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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?
Bart Simpson spends his day either skateboarding (leisure) or babysitting his sister Maggie (work), for which his mom (Marge) pays him an hourly wage of w. Marge has decided to increase Bart's hourly wage. For each of the following cases, determine w..
Discuss the economic impact (positive and negative) of international tourism on host destinations. In your discussion examine the impacts from the viewpoints of at least 2 different stakeholders (i.e. multinational corporations, host community, lo..
What is the impact of the variable you added? Is it statistically significant? Explain your answer in a sentence or two. Did this affect the output from the "baseline" regression
Where Q measures the number of units of the public good and P is the price in dollars. The marginal cost of providing the public good is $180. a) What is the economically efficient level of production (Q*) of the good? b) Illustrate your answer on ..
At what salary would it make sense for this firm to hire an incompetent manager?
The utility estimates that by switching to gas, it will save $22,000 per year, starting 3 years from now. At an interest rate of 8% per year, determine the present worth in year 0 of the projected savings that will occur in years 3 to 10.
A random variable X is defined to be the difference between the higher value and the lower value when two dice are thrown. If they have the same value, X is defined to be 0.
The model is then identical to the classical Harrod-Domar growth model developed by Roy Harrod and Evsey Domar (Harrod, 1939; Domar, 1946). Show that in this case there is typically no steady-state equilibrium with full employment and no idle capi..
If an alternative has an advance payment of $100,000 upon contract award and then quarterly payments of $25,000 for the next 3 years, what would the cash flow diagram look like
The crockett Land Winery must replace its present grape-pressing equipment. The two alternatives are the quick-skwish and the stomp-master. the annual operating costs increase by 12% each year as teh machines age.
Assuming a 10 percent sales tax is levied on all consumption, complete the following table: Sales Percent ofIncome Consumption Tax Income Paid in Taxes $10,000 $12,000 20,000 18,000 40,000 32,000 80,000 60,000
Consider the log-linear model 0 1 1 2 2 ln(Y) β0+ β1X1+ β2X2 + u Suppose you think that the value of β2 (the effect of X2) was not constant, but rather increased when X1 increased.
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