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Firms in Fredonia always invest $700 and net exports are zero, initially. The government budget is balanced with spending and taxes both equal to $500.
What will happen to the equilibrium level of GDP if investors become optimistic about the country’s future and raise their investment to $600?
The government budget is balanced, with government purchases and taxes both fixed at $1,000. Net exports are $100. Investment is $600. Find equilibrium GDP. What is the multiplier for this economy?
Mr. Black and Mr. Blue, each out for a Sunday drive, have a collision in which their cars are destroyed. Black and Blue each hire a lawyer to sue the other, paying the lawyers $5,000 each for services
What are the four main components of aggregate demand? Which is the largest? Which is the smallest?
From 1990 to 1997 in the United States, the number of working men grew by 6.7 percent; the number of working women grew by 11 percent. During this time, average wages for men grew by 20 percent
The same rightward shift of the demand curve may produce a very small or a very large increase in quantity, depending on the slope of the supply curve. Explain this conclusion with diagrams.
Find the equilibrium price and quantity after the shift of the demand curve.If, instead, two new stores that sell T-shirts open up in town, which of the following might be the new supply curve?
How are the following demand curves likely to shift in response to the indicated changes?
What is meant by the term balance-of-payments adjustment? Why does a deficit nation have an incentive to undergo adjustment? What about a surplus nation?
What are some examples of welfare gains and welfare losses that can result from the formation of international joint ventures among competing businesses?
How can trade liberalization exist on a nondiscriminatory basis versus a discriminatory basis? What are some actual examples of each?
Profit-maximizing behaviour on the part of firms explains why the short-run aggregate supply curve is upward-sloping. Is this statement true, false, or uncertain? Explain your answer.
Suppose that government spending is raised at the same time that the money supply is lowered. What will happen to the position of the aggregate demand curve?
A is autonomous expenditure, b is the interest elasticity of investment expenditure, k is the income elasticity of money demand, he is the interest elasticity of money demand, It is the tax rate, and
M/P=kY – bi where k is the income elasticity and h is the (nominal) interest rate elasticity of real money balances. Assume that k > 0 and that h > 0. Further assume that the quantit
If firms suddenly become more optimistic about the profitability of investment and planned investment spending rises by $100 billion, while consumers become more pessimistic and autonomous
Why do companies cut production when they find that their unplanned inventory investment is greater than zero? If they didn’t t cut production, what effect would this have on their profits? Why?
What is the definition of the velocity of money? Use the concept of velocity to explain how a given quantity of money balances can be used to pay for a relatively large volume of con
In Tobin s analysis of the speculative demand for money, people will hold both money and bonds, even if bonds are expected to earn a positive return. Is this statement true, false, or uncertain? Expla
Explain why you would be more or less willing to buy long-term Air Canada bonds under the following circumstances:
Suppose that the interest rate is 5%. Which of the following statements are true and which are false?
What is the real interest rate if the nominal interest rate is 8% and the expected inflation rate is 10% over the course of a year
This is an extremely unusual event because no other country in the world has seen negative interest rates during the last fifty years. How could this happen?
As an example of how the present value concept can be used, let s assume that you just hit the $20 million jackpot in a lottery, which promises you a payment of $1 million for the next twenty years. Y