Preamble for Questions 1-8. Consider a fish/fishing rod economy, with Crusoe and Friday the entire population. The local currency is the dollar, and the prices of a fish and a fishing rod are $2 and $40 respectively. Over the year Friday spends all his time making fishing rods for himself, Crusoe all his time fishing (by tickling them). Over the year Friday successfully completes 50 fishing rods (which Friday keeps) and Crusoe catches 1000 fish. Each man eats one fish per day; Friday borrows his 365 fish from Crusoe over the year (which is not a leap year), and will repay Crusoe with 438 fish next year. They form a government to which each contributes $x in taxes, where x is some number; the government buys 150 fish from Crusoe to feed to the governmental wolfhound, Gelert. Any fish that Crusoe catches that he does not eat, lend to Friday or sell to the government, he sells to a neighbouring island (i.e. abroad). Your answers to questions 1-8 should just be numbers, i.e. should not feature x. 1. What is Y, total GDP in this economy? 2. What is I, total investment spending in this economy? [As usual, treat Friday as buying the fishing rods that he makes from himself, so that his investment spending is equal to the value of his output.] 3. What is the value of net exports NX?
Preamble for Questions 1-8. Consider a fish/fishing rod economy, with Crusoe and Friday the entire population. The local currency is the dollar, and the prices of a fish and a fishing rod are $2 and $40 respectively. Over the year Friday spends all his time making fishing rods for himself, Crusoe all his time fishing (by tickling them). Over the year Friday successfully completes 50 fishing rods (which Friday keeps) and Crusoe catches 1000 fish. Each man eats one fish per day; Friday borrows his 365 fish from Crusoe over the year (which is not a leap year), and will repay Crusoe with 438 fish next year. They form a government to which each contributes $x in taxes, where x is some number; the government buys 150 fish from Crusoe to feed to the governmental wolfhound, Gelert. Any fish that Crusoe catches that he does not eat, lend to Friday or sell to the government, he sells to a neighbouring island (i.e. abroad). Your answers to questions 1-8 should just be numbers, i.e. should not feature x. 1. What is Y, total GDP in this economy? 2. What is I, total investment spending in this economy? [As usual, treat Friday as buying the fishing rods that he makes from himself, so that his investment spending is equal to the value of his output.] 3. What is the value of net exports NX?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please help with #6 and 8
![Preamble for Questions 1-8. Consider a fish/fishing rod economy, with Crusoe and Friday the entire
population. The local currency is the dollar, and the prices of a fish and a fishing rod are $2 and $40
respectively. Over the year Friday spends all his time making fishing rods for himself, Crusoe all his time
fishing (by tickling them). Over the year Friday successfully completes 50 fishing rods (which Friday keeps)
and Crusoe catches 1000 fish. Each man eats one fish per day; Friday borrows his 365 fish from Crusoe over
the year (which is not a leap year), and will repay Crusoe with 438 fish next year. They form a government to
which each contributes $x in taxes, where x is some number; the government buys 150 fish from Crusoe to
feed to the governmental wolfhound, Gelert. Any fish that Crusoe catches that he does not eat, lend to Friday
or sell to the government, he sells to a neighbouring island (i.e. abroad).
Your answers to questions 1-8 should just be numbers, i.e. should not feature x.
1. What is Y, total GDP in this economy?
2. What is I, total investment spending in this economy? [As usual, treat Friday as buying the fishing rods
that he makes from himself, so that his investment spending is equal to the value of his output.]
3. What is the value of net exports NX?
4. What are national savings S = SP + S9? [Your answer should just be a number, i.e. should not feature x.]
5. What is the real interest rate in this economy? [If you think the answer is 50%, write 50 and not 0.5.]
6. Suppose Friday's individual private savings are equal to $1000. What are government savings S9?
Preamble for Questions 7-8. Consider two changes to the economy. Suppose that, of the 365 fish that
Crusoe was eating, he instead only eats 200 fish and buries 165 in the ground to keep for next year. Suppose
also that Friday exports 20 of the fishing rods he makes and keeps only 30. These are the only changes to the
economy as originally described.
7. With these changes, what then would be the value of investment I?
8. With these changes, what then would be the value of national savings S = SP + S9?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fef160660-a18a-490a-a4dc-19d7272f6d57%2Ff3e12721-a7bb-4bed-b2e3-215745c647c9%2Ftkqaq9_processed.png&w=3840&q=75)
Transcribed Image Text:Preamble for Questions 1-8. Consider a fish/fishing rod economy, with Crusoe and Friday the entire
population. The local currency is the dollar, and the prices of a fish and a fishing rod are $2 and $40
respectively. Over the year Friday spends all his time making fishing rods for himself, Crusoe all his time
fishing (by tickling them). Over the year Friday successfully completes 50 fishing rods (which Friday keeps)
and Crusoe catches 1000 fish. Each man eats one fish per day; Friday borrows his 365 fish from Crusoe over
the year (which is not a leap year), and will repay Crusoe with 438 fish next year. They form a government to
which each contributes $x in taxes, where x is some number; the government buys 150 fish from Crusoe to
feed to the governmental wolfhound, Gelert. Any fish that Crusoe catches that he does not eat, lend to Friday
or sell to the government, he sells to a neighbouring island (i.e. abroad).
Your answers to questions 1-8 should just be numbers, i.e. should not feature x.
1. What is Y, total GDP in this economy?
2. What is I, total investment spending in this economy? [As usual, treat Friday as buying the fishing rods
that he makes from himself, so that his investment spending is equal to the value of his output.]
3. What is the value of net exports NX?
4. What are national savings S = SP + S9? [Your answer should just be a number, i.e. should not feature x.]
5. What is the real interest rate in this economy? [If you think the answer is 50%, write 50 and not 0.5.]
6. Suppose Friday's individual private savings are equal to $1000. What are government savings S9?
Preamble for Questions 7-8. Consider two changes to the economy. Suppose that, of the 365 fish that
Crusoe was eating, he instead only eats 200 fish and buries 165 in the ground to keep for next year. Suppose
also that Friday exports 20 of the fishing rods he makes and keeps only 30. These are the only changes to the
economy as originally described.
7. With these changes, what then would be the value of investment I?
8. With these changes, what then would be the value of national savings S = SP + S9?
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