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The (less paradoxical) paradox of saving A chapter problem at the end of Chapter 3 considered the effect of a drop in consumer confidence on private saving and investment, when investment depended on output but not on the interest rate. Here, we consider the same experiment in the context of the IS-LM framework, in which investment depends on the interest rate and output.
a. Suppose households attempt to save more, so that consumer confidence falls. In an IS-LM diagram, show the effect of the fall in consumer confidence on output and the interest rate.
b. How will the fall in consumer confidence affect consumption, investment, and private saving? Will the attempt to save more necessarily lead to more saving? Will this attempt necessarily lead to less saving?
Consider a two-good exchange economy with two individuals, A and B. A's preference is represented by uA(xA1, xA2) = 0.3ln(xA1) + 0.7ln(xA2), and B's is represented by uB(xB1, xB2) = 0.8ln(xB1) + 0.2ln(xB2).
An engineer deposits $300 per month into a savings account thatpays interest at a rate of 6% per year, compounded semiannually. How much will be in theaccount at the end of 15 years
the demand for the bus 207 textbook qx is given by the following equationqx 100 - 5.0 px 1.5 py - 2 pz 4.7
Suppose that the country of Bigu has a population of 127 million, of which 83 million are in the working-age population. Of those, 25 million are not in the labor force and 52 million are employed. a Calculate the working-age population as a percen..
Throughout the problem set, we assumed that net taxes do not depend on income (that is, net taxes are a lump sum). However, in reality, taxes do vary with income. Suppose Bodinia and Goldland are two economies that are exactly the same in every as..
According to the recent CNBC and the Wall Street Journal poll, 40% of the American public approves of the way the President of the United States is handling his job. Take a random sample of n = 10 Americans. And let X equal the number who gives ap..
a. Find the profit maximizing price and quantity. b. Assume that ATC = $35 at the profit maximizing quantity. Calculate the monopolist's total profit. A monopolist's Demand, MR and MC curves ar
Consider the following information below for Pat's Pizza Restaurant and answer the questions below: Marginal Product of Capital: 4,000 Marginal Produce of Labor: 100 Wage Rate: $10 Rental Price of Pizza Ovens: $500 a) Is the owner of Pat's Pizza Rest..
Is Lionel better off in the new or old situation?
In doing so, what would be the primary obstacle to overcome in implementing such a policy?
A family bought a house in October 1998 for $200,000. The house was financed by a mortgage where they paid 20% of the value and the bank financed the balance of the loan at 9% annual interest compounded monthly [.0075% monthly] over a 15-year peri..
Show, graphically, the short- and long-run effects of a monetary expansion when both exchange rates and prices are flexible and capital is perfectly mobile. What happens during the period of adjustment from the short to the long run?
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