Calculate the current equilibrium output of this economy

Assignment Help Business Economics

Reference no: EM131007719

Consider a hypothetical economy without government or international trade. Households spend $0.90 of each additional dollar they earn and save the remaining $0.10. Even when they have no income, they spend $100 in total. Firms plan a total of $150 investment. Calculate the current equilibrium output of this economy. Then, suppose that firms increase their planned investment from $150 to $250. Also suppose that firms adjust their amount of production by the amount of unplanned inventory every year. (For example, when they have +$20 unplanned inventory, they reduce their production by $20 during that year) What will be the output of this economy four years later?

Reference no: EM131007719

Questions Cloud

Free trade is implemented in the local economy : In addition to the positive welfare effects that free trade has on an economy, there are a variety of other benefits of international trade. Without free trade, Sapphira has market power as a local producer. Once free trade is implemented in the loca..

Imposing trade restrictions on imported semiconductors : Suppose there is a policy debate regarding the United States’ imposing trade restrictions on imported semiconductors: A senator from a state with several semiconductor factories argues that the government should impose a tariff on semiconductors beca..

Ompetitive market-consumer surplus and producer surplus : We have learned that under the perfect competitive market, consumer surplus and producer surplus are maximized. Therefore, market is the most efficient. Research and give an example of an incomplete market, discuss why it is inefficient, and illustra..

Considering an excise tax on soda : The town you live in is considering an excise tax on soda. It has been estimated the price elasticity of demand is 1.24. You have a friend that believes that tax will just be pushed on to consumers and it is a tax grab by the local government. Explai..

Calculate the current equilibrium output of this economy : Consider a hypothetical economy without government or international trade. Households spend $0.90 of each additional dollar they earn and save the remaining $0.10. Even when they have no income, they spend $100 in total. Firms plan a total of $150 in..

Explain the short run shut down rule : A firm currently uses 40,000 workers to produce 180,000 units of output per day. The daily wage per worker is $100, and the price of the firm's output is $28. The cost of other variable inputs is $500,000 per day. Calculate the firm’s profit or loss...

Devastating impact on our national economy : In 2009 the American auto industry was in a dire economic state. Chrysler was in Chapter 11, GM was on the brink of bankruptcy, and Ford’s future was at best uncertain. The demise of the U.S. auto industry would have a devastating impact on our natio..

What is the value of lerner index at profit-maximizing price : Rick sells hamburgers, facing no competition the demand for his burgers is: Q=1000-2P, where Q is the quantity of burgers sold per week and P is the price of a given hamburger. Suppose Rick’s monthly cost is given by: TC= 1000+100Q. What is the value..

Discuss all of the lawsuits and the parties contentions : Taylor, a securities lawyer for a major Wall Street law firm, worked on numerous successful takeover bids of companies listed on the New York Stock Exchange. Rogers and Price defend that they were merely acting on stock market tips received from a pe..

User Account

All Pages