An economics student is about to graduate from UPF. They can choose between two options:

Option 1: Start working now

• They start working immediately and then work for 40 years.
• Their annual wage is €50,000, with no growth. 

 Option 2: Do a one-year master’s degree in economics

• This year, they do not work and study for their master's degree, paying a tuition cost of C euros.
• From next year on, they will work for 39 years. Their initial annual wage is also €50,000, and it now increases by 2% per year.

Assume: (1) the interest rate is expected to remain at 10% forever and there is no expected inflation, and (2) the student is risk-neutral and only cares about the present value of lifetime labor income net of tuition.

What is approximately the maximum tuition C the student would be willing to pay for this master’s?

NOTE: select the closest number to the exact answer.

Denmark keeps its currency, the krone, pegged to the euro at a fixed rate. A global crisis makes investors see Denmark as a safe haven (a safe place to invest), creating upward pressure on the krone (it would appreciate if the exchange rate were flexible). However, the Danmarks Nationalbank wants to maintain the fixed exchange rate and free capital mobility.  

Which of the following policies is consistent with defending the peg under this upward pressure?

The figure shows the natural log of real GDP (solid black line) and its trend (dashed gray line) between 2014 and 2024.  Which of the following statements is correct? 

The president of Argentina, Javier Milei, announced a drastic fiscal austerity plan (“chainsaw plan”) to reduce the primary deficit quickly. The Argentinian government argues that this austerity will improve expectations, lower interest rates on government debt, and boost investment, even if it causes a short-run recession.

In which situation is this argument most likely to be valid?

Consider an economy with an annual inflation rate of 4%. Cash pays a 0% nominal interest rate while government bonds pay a 6% nominal interest rate.

Two types of households have the following portfolios:

Poor households: 80% of their financial wealth is in cash and 20% in bonds.

Which statement is correct? (For your answer, assume that expected inflation is equal to actual inflation)

In September 2022, the UK government announced a reduction in future taxes to be implemented in 2023. Assume that the current interest rate did not change. Which of the following is correct? (Pick the best answer)