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Consider the LM and IS functions determined in questions 2a and 3b and the equilibrium level of income and interest rate determined in 4a. Compare each one of the following situations with the equilibrium obtained in part 4a.
1. Determine the equilibrium level of income and the interest rate if after the invention of a new high-speed computer chip the investment function changes to I '= 1200 - 40 r . Show your work
2. If instead of saving 25% of their disposable income people decide to save 30%, what would happen to the equilibrium interest rate and level of income determined in part a. Show your work.
3. Consider your results from part a. What would happen to the equilibrium level of output and interest rates if the demand for real balances changes to: (M / P)^d = Y - 100r .
What kind of shocks could have caused this change to the money demand function?
Determine the new interest rate and equilibrium level of output.
Which of the following is a long-run macroeconomic policy goal? If the CPI was 132.5 at the end of 2003 and 140.2 at the end of 2004, the inflation rate over these two years was
Compute the producer surplus from parts a and b. Are producers better or worse off as a result of international trade? Discuss why.
In 1991, Brazil and Columbia united to form a coffee cartel and reduce coffee output. Suppose total costs for the cartel are:
Taiwan Electronics produces 3 models of the CB radios, A, B, and C-Employ the transportation model to find out the best production schedule.
Vulnerability Analysis
Define and describe the difference between the absolute advantage and the comparative advantage.
Indicate whether each of the following statements is true or false and explain why.
What is the level of price, output, and amount of profit for an unregulated monopolist? Analyze the effect of regulation on the allocation of resources. Which situation is most efficient? Which situation is most likely to be chosen by government? ..
A profit-maximizing monopolist never produces in the inelastic part of a linear demand curve. The short-run supply curve of a competitive firm is its MC curve.
What does Friedman believe about expansionary monetary policy? Do you think Keynesian economists would agree?.
Macroeconomics questions, discuss the short-run and long-run effects, Keynesian model, Distinguish between ongoing demand pull and ongoing cost push inflation.
In each of the cases listed below determine what this consumer needs to do (in terms of purchasing X and Y) to maximizes their utility.
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