Question 2 Are the following statements true or false? Explain the false statements. a. The main determinants of investment are the level of sales and the interest rate. b. The IS curve is downward sloping because goods market equilibrium implies that an increase in taxes leads to a lower level of output. c. If government spending and taxes increase by the same amount, the IS curve does not shift. d. With a horizontal LM curve, the amount of money in the economy is constant along the LM curve.
Q: The percentage markup of prices over marginal cost is (P-MC)/P. For a profit maximizing monopolist,…
A: Price elasticity of demand measures the responsiveness of the quantity demanded of a good or service…
Q: Consider an economy with two goods, consumption c and leisure I, and a representative consumer. The…
A: Considering an economy with two goods consumption and leisure A consumer's daily leisure hours l =…
Q: Suppose the economy is initially at a long-run equilibrium. The Fed then increases the money supply.…
A: In AD and AS model, Economy is in equilibrium where AD=SRAS and in long run it is where…
Q: Tim Urban, owner/manager of Urban's Motor Court in Key West, is considering outsourcing the daily…
A: The concept of a crossover point is used in comparing the costs/benefits of two alternative ways of…
Q: Explain the Bertrand paradox. How does it inform our explanations of market power in industries with…
A: Bertrand Competition refers to the competition where two firms compete on the basis of the price. It…
Q: � = 3.69 - 0.007999Q� + 0.000005359Q2�2 + 25.0X1�1 (3.69) (3.08) (3.42) (3.50) where C�…
A: To find the answer to the first question, we need to use the given cost function and find the value…
Q: The Canadian Government just announced that they will help new start-up companies in the industry of…
A: Demand curve depicts the inverse relationship between price and quantity demanded, keeping other…
Q: True or False Explain why, Use basic AD/ AS model Suppose that there is a decline in velocity…
A: The AD/AS model is a macroeconomic model that explains the relationship between aggregate demand…
Q: Give typing answer with explanation and conclusion What is a monopsony and how does it affect…
A: A market structure known as a monopsony occurs when there is just one consumer for a specific good…
Q: U.S. route 83 passes through the village of Burr Ridge, IL. The engineers of the Transportation…
A: The term "economic impact" describes how a specific economic action or event affects the economy,…
Q: Use the following graph to answer the next question. Price Level AS3 AS₁ 0 Real Domestic Output, GDP…
A: Aggregate Supply refers to the total amount of goods supplied by the businesses with the boundaries…
Q: 5. Individual Problems 7-5 Suppose you have a production technology that can be characterized by a…
A: The additional cost of producing a second unit of a good is known as the marginal cost (MC). Total…
Q: Under a monopoly, demonstrate with with a demand curve, marginal revenue curve, and cost curve why a…
A: A market form where a single firm dominates the entire market for a particular product or service,…
Q: 6-10F Fill in the blanks in the figure below: a. c. b. f. & h C. d. Price and marginal revenue (in…
A: "Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…
Q: Endellion owns a small delivery company. He decides to hire an office assistant and buys her a…
A: Introduction In economics, the resources that individuals use to produce goods and services are…
Q: Valerie is a talented artist who sells hand-crafted goods on her website. Valerie currently crafts…
A: A production possibility frontier (PPF), commonly referred to as a production possibility curve, is…
Q: complete the solution for Marginal profit of Y = dProfit /dY = -X - 4Y + 120
A: Marginal profit is the derivative of total profit with research to the quantity. Marginal profit is…
Q: Assume the following demand curve: Q = 50,400 1,200(P). Variable costs are estimated to be $25.06.…
A: Total revenue and variable costs: Total revenue is the total value of the commodities produced and…
Q: Question 3 Judge Mark Griffiths finds that Moodle is a relentless and predatory monopolist. Judge…
A: In economics, a monopoly refers to a situation where a single company or entity dominates the market…
Q: "M-1" and "M-2" are two of the most well-known measures of the United States' money supply. We need…
A: Money supply refers to the total amount of money in circulation within an economy at a given time.…
Q: Consider an economy with 2 goods and 2 agents. The Örst agent has the utility function, u (x1; x2) =…
A: The social planner's problem is to allocate the resources of the economy to maximize social welfare…
Q: Suppose when income increases by $5,000, there is an increase in consumption of $3,000. a. Calculate…
A: The multiplier effect in AD-AS framework: The main idea behind the multiplier effect is that an…
Q: Problem 3 Consider a firm that employs a worker on a project. If the project succeeds, it generates…
A: The game tree describes all of the game's main aspects, including the participants, strategies, and…
Q: 1. You have been asked to assess a proposed project to buy a new automated assembly machine that…
A: NPV stands for Net Present Value. It is a financial measure that calculates the difference between…
Q: 2. Explain what types of policies the Federal government actually implemented to restore aggregate…
A: The Federal government refers to the national government of a country that exercises authority over…
Q: Suppose that Sam and Teresa are the only consumers of dance classes in a particular market. The…
A: Demand schedule is the tabular representation of quantity demanded at various prices. Demand curve…
Q: Question: If the government has a target to lower the inflation target; then how the government can…
A: A central banking strategy known as inflation targeting involves modifying monetary policy to attain…
Q: 9. In response to the Great Recession, the Federal Reserve took drastic and largely untested…
A: A significant global economic slowdown known as "The Great Recession" started in 2008 and lasted…
Q: If a local government is willing to provide a plot of land and buildings for an incoming FDI, the…
A: “Since you have posted multiple questions, we will provide the solution only to the first question…
Q: What are the benefits and drawbacks of ID requirements for voting?
