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In a certain economy, the components of planned spending are given as: Cd=600+0.8(Y-T)-350r, Ip=200-450r, G=250, NX=20, T=300
a) Find the relationship between planned aggregate expenditure and the real interest rate, r, and output, Y, in this economy.
b) The real interest rate, r, is set by the Reserve Bank to equal 0.05 (5 per cent). Find the short-run equilibrium output.
c) Suppose potential output (Y*) is 4100. The Reserve Bank has set the real interest rate equal to 5 per cent. At that real interest rate, what is the output gap? What should the Reserve Bank do to eliminate the output gap and restore full employment?
Assume that you have been put in the position of the Federal Reserve Chairman and then the President of the United States.
Discuss structural, cyclical, frictional, and natural unemployment. What fiscal and monetary policies are appropriate to fight unemployment? What type of unemployment will be affected most by these policies? Why? Which will be affected least? Why?
Use an appropriate diagram, demonstrate and describe briefly how a increase in minimum wage could result in higher employment in a monopolistic labor market.
The extensive application of protective tariffs destroys the ability of the international marketplace system to allocate resources efficiently.
Consider the following model of aggregate demand, in which there is no international trade, the price level is fixed, and the symbols are defined as in class (all dollar amounts in billions):
Why wage rates do not fall when the demand for labor falls? Explain the reasons.
Determine whether this statement and resulting action by the school violate the First Amendment. Provide support for your answer: Smith, a student at Osceola High School, creates a website where she posts pictures of another student with various capt..
How have these changes in supply and demand affected the equilibrium price of this product? Do you anticipate any changes to the demand and/or supply.
What is the profit-maximizing price for this firm? On the graph show the area, which area represents the net loss to society resulting from the monopoly power conferred by the patent?
What is the opportunity cost of war? What role does scarcity play in the total cost of war? Examples need to not just be about money.
What are some of the problems in using fixed weights to compute real GDP and the GDP price index? How does the BEA’s approach attempt to solve these problems?
Illustrate which tool is used most frequently. Illustrate what are two limitations on the money expansion process.
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