MACROECONOMICS W/SAPLING PLUS
10th Edition
ISBN: 9781319258900
Author: Mankiw
Publisher: MAC HIGHER
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Question
Chapter 19, Problem 7QR
To determine
Tobin’s q and the investment.
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Chapter 19 Solutions
MACROECONOMICS W/SAPLING PLUS
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Similar questions
- Consider two savings accounts that pay the same interest rate. One account lets you take your money out on demand. The second requires that you give 30-day advance notification before withdrawals. Which account would you prefer? Why? Can you imagine a person who might make the opposite choice? What do these choices say about the theory of the consumption function?arrow_forwardThe importance of income in determining savings has persisted since the time of Keynes. Why have other theories failed to displace income as the most critical variable in saving theory?arrow_forwardDiscuss the overall purpose people have for investing. Define investmentarrow_forward
- What does Tobin's q tell us about what determines a firm's investment decision?According to the the Tobin's q, when should a firm invest?arrow_forwardAssume an intertemporal budget constraint that shows how consumption can be traded off between two periods, t and t+1. Assume the consumer can save and borrow at the same interest rate of 10%. Assume the consumer collects income of $100 in each period. To gain an extra $10 dollars in period t+1, what must the consumer give up in period t?arrow_forwardWhat is the relationship; remember how economist talk about relationships, between the level of investment and the interest rate? Which is the independent variable? What is the most intuitive way for you to remember this? Remember, do not memorize; find a story to tell.arrow_forward
- Ben earns $7,200 this year and zero income the next year. Ben also has an investment opportunity in which he can invest $3,100 and receive $7,000 next year. Suppose Ben consumes $3,000 this year, invests in the project, and consumes $8,205 next year. a. What is the market rate of interest? (Hint: The new market interest rate line EF is parallel to AH.) Market rate % b-1. Suppose the interest rate increases. What will happen to Ben's consumption for this year? If interest rate increases, Ben's consumption (Click to select) ✓ b-2. Is Ben better off or worse off than before the interest rate rise? Ben is (Click to select) ✓off than before the interest rise.arrow_forwardDraw the consumption function as the relation of the consumer's income and expenditure. What does the slope of the consumption function depend on? Is the consumer's income the only factor determining the level of his consumption spending?arrow_forwardDescribe nonsimple investment?arrow_forward
- Explain the term random walk in consumption. Under what conditions will consumption follow such a behaviour?.arrow_forwardDraw a consumption function for an individual whereS=-250+0.3Y. Show the change that would result from an increase in Income.arrow_forwardSuppose, that a consumer is a saver, who saves some of his first-period income, and interest rate increases. Discuss the income and substitution effects on consumption in both periods. How consumptions in both periods will change?arrow_forward
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