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Consider the LM and IS functions determined in questions 2a and 3b and the equilibrium level of income and interest rate determined in 4a. Compare each one of the following situations with the equilibrium obtained in part 4a.
1. Determine the equilibrium level of income and the interest rate if after the invention of a new high-speed computer chip the investment function changes to I '= 1200 - 40 r . Show your work
2. If instead of saving 25% of their disposable income people decide to save 30%, what would happen to the equilibrium interest rate and level of income determined in part a. Show your work.
3. Consider your results from part a. What would happen to the equilibrium level of output and interest rates if the demand for real balances changes to: (M / P)^d = Y - 100r .
What kind of shocks could have caused this change to the money demand function?
Determine the new interest rate and equilibrium level of output.
Compute the coefficient of price elasticity for the price ranges given in the schedule and complete the first column of the table. What do you notice about the algebraic sign of the values you have just computed? Why is this so?
Discuss how each of the following developments would affect the supply of the money, the demand for money, and the interest rate. For each case, describe what happens in closed economy and in small open economy. Describe your answers with diagrams.
What is the marginal opportunity cost of services in each country? Who has the comparative advantage in factory-stuff?
Dana's Doorsteps (DD) is a monopolist in the doorstep industry. Its cost is C= 10Q and demand is P = 30- Q.
State with brief reasons whether the following statements are true, false, or uncertain.
Compute the monopoly equilibrium. Compute the consumer surplus. Assume this firm practices two-parts tariffs, Compute the optimal output.
Suppose a frost kills a large portion of an orange crop, with a resulting higher price of oranges. It has been said that such an increase in price benefits no one since it cannot elicit a supply response; the higher price, it is said, simply "line..
Write down the effect on the real wage and hours worked in the short run.
Which of the following strategies are used by businesses to capture consumer surplus? Nash equilibria are stable because
According to the Heckscher-Ohlin theorem, is Russia capital abundant or labor abundant? Briefly explain. What is the impact of opening trade on the real wage in Russia? Briefly explain.
A Monopolist is deciding how to allocate output between two markets. The two markets are separated geographically. Demand and marginal revenue for the two markets are given by:
The law of comparative advantage recommends that countries specialize in those products in which they have a comparative advantage, not an absolute advantage.
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