A: Voter suppression refer to any tactic or practice that is intended to discourage or prevent certain…
Q: 3. If all other factors remain the same, what happens to the demand curve for coffee if there is:…
A: A demand (D) curve is a graphical depiction of the correlation between the quantity (Q) of a product…
Q: Refer to the Figure 11a. If the economy is at point Er, a government creating economic policy in…
A: A positive output when actual output is greater than potential output. A negative output when…
Q: Determine a scenario where government imposes a binding restriction on price (ceiling or floor).
A: Price ceilings means through which a good's price is kept from increasing past a specific point. The…
Q: Suppose a monopoly team faces a demand for a sporting event of Q =100-p Given that the associated MR…
A: A market form where there exists only one seller or provider of a good or service, and no close…
Q: You produce widgets. Currently you produce four widgets at a total cost of $40. What is your average…
A: The average cost is the total cost divided by the quantity of output whereas the marginal cost is…
Q: n economy is described by the following equations: C = 1600 + 0.8(Y – T) I = 1000 G = 1800 T =…
A: C = 1600 + 0.8(Y – T) I = 1000 G = 1800 T = 3000 + tY
Q: All equal, governments should prefer projects that have a high i 1 benefits, lees certainty Oblow…
A: The degree of confidence the government has in its assessment of the anticipated costs and benefits…
Q: Give typing answer with explanation and conclusion How might the global financial crisis create…
A: Introduction Since the pandemic emergency arrived, there has been a 90 trillion USD loss to the…
Q: Question 3 NOTE: Economists distinguish between two types of costs: Accounting cost and Economic…
A: Accounting costs are the actual charges that a business incurs in producing and selling its products…
Q: The lower the interest rate: the greater the level of inflation the smaller the present value…
A: The interest rate used in the computation of the present value is termed as the discount rate. Using…
Q: How does the law of supply and demand affect prices? Investopedia. Most goods respond to the…
A: Law of demand states the relationship between demand and prices. Law of supply states the…
Q: Explain in detail The monopoly produce a unique product and sometimes it can be beneficial for the…
A: A monopoly is a market structure where there is only one seller of a particular product or service,…
Q: 30. Consider a Solow Model where y = (Y/L) and k = (K/L) and y = k.5. L stands for the number of…
A: The Solow model explains that economic growth can occur through capital accumulation, which is the…
Q: Consider an economy that exhibits both population growth (L grows at rate n) and technological…
A: Solow model: The growth models are an economic concept that reflects the relationship between an…
Q: Assume that the real rate of interest is 5 percent and a lender charges a nominal interest rate of…
A: Real Interest Rate: Real interest rate is the cost of borrowing estimated in terms of buying power.…
Q: Use the following information for 2019 to answer two questions. Prices That Rose Health insurance…
A: % change in fruit prices = (1/3)*(% change in the price of Apple) + (1/3)*(% change in the price of…
Q: PART II: Below is the quantity demanded and supplied in the market for skis. What is the equilibrium…
A: A linear demand curve is represented as Q = a - bP where Q refers to linear demand curve, ameans…
Q: To better understand how inflation is measured, pretend that the following table describes the…
A: Annual expenditure is the product of price per unit and yearly consumption. Item weight is…
Q: In 1997 Fuller and coworkers at Texas A&M University estimated the operating costs of cotton gin…
A: Here, we know that, we need to draw an appropriate least square regression curve of y on x, where x…
Q: Suppose two players play the prisoners' dilemma game a finite number of times, both players are…
A: Nash Equilibrium: A Nash equilibrium is where no player can independently act to rise their payoff.…
Step by step
Solved in 2 steps
- 2. In the IS-LM model, what is the effect of an increase in government purchases? Draw an IS-LM diagram to illustrate. In this question, it is not necessary to include the FE line. a) What is the effect on output and the real interest rate? b) What is the effect on investment spending? c) If the LM curve had been horizontal, explain how your answers to a and b would have been different.Consider an economy with the following features: Consumption, C = 130 + 0.5Yd Income tax, T = 20 + 0.2Y Investment, I = 200 – 600r Government expenditure, G = 112 Real money demand, Md/P = 50 + 0.5Y – 600r Nominal money supply, Ms = 600 Price level, P = 2 where Yd stands for disposable income, and r for the rate of interest. Derive the IS and LM equations. Calculate the equilibrium levels of income and rate of interest.An economy is described by the following equations: C= 2,600+ 0.8(Y-T) - 10,000r IP = 2,000-10,000r G = 1,800 NX = 0 PAE = C+1²+ GANX T = 3,000, Where the definitions of each variables are the same as our lecture notes. The real interest rate, r, expressed as a decimal, is 0.10 (that is, 10 percent). a. Find a numerical equation relating planned aggregate expenditure to output. b. Solve for short-run equilibrium output. c. Show your result graphically using the Keynesian-cross diagram. d. Now, suppose that potential output Y* equals 12,000. What real interest rate should the Fed set to bring the economy to full employment? e. Recalculate question (d) for the case in which potential output Y* equals 9,000.
