Suppose that the economy is characterized by the following behavioral equations: C= 120 + 0.90Y, |= 160 G= 170 T= 100 Equilibrium GDP (Y) = D (Round your response to two decimal places.) Disposable income (Yo) =D: (Round your response to two decimal places.) Consumption spending (C) =D (Round your response to two decimal places.)
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- suppose the economy is characterized by the following behavioral equations: C=160+0.6YD, I=150, G=150, T=100. Solve the following variables: a). Equilibrium GDP (Y) b). Disposable income (YD) c). Consumption spending (C)Explain the difference between the policy preferences function and the indirect utility function.Q1) Sales are a function of advertising in newspapers and magazines (X, Y). S = XY2 The price of advertising in newspapers and magazines is Rs.5 and Rs.10 respectively. The total budget for advertising is Rs.105. For maximizing sales, find out the best combination of advertisements in newspapers and magazines by using the Lagrangian multiplier. (Hint: Make equation of the budget line with the help of the above information).
- Consider the following intertemporal consumption problem with one good and two periods. The quantity of the good consumed in period 1 and period 2 are q1 and q2. The price of each unit of the good is $1 in both periods. The consumer’s income is I1=10 in the first period and I2=12 in the second period. The consumer can borrow or save money at the interest rate of 50%, that is, r=0.50. The consumer’s utility function is u(q1,q2)= q1q2. The optimal choice of q1 is a. 9 b. 10 c. 11 And the consumer will: d. borrow 1 e. save 1 f. borrow 2 g, save 0The horizontally oriented definition of DEMAND states that "demand is the quantitites of a good that buyers are willing and able to buy at various prices in a given time interval." Which of the following statements are TRUE? If I really like a good, it does not matter how much I am able to afford to spend on it. The demand for a good is a specific amount. Demand is a behavioral relationship expressing what quantities buyers would want and be able to buy at various prices. If I can't afford to buy a product at today's available prices, I do not have a demand. The demand is all the possible price quantity combinations Demand depends on the availability of supply. Demand is a relationship between price as a variable and quantity demanded as a variable. Demand is a flow and requires a time interval be be fully understood.The one-period model with quasi-linear utility predicts that a decrease in marginal income tax rates could increase tax collection if:Group of answer choices Substitution effects dominate income effects so that the percent change in taxes is greater than the percent change in GDP Substitution effects dominate income effects so that the percent change in taxes is less than the percent change in GDP Income effect dominate substitution effects so that the percent change in taxes is less than the percent change in GDP Income effects dominate substitution effects so that the percent change in taxes is greater than the percent change in GDP
- emperical evidence suggests that consumers tend to spend their current disposable income immediatelyAccording to the basic discounting principle, individuals value current consumption (i.e. consumption now) more than future consumption (i.e. consumption tomorrow). A) True B) FalseSuppose we start with a general equilibrium, and the economy experience an improvement in payment technology. Which of the following statements correctly describes the goods market response in the short term? 1. The IS curve remains unchanged 2. The IS curve shifts to the left 3. The IS curve shifts to the right 4. None of the above
- “According to the Random-Walk Hypothesis of Consumption under Uncertainty, individuals don’t need to optimise their consumption over time since the consumption is totally unpredictable” True or False?Assume the following behavioral equations for a macroeconomy:C = 100 + 0.9Yd, I = 50, T = 100 and G = 40. Calculate the equilibrium level of output.Suppose we have a demand model for good x. It is modelled as: Q=1450-0.38p-0.61p_y-0.0086I where I is the consumers’ average disposable income How would the consumer perceive the two goods, and with respect to consumers’ disposable incomes how would they perceive good x? Substitutes goods; normal goods Complements goods; normal goods Substitutes goods; Inferior goods Complements goods; Normal goods None of the above.