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Describe how a car rental agency would calculate the price at which it rents cars, and relate your description to the equation for rental cost given in the text
What are the various ways you could accomplish this? Which of your solutions do you favor?
What will happen to the opportunity cost of consuming a set of goods today, as opposed to tomorrow?
If the MPC in the traditional model is .8 and disposable income changes by $10 million, by how much will consumption change?
What is your consumption this year and next year? What is your short-run marginal propensity to consume? Long-run MPC?
What are the two main theoretical objections to the Barro-Ricardo view? In the Barro-Ricardo view, does it make any difference whether the government pays.
Explain why the interest rate might affect saving. Has this relationship been confirmed empirically?
What assumption(s) regarding consumers' knowledge and behavior in the life-cycle- permanent-income hypothesis do we need to change?
What are the problems of excess sensitivity and excess smoothness? Does their existence disprove or invalidate the LC-PIH? Explain.
What is a random walk? How is Hall's random-walk model of consumption related to the life-cycle and permanent-income hypotheses?
The United States, during the 1980s, found its rate of personal saving. What does this hypothesis suggest we should see as this generation ages?
The Fed wants to increase the money supply. What are the main instruments available to it, and how can each, specifically, increase the money supply?
What is the individual's average cash balance? Suppose income rises to $1,800. By what percentage does the individual's demand for money change?
Suppose a firm sells steadily during the month and has to pay its workers at the end of the month. Explain how the firm would determine its money holdings.
Discuss the various factors that go into an individual’s decision regarding how many traveler’s checks to take on a vacation.
To what extent would it be possible to design a society in which there was no money? What would the problems be? Could currency at least be eliminated? How?
Why should (or shouldn't) policymakers be concerned about the relatively low levels of U.S. investment that have prevailed in the last decade?
Explain why the housing market usually prospers when the (real) mortgage rates are low. Explain how this could lead to an exception to the conclusion in (a).
Explain why lenders may ration the quantity of credit rather than merely charge higher interest rates to more risky borrowers.
The number of small firms in the U.S. economy has grown substantially. What effect might this have on output fluctuations in the United States?
According to the description of business fixed investment in this chapter. What factors would determine the speed of its reaction?
What effect has the recent shift toward investment in high-tech capital goods had on the rate of depreciation?
Suppose the government cuts income taxes. Show in the IS-LM model the impact of the tax cut under two assumptions.
What is the required policy mix? Use an IS-LM diagram to show your policy proposal.
What are some of the subsidiary targets referred to in the quote? How would they be affected by alternative policy combinations?