Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 31, Problem 26P
Sketch a diagram of how sustained budget deficits cause low
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Explain how the introduction of egg replacers and plant-based egg products will impact the bakery industry. Provide a graphical representation.
Explain Professor Frederick's "cognitive reflection" test.
11:44 Fri Apr 4
Would+You+Take+the+Bird+in+the+Hand
Would You Take the Bird in the Hand, or a 75% Chance at
the Two in the Bush?
BY VIRGINIA POSTREL
WOULD you rather have $1,000 for sure or a 90 percent chance
of $5,000? A guaranteed $1,000 or a 75 percent chance of
$4,000?
In economic theory, questions like these have no right or wrong
answers. Even if a gamble is mathematically more valuable a 75
percent chance of $4,000 has an expected value of $3,000, for
instance someone may still prefer a sure thing.
People have different tastes for risk, just as they have different
tastes for ice cream or paint colors. The same is true for waiting:
Would you rather have $400 now or $100 every year for 10
years? How about $3,400 this month or $3,800 next month?
Different people will answer differently.
Economists generally accept those differences without further
explanation, while decision researchers tend to focus on average
behavior.
In decision research, individual differences "are regarded…
Chapter 31 Solutions
Principles of Economics 2e
Ch. 31 - In a country, private savings equals 600, the...Ch. 31 - Assume an economy has a budget surplus of 1,000,...Ch. 31 - In the late 1990s, the U.S. government moved from...Ch. 31 - Imagine an economy in which Ricardian equivalence...Ch. 31 - Why have many education experts recently placed an...Ch. 31 - What are some steps the government can take to...Ch. 31 - Based on the national saving and investment...Ch. 31 - How would you expect larger budget deficits to...Ch. 31 - Under what conditions will a larger budget deficit...Ch. 31 - What is the theory of Ricardian equivalence?
Ch. 31 - What does the concept of rationality have to do...Ch. 31 - What are some of the ways fiscal policy might...Ch. 31 - What are some fiscal policies for improving a...Ch. 31 - What are some fiscal policies for improving the...Ch. 31 - Explain how cuts in funding for programs such as...Ch. 31 - Assume there is no discretionary increase in...Ch. 31 - Explain how decreased domestic investments that...Ch. 31 - The U.S. government has shut down a number of...Ch. 31 - Explain how a shift from a government budget...Ch. 31 - Describe how a plan for reducing the government...Ch. 31 - Explain whether or not you agree with the premise...Ch. 31 - Explain why the government might prefer to provide...Ch. 31 - Under what condition would crowding out not...Ch. 31 - What must take place for the government to run...Ch. 31 - Sketch a diagram of how a budget deficit causes a...Ch. 31 - Sketch a diagram of how sustained budget deficits...Ch. 31 - Assume that the newly independent government of...Ch. 31 - Illustrate the concept of Ricardian equivalence...Ch. 31 - During the most recent recession, some economists...
Additional Business Textbook Solutions
Find more solutions based on key concepts
Communication Activity 9-1
In 150 words or fewer, explain the different methods that can be used to calculate d...
Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
Create an Excel spreadsheet on your own that can make combination forecasts for Problem 18. Create a combinatio...
Operations Management: Processes and Supply Chains (12th Edition) (What's New in Operations Management)
E2-13 Identifying increases and decreases in accounts and normal balances
Learning Objective 2
Insert the mis...
Horngren's Accounting (12th Edition)
Asset Retirement Obligation. On January 1, Evergreen Utilities Company acquired a power plant at a total cost o...
Intermediate Accounting (2nd Edition)
Discussion Questions 1. What characteristics of the product or manufacturing process would lead a company to us...
Managerial Accounting (5th Edition)
Tennessee Tool Works (TTW) is considering investment in five independent projects, Any profitable combination o...
