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It is often asserted that there is a national income identity, so that in a closed economy without a government sector there is an identity between saving and investment. Explore the implications of this statement by doing the following:
Given a closed economy without a government sector, modify the IS-LM model by the assumption that saving and investment are identical (i.e. equal under all circumstances and not merely in equilibrium) and answer the following: What is the level of aggregate demand? Is the LM relationship required for its determination? Is any interest rate consistent with equilibrium in the commodity market?
Now discuss the following statements: "For purposes of a satisfactory theory of money supply and prices, the IS relationship must never be treated as an identity, so that there is only a national income equilibrium condition." "A satisfactory macroeconomic model must incorporate the potential for disequilibrium between saving and investment, even in a closed economy without a government sector."
Consider an economy in three periods, t = 0, t = 1 and t = 2. At t = 0, the market index is trading at a value of 100. At t = 1, the index either rises to 125 with 50 percent probability, or falls to 90 with 50 percent probability. Find the price you..
suppose your local congress representative suggests that the federal government should not intervene in the baseball
Can be expressed as the ratio of (marginal utility per unit of thegood)/(price per unit of the good) being equalized across all goods. Can be expressed as the ratio of marginal utilities being equatedto the ratio of prices for all possible pairs of ..
Suppose that we are comparing two countries that are similar in every respect except the education of their population. In country 1, adults have 10 years of education. In country 2, alladults have 4 years of education. Use intuitions from the Solow ..
Determine the profit maximizing average monthly production capacity
Taiwan and Jamaica are both islands that have pursued export-oriented development strategies, but Jamaica has experienced increases in unemployment and poverty, while Taiwan has experienced decreases. How might you explain this?
Complete the table.
Discuss the effect the credit market crisis in the United States in 2008 had in the market for existing single-family homes. Assuming the demand for existing single-family homes is relatively inelastic, what is likely to happen to the total revenues ..
What is the objective of the entrepreneur when it comes to the use of his or her resources? What is the major function of the middleman? Is the middleman an entrepreneur?
Montana is home to a number of firms offering wilderness hunting experiences to wealthy city dwellers. However, the profits of such firms depend on how crowded the "wilderness" is and how many deer are available.
Can anyone choose and explain that because of labor hoarding, an increase in output may signal:
In an oligopolistic market, firms pay close attention to the strategies of their rivals. In monopolistic competition with a large number of sellers, it is assumed that there is not this kind of rivalry, or interdependence. Why is there a probably ..
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