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a. Use equations (3) and (4) to forecast both the price level and the level of output that result from the simple AS - AD model of Section 21-2. You may assume that the slope of the aggregate supply curve is 2⁄3; that the values of the money supply, velocity, and potential GDP are 9, 8, and 7, respectively; and that the expected price level is 5.
b. Evaluate your forecast in light of the Lucas critique.
c. How does this forecast differ from that which would result from a perfect-foresight model?
d. Is this forecast better or worse? Explain.
Suppose a consumer has an income of $1000 and faces prices Px = $5 and Py = $10. (a). Write the equation for this consumer's budget constraint. (b). Draw the budget constraint, placing Good X on the horizontal axis. Label it BC.
Describe the successive loss of information as the presentation changed from ratio to nominal.
You are planning to build a new home with approximately 2,000 -2,500 gross square feet of living space on one floor. In addition you are planning an attached two car garage (with storage space ) of approximately 450 gross square feet.
Suppose imports are banned, raising the price to $0.30. Draw a graph to show the new equilibrium and identify the new equilibrium quantity.
what is the net present value if the opportunity cost of capital (discount rate) is 10 percent?b) add an outflow (or cost) of $1000 at year 0 . Now, what is the net present value? the future value of $500 invested at 8 percent for five years c) the p..
Equilibrium in the market-place means that quantity supplied 'Qs' equals quantity demanded 'Qd'.
Alpha and Beta, two tiny islands off the east coast of Tricoli, produce pearls and pineapples. The production-possibilities schedules in the table below describe their potential output in tons per year. (a) What is the opportunity cost of pearls on..
Interpret the estimated coefficients. Does the sign of each make sense? Compare your model in part (c) and part (h), which model performs better? What measures do you use to assess your model
An electric switch manufacturing company has to choose one of the three different assembly methods. Method A will have a first cost of $40,000, an annual operating cost of 9,000 and a service life of 2 years. Method B will cost $80,000 to buy.
Explain why their contrasting views on the shape of the aggregate supply curve lead some economists to argue much more strongly for stabilization policies to fight unemployment and other economists to argue much more strongly for stabilization pol..
How do you calculate price elasticity of demand If 50 Units of a good are demanded at a price of $1 per unit. A reduction in price to $0.20 results in an increase in quantity demand to 70 Units. Show that these data yield a price elastity of $0.2..
What would be the difference, then, between the two types of trade barriers?
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