Engineering Economy (17th Edition)
Knowledge Booster
Similar questions
- Describe the various measures used to assess poverty and economic inequality. Analyze the causes and consequences of poverty and inequality, and discuss potential policies and programs aimed at reducing them, assess the adequacy of current environmental regulations in addressing negative externalities. analyze the role of labor unions in labor markets. What is one benefit, and one challenge associated with labor unions.arrow_forwardEvaluate the effectiveness of supply and demand models in predicting labor market outcomes. Justify your assessment with specific examples from real-world labor markets.arrow_forwardExplain the difference between Microeconomics and Macroeconomics? 2.) Explain what fiscal policy is and then explain what Monetary Policy is? 3.) Why is opportunity cost and give one example from your own of opportunity cost. 4.) What are models and what model did we already discuss in class? 5.) What is meant by scarcity of resources?arrow_forward
- 2. What is the payoff from a long futures position where you are obligated to buy at the contract price? What is the payoff from a short futures position where you are obligated to sell at the contract price?? Draw the payoff diagram for each position. Payoff from Futures Contract F=$50.85 S1 Long $100 $95 $90 $85 $80 $75 $70 $65 $60 $55 $50.85 $50 $45 $40 $35 $30 $25 Shortarrow_forward3. Consider a call on the same underlier (Cisco). The strike is $50.85, which is the forward price. The owner of the call has the choice or option to buy at the strike. They get to see the market price S1 before they decide. We assume they are rational. What is the payoff from owning (also known as being long) the call? What is the payoff from selling (also known as being short) the call? Payoff from Call with Strike of k=$50.85 S1 Long $100 $95 $90 $85 $80 $75 $70 $65 $60 $55 $50.85 $50 $45 $40 $35 $30 $25 Shortarrow_forward4. Consider a put on the same underlier (Cisco). The strike is $50.85, which is the forward price. The owner of the call has the choice or option to buy at the strike. They get to see the market price S1 before they decide. We assume they are rational. What is the payoff from owning (also known as being long) the put? What is the payoff from selling (also known as being short) the put? Payoff from Put with Strike of k=$50.85 S1 Long $100 $95 $90 $85 $80 $75 $70 $65 $60 $55 $50.85 $50 $45 $40 $35 $30 $25 Shortarrow_forward
- The following table provides information on two technology companies, IBM and Cisco. Use the data to answer the following questions. Company IBM Cisco Systems Stock Price Dividend (trailing 12 months) $150.00 $50.00 $7.00 Dividend (next 12 months) $7.35 Dividend Growth 5.0% $2.00 $2.15 7.5% 1. You buy a futures contract instead of purchasing Cisco stock at $50. What is the one-year futures price, assuming the risk-free interest rate is 6%? Remember to adjust the futures price for the dividend of $2.15.arrow_forward5. Consider a one-year European-style call option on Cisco stock. The strike is $50.85, which is the forward price. The risk-free interest rate is 6%. Assume the stock price either doubles or halves each period. The price movement corresponds to u = 2 and d = ½ = 1/u. S1 = $100 Call payoff= SO = $50 S1 = $25 Call payoff= What is the call payoff for $1 = $100? What is the call payoff for S1 = $25?arrow_forwardMC The diagram shows a pharmaceutical firm's demand curve and marginal cost curve for a new heart medication for which the firm holds a 20-year patent on its production. Assume this pharmaceutical firm charges a single price for its drug. At its profit-maximizing level of output, it will generate a total profit represented by OA. areas J+K. B. areas F+I+H+G+J+K OC. areas E+F+I+H+G. D. - it is not possible to determine with the informatio OE. the sum of areas A through K. (...) Po P1 Price F P2 E H 0 G B Q MR D ōarrow_forward
- Price Quantity $26 0 The marketing department of $24 20,000 Johnny Rockabilly's record company $22 40,000 has determined that the demand for his $20 60,000 latest CD is given in the table at right. $18 80,000 $16 100,000 $14 120,000 The record company's costs consist of a $240,000 fixed cost of recording the CD, an $8 per CD variable cost of producing and distributing the CD, plus the cost of paying Johnny for his creative talent. The company is considering two plans for paying Johnny. Plan 1: Johnny receives a zero fixed recording fee and a $4 per CD royalty for each CD that is sold. Plan 2: Johnny receives a $400,000 fixed recording fee and zero royalty per CD sold. Under either plan, the record company will choose the price of Johnny's CD so as to maximize its (the record company's) profit. The record company's profit is the revenues minus costs, where the costs include the costs of production, distribution, and the payment made to Johnny. Johnny's payment will be be under plan 2 as…arrow_forwardWhich of the following is the best example of perfect price discrimination? A. Universities give entry scholarships to poorer students. B. Students pay lower prices at the local theatre. ○ C. A hotel charges for its rooms according to the number of days left before the check-in date. ○ D. People who collect the mail coupons get discounts at the local food store. ○ E. An airline offers a discount to students.arrow_forwardConsider the figure at the right. The profit of the single-price monopolist OA. is shown by area D+H+I+F+A. B. is shown by area A+I+F. OC. is shown by area D + H. ○ D. is zero. ○ E. cannot be calculated or shown with just the information given in the graph. (C) Price ($) B C D H FIG шо E MC ATC A MR D = AR Quantityarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Principles of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStax
Economics Today and Tomorrow, Student EditionEconomicsISBN:9780078747663Author:McGraw-HillPublisher:Glencoe/McGraw-Hill School Pub Co
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc
Principles of Economics 2e
Economics
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:OpenStax
Economics Today and Tomorrow, Student Edition
Economics
ISBN:9780078747663
Author:McGraw-Hill
Publisher:Glencoe/McGraw-Hill School Pub Co