What is the overall impact on the national income

Assignment Help Microeconomics
Reference no: EM131010101

1. Suppose that in order to stimulate economy but not to run budget deficit government increases spending as well as income taxes by $400 billion. If marginal propensity to consume is 0.8, what is the overall impact on the national income? Explain quantitatively and present AS/AD graph of the situation.

2. Suppose that money supply is equal to $500 billion and demand for money is given by Md =1000 -100R where R is the interest rate in percentages. If the demand for money increases by 5% what should be the size and direction of an open market operation by the Central Bank to maintain the same interest rate as before? Solve the problem algebraically and present graph associated with your solution.

Problem 6 (20). Suppose that AS/AD model is given by

Yp = $500 billion
P = 200 - 0.1Y
P = 20 + 0.4Y

where Yp is potential GDP, Y is real GDP in billion dollars and P is GDP deflator. By how much overall should government expenditures change to achieve potential GDP level if MPC = 0.8? Calculate the size of inflation/deflation associated with this fiscal policy action. Present graphical interpretation of the problem.

Reference no: EM131010101

Questions Cloud

Find the value of c guaranted by the conclusion of the mvt : Consider f over [3, 10]. Find the value of c guaranted by the conclusion of the MVT. Draw the secant line through (3, f(3)) and (10, f(10)), and then the tangent line at (c, f(c)).
Creating a power point presentation on history of sociology : The first semester long project for this course is the project creating a power point presentation on the history of sociology. In this presentation, you will want to address the origins of sociology, the important early theorists and the theories..
Process of managing four phases of service life cycle : Suppose a company intends to offer a new service to some of its internal customers. Briefly discuss how the fact that the customers are internal would change the process of managing the four phases of the service life cycle.
Problem regarding the managing the organisation : You have been commissioned by the Chief Executive Officer (CEO) of your organisation (or one with which you are familiar) to examine and report on the role of the HR function in managing the organisation and to demonstrate how the organisational a..
What is the overall impact on the national income : Suppose that in order to stimulate economy but not to run budget deficit government increases spending as well as income taxes by $400 billion. If marginal propensity to consume is 0.8, what is the overall impact on the national income? Explain qu..
How does county contribute to the human rights violations : How does County (i.e. Government) contribute to the human rights violations? What was done to change things for women - The government was changed (in ancient we had to follow the laws from the kingdom)
Project risk has been properly considered in NPV analyses : Project X is very risky and has an NPV of $3 million. Project Y is very safe and has an NPV of $2 5 million. They are mutually exclusive, and project risk has been properly considered in the NPV analyses. Which project should be chosen? Explain.
Choice of developmental methods : Zappos is modern and fun, while GE is a huge, competitive, traditional company. How would you expect the cultural differences to affect the choice of developmental methods at the two companies?
Internal model to estimate its capital requirements : Trans America Bank has estimated its previous day's DEAR to be -1.28 million. It has also estimated its average VAR over the last sixty working days to be -$1.75 million. It uses its own internal model to estimate its capital requirements following t..

Reviews

Write a Review

Microeconomics Questions & Answers

  The free rider problem

Question: Explain why the free rider problem makes it difficult for perfectly competitive markets to provide the Pareto efficient level of a public good.

  Failure of the super committee is good thing for economy

Some commentators have argued that the failure of the “Super committee” is good thing for the economy?  Do you agree?

  Case study analysis about optimum resource allocation

Case study analysis about optimum resource allocation: -  Why might you suspect (even without evidence) that the economy might not be able to produce all the schools and clinics the Ministers want? What constraints are there on an economy's productio..

  Fixed cost and vairiable cost

Questions:  :   Which of the following are likely to be fixed costs and which variable costs for a chocolate factory over the course of a month?  Explain your choice.

  Problem - total cost, average cost, marginal cost

Problem - Total Cost, Average Cost, Marginal Cost: -  Complete the following table of costs for a firm.  (Note: enter the figures in the  MC   column  between  outputs of  0 and 1, 1 and 2, 2 and 3, etc.)

  Oligopoly and demand curve problem

Problem based on Oligopoly and demand curve,  Draw and explain the demand curve facing each firm, and given this demand curve, does this mean that firms in the jeans industry do or do not compete against one another?

  Impact of external costs on resource allocation

Explain the impact of external costs and external benefits on resource allocation;  Why are public goods not produced in sufficient quantities by private markets?  Which of the following are examples of public goods (or services)? Delete the incorrec..

  Shifts in demand and movements along the demand curve

Describe the differences between shifts in demand and movements along the demand curve. What are the main factors which can shift the demand curve? Explain why they cause the demand curve to shift. Use examples and draw graphs to support your discuss..

  Article review question

Article Review Question: Read the following excerpts from the article "Fruit, veg costs surge' by Todd, Dagwell, published in the Herald on January 25th 2011 and answer questions below:

  Long-term growth, international trade & globalization

Long-term Growth, International Trade & Globalization:- This question deals with concepts such as long-term growth, international trade and globalization. Questions related to trade deficit, trade surplus, gains from trade, an international trade sce..

  European monetary union (emu) in crisis

"Does the economic bailout of Spain and Greece spell the beginning of the end for the European Monetary Union (EMU)?"

  Development game “settlers of catan”

Read the rules of the game, the overview and the almanac for the Development Game "Settlers of Catan"

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd