars. (Marginal cost is constant 30.) If they make a deal at any price $p$ the total surplus they enjoy will be $(50 - p) + (p - 30) = 20.$ The individual surpluses need only be non-negative because otherwise one party would probably not consent to the deal. The price that is finally reached depends on their bargaining power. With a monopoly all the bargaining power is on the seller's side, so the price would be $p = 50$. Total surplus is still 20. So there's no loss.

However if there are two consumers, one with a reservation price of 50 and the other with 31 then at price 50 only one of them (the former) will buy the good. At price 30, both of them would buy the good and total surplus would be $(50 - 30) + (31 - 30) + (30 - 30) = 21$. But the monopoly's profit is 20 dollars if it sets $p = 50$, and 0 dollars if it sets $p = 30$. So it will choose the former. Because of uniform pricing, a good that would increase the total surplus is unsold, creating deadweight loss.


The deposits that people have in the banks is a lot more than the money that the banks actually have.  This is due to fractional reserve banking.

As a consequence, if everybody tries to take out their money, the banks will run out of cash: the banks themselves will be unable to meet their financial obligations, and go bankrupt.

When the bank goes bankrupt, people lose their deposits.  Normally the government guarantees the deposits, but in the case of Greece the government is running out of money as well, so it will not be able to meet this guarantee.  Usually a government can print money to meet the demand anyway, but Greece is in the Eurozone so it cannot do this (and the European Central Bank is unwilling).

That's why there are closed banks and capital controls (i.e. at most €60/day withdrawal and other limits).  It's intended to be temporary.  Right now there is a lot of unclarity what will happen.  When there is more clarity the banks will surely open again.


Per Capita Income data of states in the USA

BEA Person Income per capita for USA or states
https://apps.bea.gov/iTable/iTable.cfm?acrdn=5&isuri=1&reqid=70&step=1
St Louis FED can pull up this data for you.
https://fred.stlouisfed.org/series/A792RC0A052NBEA

For your second question, it really depends on how you define personal income.  A recommendation is to check the statistical agencies definition of personal income and see if it matches up with your analysis/ project.


Can I rename a utility function based on its properties?

You can do whatever you want, it's your paper. Will it make it more difficult to publish? Yeah. Referees are fickle and easily annoyed.
You would not be the first person to go down this route. For example, the term Maskin monotonicity is common place in implementation theory. However, some authors use another term, I believe Maskin invariance. The claim is that invariance is a more appropriate term for the definition. Its worth noting that all of these authors had the same advisor who is a giant in the field.


Could eliminating all taxes and only creating new money theoretically work?

It would not work.
Historically speaking, governments that try to fund their operations primarily via the printing press experience not just inflation but hyper-inflation. Why? Well, one explanation is that without taxes nobody has any reason to want the government's currency. You can try to force people to use it, but that just encourages black marketeering.
Another way to look at it is that a policy of funding the government by printing money is equivalent to funding the government entirely with taxes on holding currency. But since the tax only applies to currency, and not gold, or land, or massive stockpiles of cigarettes, people have an incentive to avoid holding onto money at all costs. No matter the current price of cigarettes, using your spare cash to buy cigarettes for barter later on will always seem like a good deal because the cigarettes are more likely to maintain their value than the cash. But if no one wants cash, by law of supply and demand the value of cash should plummet.
Edit for the benefit of pedants: I am not saying that any "inflation tax" will automatically destroy the value of a currency. I am saying that people need reasons to hold your currency which are strong enough that they'll tolerate the inflation tax—and the larger the de facto tax on holding currency, the better people's reasons for doing so need to be. In the normal world, taxes are a key source of demand for fiat currency, take that away and the system stops working.


Who first used the term "externality" in economics?

I suspect you have found the author responsible for the original coinage of the word "externality" within economics, with this meaning.

In the 1950s (and earlier), the discussion of externalities was typically done using the phrase "external economies", as Francis M. Bator frequently did too. Bator built on Scitovsky (1954) and Meade (1952), both of whom used "external economies", as did JK Galbraith and others around that time (as well as several others before them).

