(a) Derive the IS curve assuming the following consumption and investment functions: C(Y-T) = 200+ (Y-T), I(r)=20-2r (Leave G and T as fixed/parameters.)
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- In an economy the savings function is given to be as:- C = 1000 + 0.75Y Where C is the Consumption Expenditure and Y is the national income. Derive the saving functionWhich of the following is NOT a determinant of the level of investment: A. Sales Outlook B. Capacity Utilization Rate C. Disposable Income D. Expected Rate of ProftIf MPC is 0.6 an increase of N$120 in autonomous investment will increase
- If business managers become more optimistic about future sales and profits, then there will be O no movement along or shift of the investment function an upward shift of the investment function a downward shift of the investment function a leftward movement along the investment function O a rightward movement along the investment function Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.Planned investment spending is a. Actual investment in a period b. Always equal to saving c. Investment spending that businesses plan to undertake during a period d. Investment spending minus depreciation in a periodSuppose the Internal Rate of Return (IRR) of this investment opportunity is 15%. Based on this information alone, should Limitless Ltd. make the investment? Why? Would this decision be consistent with that from B? Explain your reasoning. Suppose that, instead of paying the initial £500,000 now, Limitless Ltd. decides to pay it in equal instalments over the next 10 years. How much would the company need to pay each year to make all these payments equivalent to £500,000 today? Now assume that an alternative project would generate immediate (time zero) net profits of £500,000 upfront, but after that, it would result in annual losses of £120,000 over the next five years, and then the annual losses of £60,000 over the following five years. The cost of capital is 12% and the IRR is 15%. Should you start this project? Explain your reasoning. Would you make the same decision based on NPV and IRR? Why?
- The set-up remains deterministic (i.e., no uncertainty) and has two periods. c is period 1 consumption and c' is period 2 consumption. S is savings, w is wealth, and r is the return on saving. max [w.r.t c, S] {U(c) + W (c') subject to - c + S <= w c' <= (1 + r)S Inada conditions hold max [ w.r.t S] {U(w - S) + W (S(1 + r))} (a) Solve for optimal savings as a function of r and w. (b) Assuming W = W (c) = U(c) = c^1-γ / (1-γ), γ >= 0, solve for ∂S/∂r and show that if γ f γ > 1, ∂S/∂r < 0; if γ = 1, ∂S/∂r = 0 (c)Try to explain intuitively what these results in (b)Consider the following 2-period model with optimal saving. U(C1,C2) = 3 ln(C1) + 2 ln(C2) Y1 = 60 T1 = 10 Y2 = 30 T2 = 8 r = 0.10 What is the optimal saving, S*?If consumption is $30,000 when income is $35,000, and consumption increases to $36,000 when income increases to $43,000, the MPC is Group of answer choices 0.80. 0.65. 0.75. 0.95.
- firm decides to invest X units of capital in Project A and Yunits of labour in Project B. iv. The expected return for each unit of investment is $500 in Project A and $1500 in Project B. However in order to meet the expectations of the firm's ethical and environmental policy values of X and Y must satisfy the constraint x+y-5x-6y= 210. How many units of each type should firm buy in other to maximize total volume? What is the implication of a unit change in investment in capital and (or) Labour Economic Analysis?If household savings is negative then national savings a.must increase to preserve living standards. b.must also be negative. c.could still be positive. d.will be insufficient to fund investment.The demand equation for a product for a product brand of mackerel is given by the equation Qx=50-7Px+0.002I+12Py Where Qx=monthly consumption per family in cartons Px=price per carton of makerel=GHC 2.00 I=median annual family income=GHC20,000 Py=price per carton of competing brand of mackerel=2.5 Required: i.At the stated values of the explanatory variables,calculate the consumption of makerel(cartons). ii.what is the relationship between Good x and Good y? iii.what is the nature of Good x ? iv.Suppose the median annual family income increases to GHC40,000,What will be your new consumptino for Good x? v.Suppose that the price per carton of competing brand increases GHC3.00, What will be your new consumption for Good x?
