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Suppose that the real money demand function is
Md/P = 500 + 0.2Y - 1000i. Answer the following 2 questions: show the impact.
a. Suppose that the economy is at the full-employment level. In that case Y=1000, P=100, and i=0.10. Calculate the real money demand and the nominal money demand. SHOW WORK and discuss.
b. Write down the equilibrium equation that MUST hold in the Asset Market (i.e. the asset market equilibrium condition). Then solve the condition for P (i.e. rewrite the equation so that you solve for P as a function of all the other variables).
c. Now assume that prices and wages in the economy adjust quickly so that all the markets in the economy are always in equilibrium. Suppose that the interest rate on money increases. What is the impact of this shock on P (hint. Use the equation you solved for in part (c)? Explain. What is the impact on Y (full employment level of output)? Explain. What is the impact on r? Explain.
d. Again, assume that prices and wages in the economy adjust quickly so that all the markets in the economy are always in equilibrium. Suppose government expenditure increases. What is the impact of this shock on P (hint. Use the equation you solved for in part (c)? Explain. What is the impact on Y (full employment level of output)? Explain. What is the impact on r?
The total relevant cost of holding inventory in a plant for purchased materials is given, TRC = (6000/Q)(60) PLUS 0.30(12)(Q/2) PLUS 6000(12) WHERE Q IS THE ECONOMIC ORDER QUANTITY.
New York City's banking community served many of the functions of a central bank during large parts of the “displaced 19th century”
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Your are the chief economic advisor to the King of Terra. The king has observed that while the price of energy has increased 20 percent over the past five years, consumers have actually increased their energy consumption by 10 percent over the sam..
Given the optimal order quantity calculated above, if the average inventory is 136 cartons, then the monthly holding cost is ____ dollars, and the total cost including the cost of supply or the total unit cost for all units, holding and ordering i..
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The market represented in exhibit above is allowed to operate freely, find the total employment in the market and total employment by the firm
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"Suppose Y = $200, C = $140, G = $25, x-m = -5, and T = $25. What is Sp? What is I?" Here is the answer:Yd = Y - T | C + Sp = Y - T | Sp = Y - T - C,Sp = Y - C - T = 200 - 25 - 140 = $35,I = Sp + (T - G) + (x-m) = $35 I = $35 + 0 - 5 = $30
Each class member shall prepare a written report concerning the performance of a company of their choice and based upon observation period, offer forecast of companies' future sales and revenue
Assume an airline flying on the New York - Chicago route has estimated the demand curves for three different types of customers: business (no advance purchase), leisure (7 day advance purchase), and discount (14 day advance purchase) travelers.
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