# Analyzing Economic Crises

1. Consider an economy with only two capitalist enterprises. Assume that enterprise A advances weekly constant capital of \$200 and weekly variable capital of \$100. Enterprise B advances weekly constant capital of \$100 and weekly variable capital of \$200. In addition, assume that enterprise A has a turnover time of 4 weeks and enterprise B has a turnover time of 8 weeks. Calculate the annual rate of profit and the annual rate of surplus-value assuming the weekly rate of surplus-value is 100% for both enterprises and that each year has 52 weeks.

How do the annual rates of profit compare? Is this result surprising? Explain the result with reference to the organic compositions of capital and to the turnover times of the two enterprises.

1. Competition among capitalists in the international commodity markets has pushed down the prices of imported raw materials that are used in many domestic industries. What is the impact on the aggregate constant capital advanced? What is the impact on the annual general rate of profit?
2. We have an economy with two major sectors: Sector I produces the means of production, and Sector II produces the means of consumption. The constant capital advanced in Sectors I and II are \$20 billion and \$30 billion, respectively. Assume that the variable capital advanced in Sectors I and II are \$20 billion and \$10 billion, respectively. Also assume that the rate of surplus-value is 100% in each sector. Is the economy balanced or will a macroeconomic crisis occur due to the un-coordination between the two sectors? Explain with reference to the numerical values in this example.
3. There was a clear conflict of interest that arose for the credit rating agencies leading up to the financial crisis of 2008. What do you think is the best way to limit such conflicts of interest that might arise in financial markets?
4. Use Post-Keynesian theory when considering this question. Suppose that workers reduce their savings. What will happen to capitalist profits and the degree of income inequality? To which phase of the business cycle does this change correspond? Is this change consistent with what you would expect to happen using the neoclassical synthesis model?

Length: 2-3 pages

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