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a. Use equations (3) and (4) to forecast both the price level and the level of output that result from the simple AS - AD model of Section 21-2. You may assume that the slope of the aggregate supply curve is 2⁄3; that the values of the money supply, velocity, and potential GDP are 9, 8, and 7, respectively; and that the expected price level is 5.
b. Evaluate your forecast in light of the Lucas critique.
c. How does this forecast differ from that which would result from a perfect-foresight model?
d. Is this forecast better or worse? Explain.
Suppose that the firm uses three inputs to produce its output: capital K, labor, L and materials, M. The firm's production function is given by Q = K^ (1/3) * L ^ (1/3) * M ^ (1/3). The prices of capital, labor, and materials are r=1, w=1, and m=1..
What is the minimum increase in income necessary for the consumer to be as well off under price px = 1, py = 2, as she/he was at prices px = 1, py = 1 Explain why the percentage increase is smaller than the increase in the CPI for the consumer
Atari needs $4.5 million in new investment capital to develop and market downloadable games software for its new GPS2-ZX system. The plan is to sell $10,000 face-value corporate bonds at a discount of $9000 now.
Is Lionel better off in the new or old situation?
Initially, three administrators are trained for each system. Turnover will result in one additional administrator being trained each year. A course day is 8 hours.
Other things equal, in which year was seignior age revenue greater? (Assume that asset holders correctly anticipated the path of inflation.)
multiplier modelc3000.5yd t1000 i200 g2000a. calculate the equilibrium level of gdp and demonstrate on a
Mary plans the entire week's meals for her family, while Fred shops each day. Which is likely to produce more varied meals? What is this effect called?
Assume Nail Mania advertises in the local newspaper. Each day it advertises costs $100. Over the past several months, Nail Mania has conducted market research and developed the following information Number of days advertised per week Number of cust..
You are the manager of a monopoly. A typical customer's inverse demand function for your firm's product is p=250-4Q and your cost function is C(Q)=10Q. Determine the optimal two part pricing strategy. Per Unit fee Fixed FeeHow much addtional profit..
Assume that the Bank of Ecoville has the following balance sheet and the Fed has a 10% reserve requirement in place: BALANCE SHEET FOR ECOVILLE INTERNATIONAL BANK ASSETS LIABILITIES Cash $33,000 Demand deposits $99,000
Consider the following data on the asset: Cost of the asset, I = $100,000 Useful life, N = 5 years Salvage value, S = $10,000 a. Compute the annual depreciation allowances and the resulting book values
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