If borrowing and lending are allowed, the relative price of future consumption, and thus the world realinterest rate, will be determined bythe world supply and demand for future consumption.O the world relative supply and demand for future consumption.the world supply and demand for current consumption.the world relative supply and demand for current consumption.

Future consumption is the consumption at a future point in time and current consumption is present…

If borrowing and lending are allowed, the relative price of future consumption, and thus the world real interest rate, will be determined by the world supply and demand for future consumption. the world relative supply and demand for future consumption. the world supply and demand for current consumption. the world relative supply and demand for current consumption.

If borrowing and lending are allowed, the relative price of future consumption, and thus the world real interest rate, will be determined by the world supply and demand for future consumption. the world relative supply and demand for future consumption. the world supply and demand for current consumption. the world relative supply and demand for current consumption.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter20: Exchange Rates And The Macroeconomy

Section: Chapter Questions

Problem 3TY

See similar textbooks

Similar questions

What is a foreign exchange rate? (a) The rate at which the currency of one country trades for the goods ofanother country.(b) The rate at which one country’s goods trade for those of another country.(c) The rate at which currencies of different countries are exchanged.(d) The rate at which one country’s currency trades for gold provided byanother country. Induced consumption is: (a) the part of consumption which is independent of the level of income.(b) the minimum level of consumption that is financed from sources other than income.(c) The maximum level of consumption that is financed from sources other than income.(d) shown by the slope of the consumption function. In the Keynesian model, an introduction of a proportional tax will: (a) increase the slope of the consumption function.(b) reduce the multiplier.(c) increase the equilibrium level of income.(d) increase the multiplier. A decrease in the price level will: (a) shift the AS curve to the left.(b) shift the AD curve to the…
Consider an economy described by the following data:C = $3.25 trillionI = $1.3 trillionG = $3.5 trillionT = $3.0 trillionNX = - $1.0 trillionf = 1mpc = 0.75d = 0.3x = 0.1a. Derive simplified expressions for the consumptionfunction, the investment function, and the net exportfunction.b. Derive an expression for the IS curve.c. If the real interest rate is r = 2, what is equilibriumoutput? If r = 5, what is equilibrium output?d. Draw a graph of the IS curve showing the answersfrom part (c) above.e. If government purchases increase to $4.2 trillion,what will happen to equilibrium output at r = 2?What will happen to equilibrium output at r = 5?Show the effect of the increase in government purchases in your graph from part (d).
2In a country where the consumption function is C= 100+0.75Y, the planned investments are 100 units. If the planned investments are increased from 100 units to 200 units, how much will the balance output level change? Please select one: a. 200 b. 100 c. 250 d. 400 e. 50
In a closed economy with fixed prices and wages and where the marginal propensity to consume of the rich is smaller than that of the poor, a transfer of income from the rich to the poor will 3 a. Increase equilibrium level of output but reduce private savings b. Decrease equilibrium level of output but increase private savings c. Increase in output and an increase private savings d. Decrease in output and a decrease in private savings
ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption is: C = 100 + 0.75Y Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 60 and Xn = 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig + Xn Instructions: Round your answers to the nearest whole number.a. What is the equilibrium level of income or real GDP for this economy? Equilibrium GDP (Y) = $ . b. What happens to equilibrium Y if Ig changes to 40? Equilibrium GDP (Y) = $ . What does this outcome reveal about the size of the spending multiplier? Spending multiplier = .
1. B. The consumption schedule for an open economy is given as C = 40 + 0.7Y. Assume that planned investment Ig and new exports Nx are independent of the Real GDP and constant, where Ig = 60 and Nx = 20. The equilibrium real output, Y is equal to aggregate expenditures. Calculate the equilibrium level of real GDP for this economy. What happens to the equilibrium Y if Ig changes to 30? What does the new outcome reveal about the size of the multiplier?
Write out the equation for desired national savings. What changesto desired national saving and desired national consumption happen whengovernment spending increases, funded by an increase in taxes? Why doesconsumption change by less than G?
Consider a frugal closed economy without money market. Assume there is no government or exports/imports. The economy is described by the following set of equations. C =1000+0.5⋅Y ID = 600 1. What is the marginal propensity to save of this economy? a) 0.4 b) 0.5 c) 0.1 d) 0.3 e) 0.2 Currently, the economy is saving a half of the amount it consumes. The level of unplanned inventory change is [0, 600, 200, 1400 , 2000 ] and the economy is [equilllibrium or not at equillibrium,]
Consider an economy where: Zt = c0 + c1Y1 + It Yt = Zt-1 Let c0 = 100, c1 = 0.75, and assume that the goods market is initially in equilibrium with Ẑ = Ŷ = 1200, and Î = 200. Suppose that in period t0 investment undergoes a permanent increase from 200 to 300. Find values for Yt and Zt in periods t0 + 1, t0 + 2, and t0 + 3. What are the final values for Y and Z? Please show all calculations, thanks!
Consider an economy called Xanadu for which desired aggregate consumptiondepends on income, Y. and the real interest rate, r, according toCd =100+0.7Y - 200r.Xanadu's GDP is Y = 1000 and government spending on goods and services is G=180. Xanadu's desired future capital stock is given byK* = 140 - 100ucwhere luCdenotes the user-cost of capital. The price of capital is PK =2, thephysical depreciation rate is d =0.1 and the existing capital stock is K0= 50. Trapital stock between any period t and the following period t+1 evolves accordng toKt+1 = It+(1-d)Kt where It the level of investment. Assume throughout that net factor payments from abroad (NFP) is equal to zero.Suppose instead that Xanadu is a small open economy facing a world interest rate of 1%. It follows that Xanadu's current account position is equal toA) -16B) -51C) -6D) -8
Question Consider that the Ghanaian economy is a small and close, which is characterised by the following. AD=C+I+G+NX C=a+bY* Y*=disposal income T=T0 I=I0 G=G0 Md/P=Ld(Y,i) Ms=money supply ,which is given . AD=Aggregate demand ,C=consumption,G=Government expenditure ,T=Tax,P= Pricelevel,I=Investment,NX=Netexports (a) Consider an increase in Government spending ∆ > .Assume for now that both price and expected price are fixed. Also assume that government does not implement any other policy than the increase in Government spending. What is the effect of this policy on the goods market? (b) What is the effect on equilibrium in the money market? Present your answer in swells labelled diagram, showing both money supply and demand before the policy was implemented, and that after the policy was implemented in the same graph. (c) Solve for equilibrium in the goods market. d) Suppose the policy change is rather a increase in real money supply not a decrease in government spending.What…
If the government expenditures decrease by 100 million Euro and the aggregate demand decreases by 400, then the marginal propensity to consume is: