Economics Answers

If the Fed wants to increase the money supply by $100 million does it have to buy more than $100 million of bonds, less than $100 million of bonds or exactly $100 million of bonds? Explain. 

consider an agent whose preference cover any couple (x1,x2) , where x1 E R+ and x2E R+.e.g ..apples and oranges , is such that she prefers the bundle that is close to having the same number of apples and oranges . write a utility function

Answer the following questions about marginal propensity to consume and the multiplier. First provide the correct equation and then show your work to arrive at the answer:

What is the marginal propensity to consume when consumption changes from 7 to 6 and disposable income changes from 5 to 3?

If disposable personal income is 10 and consumption is 12, what is personal savings? What does this mean?

What is the multiplier when the change in equilibrium level of real GDP in the aggregate expenditures model is 9, and change in autonomous aggregate expenditures is 3?

What is the multiplier when the marginal propensity to save is 1/3?

What would happen to the marginal propensity to save when a tax cut was enacted causing the multiplier to change to 5?

under what conditions can expansionary monetary policies create a surplus in balance of payments. Would fiscal policy be more successful?

SLR has set a target of 20% annual rate of return on investments. The fixed assets employed on one of their products, the X2, amount to £21,000,000. Working capital investment for the X2 is £4,000,000. Total operating costs to be incurred on the X2 for next year are forecast to be £8,000,000. SLR uses cost plus pricing.

What is the required percentage mark up on the costs for X2?

A consumer has a demand function for rice of the form:

X = 3 + m/2p

Assume that his/her income per month that is allocated to consumption of rice in a month is kshs 600/-The price of one kg of rice is kshs 100/-. During harvesting, the price of rice falls by shs 25 per kg.

Compute the consumption of rice by the consumer in a month before and after the fall in price.

Compute the Substitution Effect on the consumer

Compute the Income Effect

What is the total effect of the price change?

A consumer is faced with the Utility function of the form:

U(x,y) = αLogx + βLogy

If this Utility function is represented by a map of indifference curves, find the slope of a particular indifference curve at any point.

Define carefully what is meant by equilibrium in the multiplier model. For each of the following, state why the situation is not an equilibrium. Also describe how the economy would react to each of the situations to restore equilibrium.

a) In Table 22-2, GDP is $3300 billion

b) In Figure 22-7, actual investment is zero and output is at M.

c) Car dealers find that their inventories of new cars are rising unexpectedly

1.     Define carefully what is meant by equilibrium in the multiplier model. For each of the following, state why the situation is not an equilibrium. Also describe how the economy would react to each of the situations to restore equilibrium.

a)     In Table 22-2, GDP is $3300 billion

b)     In Figure 22-7, actual investment is zero and output is at M.

c) Car dealers find that their inventories of new cars are rising unexpectedly

the market for juice is represented by the following functions Q+1/3p= 36, Q+9=1/2p where p= price Q = quantity.

i. identify the demand and supply functions, giving reasons in each case

ii. determine the equilibrium price and quantity

iii. calculate the price elasticity of demand for juice, when its price changes from shs. 30 to shs. 36

given the following equation U=√X1 X2,. what would be the total effect of a price change when the price of one good reduces by 10% from shs. 30. the income of the consumer is shs. 6000 per month while the price of the good two is 40