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Macroeconomics
2) Consider the following statement in the short-run and the long-run: “The quantity theory of money (quantity equation) states than an increase in the money supply will lead to an equiproportionate increase in the price level”. Is this true or false? Explain.
Macroeconomics
Consider the following statement in the short-run and the long-run: “The quantity theory of money (quantity equation) states than an increase in the money supply will lead to an equiproportionate increase in the price level”. Is this true or false? Explain.
Macroeconomics
Consider the following IS–LM model: C = 200 + .65YD, I = 150 + .25Y - 1000i, G = 250, T = 200, Md>P = 2Y - 8000i, M/P = 1600
a. Derive the IS relation and LM relation
b. Solve for the equilibrium interest rate.
c. Solve for the equilibrium values of C and I, and verify the value you obtained for Y by adding C, I, and G.
d. Now suppose that the money supply increases to M/P = 1,840. Solve for Y, i, c, and T, and describe in words the effects of an expansionary monetary policy.
e. Set M/P equal to its initial value of 1,600. Now suppose that government spending increases to G = 400. Summarize the effects of an expansionary fiscal policy on Y, i, and C.
a. Derive the IS relation and LM relation
b. Solve for the equilibrium interest rate.
c. Solve for the equilibrium values of C and I, and verify the value you obtained for Y by adding C, I, and G.
d. Now suppose that the money supply increases to M/P = 1,840. Solve for Y, i, c, and T, and describe in words the effects of an expansionary monetary policy.
e. Set M/P equal to its initial value of 1,600. Now suppose that government spending increases to G = 400. Summarize the effects of an expansionary fiscal policy on Y, i, and C.
Macroeconomics
Consider the following behavioral equations: C = c0 + c1YD, T = t0 + t1Y, YD = Y – T, I = b0 + b1Y, G is constant. Assume that t1 is between 0 and 1.
a. Solve for equilibrium output.
b. What is the multiplier? Explain what the following symbols in the equation stand for. c0, c1, t0, t1, YD, b0 and b1.
c. How will a drop in all C, I and G affect inflation? Illustrate this in DIAGRAM with AD and long-run AS.
a. Solve for equilibrium output.
b. What is the multiplier? Explain what the following symbols in the equation stand for. c0, c1, t0, t1, YD, b0 and b1.
c. How will a drop in all C, I and G affect inflation? Illustrate this in DIAGRAM with AD and long-run AS.
Macroeconomics
Suppose that the economy is characterized by the following behavioral equations: C = 160 + 0.6Yd, I = 150 + 0.25Y, G = 150, T = 100. Solve for the following.
a. Equilibrium GDP (Y) and disposable income (Yd)
b. Consumption spending (C)
c. Compute the multiplier
d. If government spending doubles, what will happen to AD and Y? Compute the public and private saving. Explain what private and public savings are. Give a brief explanation of total savings in the AD model.
a. Equilibrium GDP (Y) and disposable income (Yd)
b. Consumption spending (C)
c. Compute the multiplier
d. If government spending doubles, what will happen to AD and Y? Compute the public and private saving. Explain what private and public savings are. Give a brief explanation of total savings in the AD model.
Macroeconomics
according to the quantity theory of money, in the long run an increase in the quantity of money of 5%, brings ____ in the level. What is __ ?
Macroeconomics
If the nominal interest rate is 8%, the expected inflation rate is 3%, and the tax rate is 25%, what is the after tax real interest rate when taxes are paid on nominal interest income? The after tax real interest rate when taxes are paid on real interest income?
Macroeconomics
consider a neighbouring economy with a better weather than the present economy . individuals in this economy have the same utility function as those of the present economy. However, each of their trees bear 2.75 fruits for sure in period 1.
-Is the equilibrium price of riskless bond (q) the same in both econonmies? why or why not.
- Fed up with the bad weather, some individuals cut down their trees and move to this neighbouring economy in period 0 . they only bring d0 fruits with them. what will happen to the equilibrium price of riskless bond (q0) in this economy after their arrival ? explain .
-Is the equilibrium price of riskless bond (q) the same in both econonmies? why or why not.
- Fed up with the bad weather, some individuals cut down their trees and move to this neighbouring economy in period 0 . they only bring d0 fruits with them. what will happen to the equilibrium price of riskless bond (q0) in this economy after their arrival ? explain .
Macroeconomics
The rate of economic growth per capita in France from 1996 to 2000 was 1.9% per year, while in Korea over the same period it was 4.2%. Per capita real GDP was $28,900 in France in 2003, and $12,700 in Korea. Assume the growth rates for each country remain the same.
Compute the doubling time for France’s per capita real GDP.
Compute the doubling time for Korea’s per capita real GDP.
What will France’s per capita real GDP be in 2045?
What will Korea’s per capita real GDP be in 2045
Compute the doubling time for France’s per capita real GDP.
Compute the doubling time for Korea’s per capita real GDP.
What will France’s per capita real GDP be in 2045?
What will Korea’s per capita real GDP be in 2045
Macroeconomics
max E0( ln(c0) + .8 ln (c1) )
subject to
c0+p0s1=p0s0=d0s0
c1=p1s1+d1s1
in which st is the number of trees owned in period t. Suppose that s0=1 for each individiual and d0=2. In addition , assume that d1=1 with probability 1/4, that d1=2 with probability 1/4, and that d1=4 with probability 1/2 so that E0(d1)=2.75. Note that, in equilibrium ,i) trees are worthless in period 1 (i.e. p1=0) and ii) s0=s1=1 for all individuals.
a) use a cost /benefit analysis to show that p0=0.8*do in equilibrium .
b) from the expression for p0 in question a) , one can conclude that p0 increases whenever d0 increases. Explain the economic rationale behind this fact.
c) show that the price of a discount bond which pays 2 fruits with certainty in period 1 is 1.6.
d) Calculate the expected net rate of return i) on a tree,ii) on the bond discussed in c) Explain how the rate of return on bond differs from that on trees.
subject to
c0+p0s1=p0s0=d0s0
c1=p1s1+d1s1
in which st is the number of trees owned in period t. Suppose that s0=1 for each individiual and d0=2. In addition , assume that d1=1 with probability 1/4, that d1=2 with probability 1/4, and that d1=4 with probability 1/2 so that E0(d1)=2.75. Note that, in equilibrium ,i) trees are worthless in period 1 (i.e. p1=0) and ii) s0=s1=1 for all individuals.
a) use a cost /benefit analysis to show that p0=0.8*do in equilibrium .
b) from the expression for p0 in question a) , one can conclude that p0 increases whenever d0 increases. Explain the economic rationale behind this fact.
c) show that the price of a discount bond which pays 2 fruits with certainty in period 1 is 1.6.
d) Calculate the expected net rate of return i) on a tree,ii) on the bond discussed in c) Explain how the rate of return on bond differs from that on trees.
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#339914 on Dec 2023
#339914 on Dec 2023