PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Question
Chapter 13, Problem 5P
(a)
To determine
The effect of an increase in government purchases from 1,500 to 1,600 on the short-run equilibrium output.
(b)
To determine
The effect of a decrease in tax collection of 100 on short-run equilibrium output.
(c)
To determine
The effect of a decrease in planned investment spending by 100 on the short-run equilibrium output.
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Assume that marginal propensity to consume is 0.75. autonomous consumption is 100 units (consumption function therefore is as follows: C=100+0.75 Y) . Calculate
Multiplier
Equilibrium output if Y=100
How much does equilibrium output change if autonomous consumption increases by 50 to 150 units (Hint: use multiplier)
Q1
4. Suppose you earn same income as one of your cousins but expect to live longer than your cousin, how would your consumption function be different than that of your cousin? Would you consumer more or less than him?
6. Average propensity to consumer along a linear consumption function is always constant; true or false? Justify your response.
Shortly find the mathematical expression of Lagrangian multiplier of “constrained revenue maximization”, “constrained output maximization” and “cost minimization subject to revenue constraint” then find the mathematical expression of:
(a) relationship between Lagrangian multiplier of “constrained revenue maximization” and “constrained output maximization”
(b) relationship between Lagrangian multiplier of “constrained revenue maximization” and “cost minimization subject to revenue constraint”
Chapter 13 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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