Suppоse the ecоnоmy is producing below the nаturаl rаte of output and the government is suffering from large budget deficits. To deal with the deficit problem, suppose the government takes a policy action to reduce the size of the deficits. This policy action will cause _____in the unemployment rate in the short run and _____in inflation in the short-run, everything else held constant.
Pаul аnd Dаn have been neighbоrs in a rural area fоr many years. Dan’s prоperty contains a swamp, which borders Paul’s property. It is an eyesore, containing (among other debris) a half-submerged camper trailer. As a joke, Dan put a handwritten cardboard sign near the swamp reading: “Beautiful Lakefront Property, $8.” Driving past, Paul stopped and wrote “SOLD, TO PAUL!” on the sign. A few days later, Paul hosted Dan and other neighbors for a barbecue. After both men drank several beers, Paul asked Dan what price he would actually sell the swamp for (Paul owns an excavation company with digging machinery he could use to make the land usable). Dan estimated $150,000. Paul said, “I’ll actually buy it for that.” Dan replied he was not seriously interested in selling. But the next day, Dan called Paul on the phone: “I’ll sell you the swamp for $200,000. You could actually do something with it, clean it up for both of us.” In the hour-long call that followed, the two discussed many details like their boundary lines, that Dan’s lawyer would draft paperwork if needed, and that Paul had $200,000 in investments ready to liquidate. The whole time, Paul had reservations about whether it was a good idea, given that the idea arose when he was drinking. But Paul closed the call by saying: “Ok, let’s do it. I’ll make a call to pull the $200,000 from investments. Of course we’ll want the lawyer’s paperwork but do we have deal?” “Yes!” Dan said. That same week, with Dan’s permission but in anticipation of owning the property, Paul used his excavator to dig a pond on the parcel, redirecting water and revealing dry land. It cost Paul about $7,000 in labor and materials. A week later, Dan’s lawyer sent Paul (who was unrepresented) a document titled “Letter of Intent to Purchase,” which stated that “a general understanding of our agreement has been reached,” and contained detailed terms regarding the legal description of the property, title issues, and deed recording. One clause said the Letter was “subject to” the terms of any future purchase agreement. Dan had already signed it. Paul signed the Letter and emailed it back with Dan cc’d: “Signed agreement enclosed. The purchase price is ready to transfer. As an aside, will Dan be taking the sunken travel trailer? I have plans to use it if not.” Dan never replied or collected Paul’s $200,000. A few minutes after receiving Paul’s email, Dan received an offer from a developer to pay $300,000 for the land, and he directed his lawyer to pursue that deal instead. Weeks passed; Dan removed the trailer from the property. Paul learned of Dan’s new potential sale from another neighbor. Paul sued Dan for breach of contract. … Discuss all issues relating to the formation of any contract between Paul and Dan. (80 pts) Now assume a contract was formed, and that Dan’s refusing to convey title to Paul and pursuing another contract was a breach. Further assume that Paul would prefer to take title to the real estate rather than money damages. Discuss the alternative theory of remedies available to Paul. (15 pts) Finally, assume no contract was formed. Discuss the theory under which Paul could still recover damages. (5 pts)