- An economy is described by the following set of equations: C = 2,600 + 0.8(Y – T) – 5,000r, I = 3,000 – 15,000r, G = 800, X = M = 0, T = 1,000 + 0.3Y. The real interest rate, expressed as a decimal, is 0.10 (that is, 10 percent). Suppose the flow of GDP consistent with full employment is 10,000. What real interest rate would achieve full employment?3 Explain how any technological advancement (increase in our A from production function) could affect investment, aggregate demand and income. Please show your answer by using graphs, models and explaining thoroughly.1- If government expenditure (∆G) is increased by AED 400, and tax (∆T) has also increased by AED 400, Marginal propensity to save is given as 0.25, what would the increase in National Income (∆Y)? 200 300 400 500 2- For an economy, the central bank has increased the money supply, what would happen to LM curve? It will shift to right It will shift to left It will not shift None of the options are correct 3- Which of the following sequence of events follows an contractionary fiscal policy? Increase in government expenditure and tax Decrease in tax and government spending Decrease in government expenditure and increase in ta Increase in government spending and decrease in Tax 4- Suppose for an economy following information is given. Consumption (C) = 40+0.75(Yd), Tax (T) = 80 Million AED ; I= 140-10r; Government spending (G) =100; Money demand = 0.2Y -5r ; Money supply = 85 million AED. a. Compute the equilibrium Income Y and rate of Interest (r) ? b. Suppose…
- Consider the economy of XYZ, has the following indicators in the table below:Ct = 0.7Yt̅Gt = 0.2Yt̅EXt = 0.20Yt̅IMt = 0.25Yt̅It = 0.30 − 2.0(Rt − 1.2)Yt̅A. Derive the IS equation. Explain why the IS curve has downward slope.B. Estimate the short-run output when real interest rate equals to 2 percent.C. Calculate the value of multiplier and interpret the result.D. Suppose the government increases the expenditure such as:Gt = 0.3Yt̅Show the impact on IS curve in graphically, and calculate the government expenditure multiplier.How much short-run output change? Explain the reason.19. In the short-run macro model, if the MPC equals 0.9 and investment spending rises by P200 billion, then equilibrium GDP will rise by a. P20 billion b. P180 billion c. P90 billion d. P1,000 billion e. P2,000 billionSuppose that in Macroland the consumption and the investment have a negative relationship withthe real interest rate and positive relationship with Y. The Central Bank of the country targets acertain nominal interest rate and lets the money supply adjust in order to reach that interest rate.a. Draw a graph of the IS-LM model in this situation.b. Suppose that the Central Bank announces an increase of the interest rate in the future.Represent graphically the initial position of IS-LM curves. Then, show the IS-LM curves of thefuture, after the announced increase in the interest rate is implemented. (Assume that the ISis constant.).c. Suppose that agents today take into consideration the resulting income of the future whendeciding the amount of consumption and investment. Show what happens to the IS-LMcurves today after the announcement of the CB (tip: the CB is NOT increasing the nominalinterest rate today).d. The government decides to step in and avoid any deviation of Y from the initial…
- Question Consider an economy described by the following equations: Y = C+I+G C = 100+0.75 (Y-T) I = 500-50r G = 125 T = 100 where Y is GDP, C is consumption, I is investment, G is government purchases, T is taxes, and r is the interest rate. If the economy were at full employment (that is, at its natural rate), GDP would be 2,000. What is the marginal propensity to consume in this economy? Suppose the central bank’s policy is to adjust the money supply to maintain the interest rate at 4 percent, so r = 4. Solve for GDP. How does it compare to the full-employment level? Assuming no change in monetary policy, what change in government purchases would restore full employment? Assuming no change in fiscal policy, what change in the interest rate would restore full employment?Given the following information: C = Ca + 0.8Yd Ip = 1900 - 40r G = 1800 NX = 700 - 0.14Y T = 200 + 0.20 Y Ca = 260 - 10r Md/P = 0.25Y - 25r Ms/P = 2000 Find: 1. The equilibrium level of interest rate and output. 2. If Government expenditure increased by 100, find the new equilibrium level of interest rate and outputQ-1 The following table shows income and consumption: Calculate: A- Saving (S), B- Marginal propensity to consume (MPC), C-Marginal propensity to save (MPS), D- Average propensity to consume (APC) E- Average propensity to save (APS). Q-2 Compute the (a) Number of unemployed, (b) Unemployment-rate, (c) Population, and (d) Labor force participation rate, using this data: Number of employed = 1800 million Not in labour force =730 million Number of Labour force =2500 million Q-3 Discuss how to control or reduce the Inflation and Unemployment.