Boudreaux and Meiners wrote the paper: "Externality: Origins and Classifications", 2019, within which they say:

  Bator's article likely forms the basis for the now-common notion of
  externality

which is probably as close as we can get to confirmation that the word is Bator's original coinage for this particular meaning, together with Fizz's Medema reference. There's a long footnote in the reference that Fizz found - Medema 2019 (p20) (my emphasis):

  Bator first used the term in his 1956 MIT Ph.D. thesis, from which his 1957 and 1958 articles were derived (Bator 1956). Whether it was Bator who coined the term is hard to say. Paul Samuelson, Bator’s MIT colleague, used it at nearly the same time in an article on the subject of intertemporal price equilibrium that appeared in Weltwirtschaftliches Archiv(Samuelson 1957). Samuelson noted simply that “knowledge is a resource loaded with externality” (1957, 210). Bator’s article seems to have appeared first and was certainly more widely read, being cited nearly fifty times over the next dozen years as against eighteen cites to Samuelson’s piece. (Source: Google Scholar, accessed August 22, 2017). Moreover, none of the citations to Samuelson’s article were in the welfare economics/externalities context. There is no input from Samuelson acknowledged in Bator’s opening footnote, nor is mention of Bator made in Samuelson’s article. The term was picked up relatively quickly though, being used another half-dozen times before 1960. It was also Bator who introduced the term “market failure” into the literature, this in his 1958 article, “The Anatomy of Market Failure.

Bator's 1956 PhD thesis for MIT (pdf) uses the term 78 times, with no earlier citations or quotes of its use.

So, with both Samuelson (1957) and Bator writing around that time about externalities, using that specific word, and both at MIT, there's a fair chance that the word was coined there within that MIT department by one of them, or a colleague of theirs (with Robert Solow being the most likely candidate, as Bator's PhD supervisor), and entered the writings of both of them organically at around the same time, through the usual social and professional interactions that go on in an academic department.

And Medema's footnote quoted above makes a persuasive case that it is Bator's 1957 & 1958 papers that established the term in the literature, from where it became widely disseminated.

Robert Solow is, at time of writing, still with us. I wonder if a direct enquiry to him might shed any light on this?


I guess the discount holds for the 100 first units of food even if she buys more than 100. Therefore the new budget line is
\begin{equation*}
\left\{
   \begin{array}{ll}
   & 200 = 0.2 F + 2C \text{ if } F < 100 \\
   & 200 = 0.2 \times 100 + F-100+2C \text{ otherwise }
   \end{array}
\right.
\end{equation*}
which is continuous.


Both another answer and the OP have linked to the wikipedia article on the matter. I think the following passage from the article sums adequately the situation (bold mine):

  "The term “Islamic banking” refers to a system of banking or banking activity that is consistent with Islamic law (Shariah) principles and
  guided by Islamic economics. The contemporary movement of Islamic
  finance is based on the belief that "all forms of interest are riba
  and hence prohibited".[48] In addition, Islamic law prohibits
  investing in businesses that are considered unlawful, or haraam
  (such as businesses that sell alcohol or pork, or businesses that
  produce media such as gossip columns or pornography, which are
  contrary to Islamic values). Furthermore, the Shariah prohibits
  what is called "Maysir" and "Gharar". Maysir is involved in
  contracts where the ownership of a good depends on the occurrence of a predetermined, uncertain event in the future whereas Gharar
  describes speculative transactions. Both concepts involve
  excessive risk and are supposed to foster uncertainty and fraudulent
  behaviour. Therefore, the use of all conventional derivative
  instruments is impossible in Islamic banking. In the late 20th
  century, a number of Islamic banks were created to cater to this
  particular banking market."

  "Islamic banking has the same purpose as conventional banking: to make money for the banking institute by lending out capital while
  adhering to Islamic law. Because Islam forbids simply lending out
  money at interest, Islamic rules on transactions (known as Fiqh
  al-Muamalat) have been created to prevent it. The basic principle of
  Islamic banking is based on risk-sharing which is a component of trade
  rather than risk-transfer which is seen in conventional banking.
  Islamic banking introduces concepts such as profit sharing (Mudharabah), safekeeping (Wadiah), joint venture
  (Musharakah), cost plus (Murabahah), and leasing (Ijar)."

I can also offer my professional experience on the matter, which says that some times these are used as merely veils for what is essentially a conventional loan earning interest.

As a side remark, Christian institutions like the Catholic Church never officially lifted their condemnation of "usury"/charging interest -they just don't actively enforce the doctrine. (As far as I could find, the most recent papal discussion of usury occurred in Pope Benedict XIV’s encyclical of 1745, Vix pervenit.)


Does savings lead to investment in physical capital?

I think that part of the blog post is just saying that savings may not equal investment in capital immediately, because there can be a delay caused by firms accumulating inventory.  But firms can't continue to accumulate inventory indefinitely, so this is only a transient phenomenon.  Sooner or later, inventory will reach a new equilibrium and savings will equal capital investment again.

