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Consider a two-period economy populated with consumers that have the same income and the same preferences. There is also a government whose objective is to spend 60 in period 0 and 150 in period 1. This government can issue bonds in period 0. Each bond pays interest rate r. Consumers can also issue bonds at the same interest rate. Consumers' optimal decisions, given r, imply that aggregate consumption C*0 is equal to 2/3(Y0.-T0 )+2/3(Y1-T1p/(1+r). Suppose that Yo = 300 and that income is expected to remain at this level in period 1.
a) Define the competitive equilibrium of this economy.
b) Show that, together, the three conditions given in a) imply that the equilibrium value of r is given by r=2(Y1 -G1 )/(Y0-G0) -1.
A major recession begins in period 0. As a result, economic activity falls by 18 in period 0. Economists expect this recession to continue into period 1: National income is expected to fall by 20 in period 1. Consumers believe these economists.
c) Use a graph to explain why the equilibrium interest rate r falls from 0.25 to 0.2 in period 0 as a consequence of this recession.
What is the annual equivalent value of a geometrically increasing series of payments which has first-year base of $30,000 increasing by 8% per year for 10 years with an interest rate of 12% compounded monthly?
Sometimes after a really long presentation, people ask me "what's the takeaway?" They're looking for a short summary of the main points. This essay should be the "takeaway" from the CBO's analysis of the Federal budget outlook.
1. The United States is the largest foreign purchaser of goods and services from Mexico. How does an expansion in the United States affect RGDP and the price level in Mexico?
What will be the price of the bond, if the market interest rate is 2%
Explain how the Central Bank can set the nominal interest rate in the money market. In addition, explain how it can use expansionary monetary policy to boost GDP if the economy is in a recession.
The problem is relates to Economics and problem is a critical examination of the Canadian economy. Canadian economy has been facing budgetary imbalances for quite some time.
Compare and contrast between the economic effects of increasing spending versus reducing taxes.
Although the U.S. does not have the highest saving rate in the world, Americans save more money than citizens of every other country
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Conduct a risk analysis of Italy How could a company manage this risk? How does Fiat FCA manage the risk in Italy?
Read the closing case entitled "Emerging Markets: From an industry-based view, why are alliances a frequent mode of entry for the Russian oil industry?
A firm faces the following demand curve: P = 120-0.20 * Q, and MR = 120 0.01 * Q. The firm's cost function T_C = 60 * Q + 25,000; MC = 60.
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