Search & Filtering
• If a curve shifts, explain why/economic intuition
• If a market is in disequilibrium, explain how it returns to equilibrium • Explain, if possible, the final outcome in terms of important variables:
Y,N,P,C, W/P ,W,r,S,PuS,PrS,I
YEAR (IN BILLIONS) (BASE YEAR 1992)
1993 $725 101.2
1994 $762 102.4
a. What was the growth rate of nominal income between 1993 and 1994? (Note: The growth rate is the percentage change from one period to the next.)
b. What was the growth rate of the GDP deflator between 1993 and 1994?
c. What was real income in 1993 measured in 1992 prices?
d. What was real income in 1994 measured in 1992 prices?
e. What was the growth rate of real income between 1993 and 1994?
f. Was the growth rate of nominal income higher or lower than the growth rate of real income? Explain.
What determines who should produce beer and who should produce pizza (not just in this case but always)?
Consider an economy characterized by the following equations:
C = 500 + 0.75Y + 0.05W
I = 150
where C is desired consumption, I is desired investment, W is household wealth, and Y is national income.
a) Suppose wealth is constant at W = 10000. Draw the aggregate expenditure (AE) function on a scale diagram along with the 45° line. What is the equilibrium level of national income?
b) The marginal propensity to spend in this economy is 0.75. What is the value of the simple multiplier?
c) Using your answer from part b), what would be the change in national income if desired investment increased to 250? Can you show this in your diagram?
d) Now suppose household wealth increases from 10000 to 15000 in addition to the change in c). Draw the new AE function on the same graph as a). What happens to the AE function and by how much does the equilibrium national income change?
A consumer has $25 in budget to purchase goods X & Y. Assume Px = 3 and Py=1. She has a coupon that allows her to buy-one-get-one-free for up to 5 units of X. What is the maximum amount of X that she can buy?
(a) Graphically show &explain how carpooling may eliminate shortage.