He then goes on to talk about the reasons that a higher savings rate is unlikely to be sustained (the paradox of thrift).


Create simple graphs without functional forms

My main suggestions would be:

Adobe Illustrator, which will let you draw graphs freehand. This is a very powerful professional illustration tool that will allow you to produce crisp vector images (if you don't know the difference between a vector image and a raster image then you should look that up before starting).
PGF TikZ / PGFplots. This is my preferred way of producing figures. It requires that you code the figures (and therefore that you specify either a functional form or some points on the function), but produces extremely precise and crisp images. The main advantage of this approach, though, is that it is completely integrated with LaTeX. The fonts will match those in the rest of your document/presentation (assuming you are using LaTeX) and you don't need to mess around with any external files since the code can be included in your main LaTeX document.


Uniform price vs discriminatory price double auction

I guess the main reason why you could not find an answer is that economists do not know, see, for instance this chapter of "Electricity Markets."
The auction theorist Peter Cramton has a few papers on this.


Why do banks and stock exchanges close/have fixed hours?

The answer is simple and it is due to the conduct of business and conditions relating to the early days of exchanges and banks. Then, there was no interest in trading  or providing liquidity to companies 24 hours a day and there was no coordination with the other parts of the world. Today, it is more like preserving the tradition, and just look at how NYSE opens at every morning, the good old bell is there to kick start the business. Today, it may make sense to have 24/7 financial services provision as we are living in the age of internet.

OTC FOREX trading is thriving 24/7. As long as there are willing traders/market makers to remain on the floor on different shifts during working hours.


Why is it important to look at all three different ways when looking at the macroeconomy of a country?

These are three ways of calculating GDP - all of which in theory should sum to the same amount. Each of these approaches looks to best approximate the monetary value of all final goods and services produced in an economy over a set period of time (normally one year).

The major distinction between each approach is its starting point. The expenditure approach begins with the money spent on goods and services. Conversely, the income approach starts with the income earned (wages, rents, interest, profits) from the production of goods and services.

Sources:

https://www.tutor2u.net/economics/reference/measuring-national-income-gdp
https://www.investopedia.com/ask/answers/070715/how-do-you-calculate-gdp-income-approach.asp


The US had emitted lots of money and has very little inflation.

Are we talking about quantitative easing here?  It depends how broadly you are willing to define inflation.  Quantitative easing has caused asset price increases, just not consumer price inflation.  Look at stock prices, which are about 50% overvalued according to some well regarded investors (e.g. Warren Buffett).

A common complaint about quantitative easing is that it is overly focused on investments and not focused enough on people (Wall Street over Main Street).  It has been successful at propping up stock prices to the point that they have returned to their 2008 levels, when they were regarded as being in a bubble.  Quantitative easing is heavily focused on investment assets.  It doesn't seem to be getting money into the hands of consumers.  Household incomes are still low.

In short, I don't believe that the current US recession has disproved Friedman's statement.  The Federal Reserve has eschewed its traditional open market operations in favor of quantitative easing, which has affected investments without increasing the money supply available to consumers.  A better question might be why quantitative easing is widely regarded as expanding the money supply when it doesn't seem to actually do that--at least not the kind of money supply whose expansion causes consumer price inflation.

Note:  I'm sure that there is theoretical work disagreeing with Friedman's statement.  I haven't tried to cover that.  I was caught up in the questionable assertion that the US money supply has expanded without causing inflation.  I suspect that this is too new for a consensus to have arisen. This is my thoughts on one possible explanation.


Does commercial paper usually carry a higher yield than corporate bonds? Why?

The wording seems incorrect, the only thing that appears to make sense is “higher spread,” since as you note, bonds are issued with longer maturities. The yield differential would depend on the slope of the curve.

Whether “higher spread” is accurate is yet another question. I did not spend much time looking at corporate bond data, but spreads normally increase as maturity lengthens for firms that are strong credits. A bond that is secured against specific collateral might trade tighter, but most “corporate bonds” are unsecured (as opposed to asset-backed securities). However, commercial paper may have wider spreads for banks, as the bonds may be senior versus commercial paper. (I’m guessing about that.)


Can the growth rate increase after a change in the base year?

I don't know what the Indian government's growth accounting practices are, but the World Bank has an independent forecast that shows India's GDP growth increasing in the near-term (pink area is a forecast):

The source is here: http://data.worldbank.org/country/india, where you can get more detailed data.


