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Aggregate demand shocks and the medium run
Suppose the economy begins with output equal to its natural level. Then, there is a reduction in income taxes.
a. Using the AS-AD model developed in this chapter, show the effects of a reduction in income taxes on the position of the AD, AS, IS, and LM curves in the medium run.
b. What happens to output, the interest rate, and the price level in the medium run? What happens to consumption and investment in the medium run?
Suppose we have two countries, the United States and Mexico, and one good-computers. Assume the following for each country: United States: Qd = 5000 - P and Qs = 2P - 1000 Mexico: Qd = 5000 - 2P and Qs = P - 2000
Suppose honey is produced in beehive using bees and sugar. Each honey producer uses one beehive which she rents for $1/month. Producing q gallons of honey requires spending q dollars on bees and q^2 on sugar.What is the Total cost of producing q un..
Consider an agent who lives two periods. He is unemployed at the beginning of the first period and has a wage offer of w. If he accepts the wage offer w, he will work forever at that wage. If he rejects the offer, he receives an unemployment benef..
Today, most British imports come from other European countries. How does this fit in with the changing types of goods that make up world trade?
If the United States raises its interest rate and Canada does not, will the Canadian dollar appreciate or will it depreciate? If Canada follows the United States and also raises its interest rate, what will happen to the value of the Canadian doll..
If the city wishes to raise as much revenue as possible from the tolls, where will the city decide to charge a toll: in the inelastic portion of the demand curve, the elastic portion of the demand curve, or the unit elastic portion? Explain.
a. What is the opportunity cost of a pie at Bakery 1 b. What is the opportunity cost of a cookie at Bakery 2 c. Which bakery has a comparative advantage in the production of cookies d. Draw the production possibilities curve showing the combined effo..
Do you think the "natural restorative powers" of the economy mean that policymakers should be passive in response to the business cycle?
Give two examples of variables that you would expect to be positively correlated. For each example, explain whether a causal relationship exists between the two variables.
What might prompt the government to establish this price ceiling? Explain carefully the main effects. Demonstrate your answer graphically. Next, suppose that the government establishes a price floor of $4.60 for wheat. What will be the main effect..
Suppose that we randomly select a recent graduate of the University of Virginia graduate school of business. This school has a recruiter assessment score of 4.1 and an out- of- state tuition and fees of $ 43,000. Predict the average starting salar..
Which changes to fiscal stimulus package of 2009 for $862 billion (under the bill called American Recovery and Reinvestment Act of 2009) would have a larger overall impact on AD. Explain your answer in a paragraph or two with credible logics and a..
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