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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 billionP = 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.
Show that if oil is produced from two reservoirs, one with high marginal cost and one with low marginal cost, it is not possible for the Hotelling rule to be satisfied for each reservoir simultaneously. Give two reasons that oil might be produced ..
At the end of the year, you discover that the catch was low and that fish prices had increased to $5.00 per pound, but fruit prices stayed at $1.50 and meat prices had actually fallen to $2.00.
Sketch a production possibilities curve (not a straight line), with consumer goods on the horizontal axis and capital goods on the vertical axis.
Suppose that a study conducted by the Department of Homeland Security discovered that the average time it took passengers to go through the customs process for international flights arriving at the Atlanta airport was 33 minutes
chris has an income of 90 per month at allocate between goods a and b. initially the price of a is 3 and the price of
An analyst points out that of 57,051 drivers involved in accidents last year, drivers aged 31 to 55 accounted for 24,265 cases, or some 43 percent of the total-a far greater proportion than any other age group. Should one conclude that this age gr..
A design-build engineering firm completed a pipeline project wherein the company realized a profit of $2.3 million in one year. If the amount of money the company had invested was $6 million, what was the rate of return on the investment?
At the current price level, what effect would an increase in price of the firm's products have on total revenue?Support your answer. Would it be viable for the firm to continue incurring more expenses on advertisement?
1) the automobile supply company has a small plant that produces speedometers exclusively. its annual fixed costs are $30,000 and its variable cost are $ 10/unit. it can sell a speedometer for $ 25. how many speedometers must the company sell to brea..
Suppose that oil prices rise sharply for years as a result of a war in the Middle East. Illustrate with a diagram what happens to the: Demand for automobiles? Demand for home insulation? Demand for coal? Demand for tyres? Demand for bicycles?
Suppose the demand for housing D is given by the function D=100p^-1r^-2 where p is the price of housing and r is the mortgage interest rate. Treat r as exogenous. The supply of housing is given by s=s1 , where S is exogenous.
The disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability - lead to higher interest rates on all debt securities in the economy
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