What is was the total corporate Income earned in the United States in 2014?

Not for 2014 but here is a useful 2012 report using 2007 data: Taxing Businesses Through the Individual Income Tax (CBO (2012))

It shows how taxed corporations like S corps have been in long run decline (in share terms) relative to pass through entities. Which makes it tricky because, increasingly, corporate income isn't taxable at the corporate entity and so  taxes paid on total corporate income might be a poor measure of the taxes on corporate profits because so much is taxed on individual tax returns.

The BEA, as part of the NIPA publishes a number of corporate profit measures. You can see many of them on FRED. You may be particularly interested in Gross domestic income: Corporate profits with inventory valuation and capital consumption adjustments, domestic industries: Profits after tax with inventory valuation and capital consumption adjustments:


The USA debt and the individual investor

Sure, government borrowing affects the small investor in many ways.

For starters, there is only so much money available for borrowing. The more the government borrows, the less there is available for everyone else. This pushes up interest rates and in some cases will make it impossible for the least desirable borrowers to get a loan at all.

If the government defaults on its loans, this would cause many problems. Details are debated by economists, but I don't know anyone who says it would be good for the economy.

As to what you can do personally to protect yourself ...

Of course there are political things you can do, like voting for and otherwise supporting candidates who campaign on economic policies that you believe are more desirable.

If you are worried about the government defaulting on its bonds, then don't buy government bonds.

If you are worried about the macro-economic effects of a government default, you could invest money in foreign countries that you believe have wiser debt policies.

Invest in companies that are more likely to survive or prosper in an economic downturn. Like, if there's a depression, people will still need food, so food-processing companies are probably relatively safe investments. If people are suddenly made poor, they're probably not going to buy frilly luxuries like video games, so those might be poor investments. But the rich tend to manage to get along no matter how bad things get, so services for the rich, like luxury yachts, might do well regardless. There are plenty of people out there who do research on this sort of thing that you could consult.

People who are deeply worried about government default often advise people to invest in commodities, especially gold. If the government goes bankrupt and takes large sections of the economy down with it, precious metals, especially gold, tend to hold their value.

If you're really worried you can build a compound in the wilderness, stock it with food and other supplies, and have an arsenal of guns to protect you from the marauding hordes after the economic collapse. :-) (Okay, I say that flippantly, but if you're convinced that things are going to get very bad, that would be a logical thing to do.)


Why investing in bonds imply a decrease in money demand?

One thing to consider is that, when the Federal Reserve in the United States tries to manipulate the money supply, it does so through either putting more of its money into the market through bond purchases (supplying banks with money to lend) or holding money from the market through bond sales (leaving the money essentially dormant). It is not so much that bond creators receive money when people turn to bonds with higher interest rates but rather that the bonds change hands to people (households, firms, banks) who would have actually circulated money in some way if they held it in liquid form. The missing link is the central bank's money holdings.


Statistics of links between public debt and recessions

Yes actually many people bothered to study this link. To be more specific the studies are between debt-to-GDP and economic growth (but recession is defined as negative economic growth - more narrowly by NBER as two consecutive quarters of negative growth). Here is a brief summary of the recent literature:
Rogoff-Reinhart (discredited) work:
As mentioned in the title the work of  Rogoff-Reinhart is now discredited due to several embarrassing mistakes they made in their analysis but any contemporary mention of literature review on this issue would be incomplete without mentioning them as they arguably brought attention to this topic.
Rogoff-Reinhart research is non-technically summarized in their book This Time Is Different: Eight Centuries of Financial Folly. They did quite a comprehensive study of a historical records and also very meticulous collection of historical data on government debt statistics. Analyzing this data they argued that there was a 'magic number' of debt to GDP ratio of $90\%$. They argued that below this cut-off debt did not had much effect on GDP growth but above it it started to have a negative effect.
However, it was later during replication discovered that Rogoff and Reinhart made several 'embarrassing' but probably unintentional mistakes in their analysis and replication of their study found that their result virtually disappeared when these mistakes were corrected. If you are interested in knowing what the mistakes were you can read this Economics.SE answer).
Post Rogoff-Reinhart Research
However, while Rogoff-Reinhart work was discredited it brought much needed attention to this issue. Further studies that paid attention to cross country heterogeneity, endogeneity and avoided arbitrary debt-to-GDP brackets suggest that the correlation between debt-to-GDP and growth is actually still negative but the issue is also much much more nuanced than suggested by original Rogoff-Reinhart work with their 'magical' threshold. It is also still up to debate what exactly is the nature of causality here and it is agreed that even if there is a causal link the relationship is definitely non-monotonous.
A nice survey of post Rogoff-Reinhart literature can be found in    Panizza and Presbitero 2013. Some important papers that you should read if you are interested in this include Minea and Parent (2012), Egert (2015), Panizza and Presbitero 2014 or Baglan and Yoldas (2013). There is also this VOX$^{EU}$CEPR article which makes also short summary of this area. You can find more papers in sources cited therein or by searching for keywords from those papers.
When it comes to civil unrest I would recommend Politics.SE or some sociology forum as such issues are not normally studied by economic profession or if then in a interdisciplinary way.


