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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.
Explain the influence that transferable property rights versus non-transferable property rights, has on individual decision making.
This problem uses Okun's law to study how the unemployment and inflation rates change when there are demand shocks.
Suppose you want to produce WIDGETS in your country. The international price of an imported WIDGET is $50 and pays an import tariff of $10 per unit. Three inputs are needed to produce a WIDGET.
Draw a diagram describing autarky and a pattern of comparative advantage for your example.
What takes place to the equilibrium price and quantity of ice cream in response to each of the following? Describe your answers.
Compute the coefficient of price-elasticity of supply for the seven prices ranges given above and complete the table.
Banking crises crisis decreases depositors' confidence in the banking system. What would be the effect of a rumor about a banking crisis on checkable deposits in such a country?
Evaluate: "The fact that some airplanes collide is evidence there is 'too little air traffic control'." (Be sure to explain what too little might mean.)
If the price of manufactured goods rises to $6 bushel (a rise of 50%), the parity price of corn as well rises by 50% - to $4.50 in this hypothetical example.
Describe unemployment and the unemployment rate. Might we be able to say "Job Stats: Too Good to be True?"
The following quotations are from an article in the Financial Times on November 9, 2007:
Develop an exponential smoothing forecast with smoothing constants α =0.1 and 0.3. What would be the forecast for week 11?
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