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assume (i) Consumers spend $200 billion plus 80% of after-tax income, or C=200+0.8 Yd (ii) Investment demand varies inversely with the interest rate, such that I= 500-2000r (iii) Currently government spending and taxes are both $250 billion, or G=250 and Tx=250, (iv) The total money demand or liquidity preference schedule for this economy is an inverse function of the rate of interest and is given by the equation MD=850-1000r (v) The required reserve ratio for banks in this economy is 20%. No bank holds excess reserves, and everybody keeps their money in the bank. The total of reserves in the banks is $150 billion. Answer the following questions given the information above. d) The central bank wants national income to be $3000 billion. What must investment be for the equilibrium level of national income to be $3000 billion (if investment alone changes in response to the change in the interest rate)? e) At what interest rate is this level of investment (your answer to part (d)) achieved?
Let: C = consumption I = investment spending G = government spending Tx = tax revenue Yd = after-tax income MS = money supply MD = money demand r = interest rate Assume for a given closed economy: (i) Consumers spend $200 billion plus 80% of after-tax income, or C=200+0.8 Yd (ii) Investment demand varies inversely with the interest rate, such that I= 500-2000r (iii) Currently government spending and taxes are both $250 billion, or G=250 and Tx=250, (iv) The total money demand or liquidity preference schedule for this economy is an inverse function of the rate of interest and is given by the equation MD=850-1000r (v) The required reserve ratio for banks in this economy is 20%. No bank holds excess reserves, and everybody keeps their money in the bank. The total of reserves in the banks is $150 billion.
Answer the following questions given the information above. a) What is the total money supply? b) What is the equilibrium interest rate? c) What is the equilibrium level of national income?
Suppose that type I sellers charged the price of $60 for the portable TV, type II sellers charged $80, type III sellers charged $100, type IV sellers charged $120, and type V sellers charged $140.
Determine
the expected lowest price for the TV from one, two, three, four, and five searches and
the marginal benefit from each additional search.
1. Review the last year’s COVID19 supplementary budget of Fiji (available online) and discuss if the initiatives are adequate to mitigate the pandemic. Discuss the drawbacks, and explain how they may be improved.
1. Discuss the key macroeconomic effects of COVID19 (ignore health effects) on the economy of Fiji. Identify how this economy can promote economic growth given the pandemic. Identify three macroeconomic policy interventions to support livelihood of people in such an economy.
Consider the following information about an economy with a labor force
participation rate of 80%.
Labor force 500
Number of people employed 425
Number of discouraged workers 15
a. What is the population 15 years and older of this economy?
b. How many people are unemployed? What is the unemployment rate? .
c. If the discouraged workers joined the labor force, but total employment did
not change, what would be the new unemployment rate?
1. Compare the following concepts as they relate to Macroeconomic consumption and savings: I. Autonomous Consumption and Induced Consumption II. MPC and MPS III. Linear MPC and Non-Linear MPC IV. Saving and Dis-saving V. Permanent Income and Transitory Income VI. Liquidity constraints and Buffer Stocks
how to come up with the value of multiplier?
Comparing the impact in the IS-LM model for a closed economy of an expansionary monetary policy with an expansionary fiscal policy on investment spending the result is that:
If investment is very interest inelastic most of an income tax rate cut will be crowded out therefore central bank should always supplement a tax cut with an increase in money supply”. Comment on this statement with the help of IS-LM diagram and explain the adjustment process. Would your answer change if the price lend were allowed to change. Explain