Departure point for research in economics

Always use smaller models when you can. Typically, you want to show that

surprisingly/interestingly, if we combine A,B in a model, there is an interaction that explains C.

Have the smallest model that you need to make your point (that contains A,B). Additional features are irrelevant to make your point and will only distract you and your audience.

There are many models which are famous for being able to model A, B, or similar. If you need A and C, take a model famous for being good at modeling A, and add feature C. If there is nothing clean (any model that has A, also has A2, A3, A4 - which you really don't need), you might be better off writing your own model / simplifying an existing one).

Example

For example,

A: Monopolistic competition is a nice way to have firms with positive profit margins
B: The Calvo-fairy is one way of getting sticky prices in an equilibrium model

If you combine A,B (and a few other basic elements), you can interestingly show an environment with room for monetary policy, the standard NK-model.

Say you want to look at the impact of sticky prices onto unemployment. You could take A,B and add sticky wages and monopolistic competition on the labor supply side. Or, you could start with the Diamonds-Mortensen-Pissarides (DMP) model and extend it with B.

The choice of model depends particularly on

Which is the easier choice (certainly the first one)
What is the mechanism you're interested in?

If you believe that workers really are setting the wage and there is some stickiness in their ability to do so, (i) is the way to go. If you believe it is important that employment comes after some matching-period, and wages are set through bargaining from both employers and employees, extending DMP would be a better way.

Fundamentally, if you believe that you could use DMP, but it has some clutter that you don't need, get rid of that first, and then add your price-stickiness.


Ownership in Neoclassical Economics/Property Rights Question

As far as I'm aware, this is what it means:
When we say a capitalist 'hires' labour, we are talking about the power dynamic here, where the capitalist has control over what the worker does, his/her wages etc. But in Samuelson's world, a perfectly competitive markets implies that contracts are complete, which means that the worker when agreeing to work for the capitalist has complete information over what the job is going to be like, when and whether their wages is going to be paid etc. If the worker didn't like the future work/wages, they wouldn't accept the job. So here with complete contracts, the hierarchy is irrelevant, it doesn't matter who hires whom, since both knows exactly what the future job conditions are. As you can see this assumption abstracts away from power dynamics and wouldn't be very useful in analysis of real world labour issues.


what results can be derived from the average cost curve?

Assuming a firm is a perfect competitor in input markets, the long-run average cost curve, which traces out the minimums of short-run average cost curves, can be used to characterize economies and diseconomies of scale for a firm. This is definitely a practical concept in business and IO. In an industry where the long-run average cost curve is always decreasing, a natural monopoly will tend to emerge due to the increasing cost-efficiency of larger firms.

In a monopsony, the employing firm's average labor cost curve is equal to the supply of labor in the labor market. The marginal cost curve lies above the supply curve in this market because the firm's market power allows it to expressly set wages as a function of the quantity of labor. One reason this is practical is that it offers a potential theoretical explanation of why we do not see significant disemployment effects, or may even see an increase in employment, from establishing minimum wages in particular labor markets.


Without knowing the Slutsky equation and income/substitution effect, how can I show a certain good is inferior or Giffen?

yes. Notice that a good is normal, inferior Giffen for a certain value of prices/income. For example, a good might be inferior at some prices/income but normal for some other values of the prices/income.
In some cases, however, you can make stronger statments. For example, homothetic preferences always lead to normal demands as
$$
x_1(p_1, p_2,m) = x_1(p_1, p_2,1) m
$$
where $x_1(p_1, p_2,1)$ is the unit income demand function which is always greater or equal to zero.
From this, it follows that homothetic preference can never lead to Giffen goods (but to show this, you do need the Slutsky decomposition).


Is craigslist part of the Shadow Economy?

