Macroeconomics Answers

Fort Inc., competes against many other firms in a industry. Over the last decade, several firms have entered this industry and, as consequences, Fort is earning a return on investment that roughly equals the interest rates. Furthermore, the four-firm concentration ratio and Herfindahl Hirschman index are both quite small. Based on this information, which market structure best characterizes the industry in which Fort competes? Explain the characteristics this market structure and what happens to the Fort Inc’s profit in the short-run and long-run. What are your strategic advices to Fort Inc. to sustain its profit in the long-run?

Given the following variables in the open economy aggregate expenditure model, autonomous consumption (C0) = 800, autonomous investment (I0) = 600, government spending (G0) = 700, export spending (X0) = 400, autonomous import spending (M0) = 700, taxes (TP) = 200, marginal propensity to consume (c1) = 0.75, marginal propensity to invest (i1) = 0.2, and marginal propensity to import (m1) = 0.15.

a. Calculate the equilibrium level of income for the open economy aggregate expenditure model. (Show all your steps carefully.)

b. If there is a decrease in the marginal propensity to consume from 0.75 to 0.65, calculate the new equilibrium level of income and the value of the multiplier. (Again, show all your steps carefully.)

In September​ 2015, the unemployment rate was 7.0​ percent, the inflation rate was 0.1​ percent, and the overnight loans rate target was 0.5 percent. In September​ 2017, the unemployment rate was 6.2​ percent, the inflation rate was 1.4​ percent, and the overnight loans rate target was 1.0 percent.
Why might the Bank of Canada decide to raise the overnight loans rate in​ 2018?
The Bank Canada might decide to raise the overnight rate in 2018 if​ _______.

Do Open Source softwares contribute to the GDP of a nation ? If yes then how?

If The Fed requires a bank to hold 9 percent of their deposits as reserves and the bank has $18,000 of excess reserves, and then sells the Fed a T bill for $9,000. How much does the bank now have to lend out if it decides to hold on to the required reserves?

$27k? $27,190? $26,190, or $9,000?

To what extent business models are in line with the classical theory of the firm

31. Consider an economy described by the following equations. Ip = 700 X = 100 T = 1500 Y* = 10000 Cd = 1800 + 0.6(Y-T) G = 1500 M = 0 u* = 4 where Cd is consumption on domestically produced goods, G is government expenditure, M is imports, u* is the natural rate of unemployment, P is planned investment spending, X is exports, T is tax revenue and Pis potential output. Derive the equation for planned aggregate expenditure as a linear function of output, Y. Find the short-run equilibrium for this economy. Illustrate the equilibrium on a 45-degree diagram. Suppose there is a decrease in planned investment spending from 700 to 500. a. Calculate the effect on short-run equilibrium. b. Calculate and explain the multiplier. c. Illustrate your answer on the diagram. d. Calculate the change in the output gap for this economy.

3. a. Using isoquants and isocost lines, show why a lower level of output in the short-run will always cost more than in the long run. Be sure to explain your graph.

b. Provide a short explanation (in words only) why this true. Be sure to reference the difference between production decisions in the short run and long run.

The publishing company ReadIt publishes its magazine Survive Economics on the internet. In order to access it, readers have to purchase an annual subscription that is currently priced at P1 = 100 EUR. At this price, the company recorded Q1 = 600 subscriptions. The cost of providing the magazine online is independent of the number of subscriptions. . Recently, an analysis of the demand for Survive Economics lead to the trustworthy information that demand is linear and that the firm sells Q2 = 800 subscriptions if it sets the price at P2 = 50 EUR and that it sells Q3 = 200 subscriptions if it charges P3 = 200 EUR. The management knows that there is an ambiguous effect on subscription revenue if it increases or decreases the subscription price that is somehow related to the economic concept of a price elasticity of demand. In order to figure out up to what level it should increase or decrease its price or even leave it unchanged, it decided to employ the management consultancy Clever&Smart.

Suppose an economy is in recession with a negative GDP gap of $800 billion. If MPC is 0.9, how much should the government spend to eliminate the negative GDP gap?