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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?
According to U.S. Census Bureau data (2004), average monthly income for a person with a degree in engineering was $5296 versus $3443 for a degree in liberal arts. What is the future value in 40 years of the incom differnce
Sally, a college student at UConn, earns $10 per hour working at Friendly's. Her parents also give her $100 per week to help with expenses. Lately, Sally's parents have been concerned about her grades and want her to spend less time at work and mo..
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A firm has undertaken a project in which the firm has the option to invest in additional manufacturing and distribution resources (or scale up). The project's current value is V0 = $25M. Anytime over the next three years, the firm can invest an add..
Which Linux distro might be best for your Mom to use as a Windows replacement?
Full-employment level of real output is $250 and the initially the price level is 100. Use the short-run aggregate supply schedules above to answer the questions that follow a)What will be the level of real output in the short run if the price leve..
Plot the MC curve on the same graph as the ATC curve, and verify that it cuts the ATC at its minimum point.
Peyton Packing has a ham cooker that has the cost stream below. If the interest rate is 15% per year, determine the annual worth(in years 1 through 7) of the costs. year 0=$4,000, year 1=$4000, year 2=$3000, year 3=$2000, year 4=$6000, year 5=$800..
assuming product price is $32. With $32 in place of $56, its costs us $52.50 and we sell it for $30. This does not produce in the short run. The loss-minimizing outcome would be a loss of $22.50. The economic loss would be if you take the loss of ..
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some fields have large enough quantities of both oil and natural gas that coordination must be achieved for production of both, rather than oil alone as in our examples. will field with both oil and gas have greater difficulties in unitization tha..
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