If we take the definition of shadow economy to be illicit economic activity existing alongside the traditional economy and further pin down illicit to mean any sort of economic activity that violates laws governing our conduct (civil, economic etc.) then the short answer is - yes.

Why? Many reasons. I think the easiest to verify and perhaps most obvious is that the majority of gigs, services, temporary labor positions, etc. on Craigslist are paid in cash. Here I make an assumption: most of the people doing these jobs for cash are not reporting these extra earnings. Thus, they are generating a supplemental income that goes untaxed.

I read a bit of (non-academic) research about how these sorts of sites often provide a lifeline to illegal immigrants precisely because they facilitate economic illicit activity (I will update this post with the link if I can dig it up).

Why else? Again I speculate (but reasonably). Craigslist, I think, is often used to move stolen property. Because transactions are largely anonymous and conducted on a cash basis and with little or no record of sale, CL is a safe place for petty criminals to liquidate stolen assets. This also clearly aligns with our given definition.

You could probably think of other reasons to support the claim that CL fuels (alternatively: is part of) the shadow economy in America. Then again, I think these two examples make it clear (if you are willing to accept the assumptions throughout the post).


It depends on what you want to look at. The blue line compares GDP of this period to the same period of the previous year. This is referred to "year-on-year" or "year-over-year" growth. The green line compares GDP of this period to the GDP of the previous period, "quarter-on-quarter (QoQ)" growth.

Because there's seasonality in the GDP (usually Q4 is the highest because of the holiday shopping), when you do QoQ growth you have to adjust for it, and that's where "seasonally adjusted" comes from.

Usually the year-on-year growth is what gets reported in the news.


Sources of data for GDP and BoP accounts

When an American buys a coffee within the US, how does that 3.50 dollars worth of consumption expenditure make it's way to the US GDP account?

It would be personal consumption expenditures which primary data source is from the:

BEA’s Benchmark Input-Output (IO) Accounts, which are based primarily on the Census Bureau’s Economic Censuses

BEA’s International Transactions Accounts;

Census Bureau’s Annual Retail Trade Surveys

Service Annual Surveys

Quarterly Services Surveys

Monthly Retail Trade Surveys  (the coffee purchase would most likely come from here)

Bureau of Labor Statistics’ Consumer Price Indexes

https://www.bea.gov/sites/default/files/methodologies/nipa-handbook-all-chapters.pdf#page=90   page 5-7

When a French citizen buys the same 3.50 dollar coffee in the US how does that information get reported so as to make it into the US and French Balance of Statements?

This questions seems to be difficult to answer; however, after looking at the BEA’s Balance of Payments methodology on data sources it seems that this information is easily collected  from the BEA’s Quarterly Survey of Payment Card and Bank Card Transactions Related to International Travel (BE–150)

[As long as they are paying with a credit/debit card].

(https://www.bea.gov/sites/default/files/methodologies/ONE%20PDF%20-%20IEA%20Concepts%20Methods.pdf#page=8)  [page 13-5] (section 13.23)

This survey is filed by U.S. companies that operate payment and bank card networks. The survey captures information on credit, debit, charge, automated teller machine, and point of sale transactions between U.S. merchants and customers holding foreign-issued cards and between foreign merchants and customers holding U.S.-issued cards.

When a French citized buys the same 3.50 dollar coffee this transaction would be collected (if the person uses a credit or debit card) by the persons bank card company.  Then the bank card company would fill out the survey and indicate that their card user bought coffee at a US firm for 3.50 dollars.

This information would be submitted into the mandatory survey that the BEA collects for their balance of payments direct investment (chapter 13 of BEA BOP methodology).  https://apps.bea.gov/itable/itable.cfm?reqid=62&step=1


Why did US dollar appreciate during the Global Economic Crisis (2007-09)

Because dollar is a major reserve currency. When a financial crisis occurs in other countries, like India, Brasil, Russia, etc, everyone sells stocks and liquiates assets to raise cash. But the cash they want to raise is usually dollars or euros. When a crisis hit the US, everyone started selling assets FOR dollars. I.e. they were buying dollas for stocks, trillions of dollars worth. This demand for cash appreciated dollar. There was a multitude of other factors involved, as discussed in this paper: Dollar Appreciation in 2008: Safe Haven, Carry Trades, Dollar Shortage and Overhedging http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1519814

After Fed's relatively successful monetary policy decisions, the US economy recovered faster than the economies of the EU and Japan, other reserve currency emitters. Then it was natural for dollar to continue strengthening.