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Although we usually assume for the Keynesian cross that government spendings are a fixed amount, mostcountries adjust their spendings automatically with national income. Let's represent this scenario by writingthe government spending as
G=G+g
Ywhere G and g are parameters of the government spending. The parameter g represents the marginal change in spending with income: if income rises by $1, G rise by $g×1.
Moreover, not to create large budget deficits governments increase the taxes when government spendingincreases. Let's represent this fiscal fiscal relationship by writing tax revenue as
T=T+tG
where T and t are parameters. The parameter t is the marginal tax rate: if government spending rises by $1, taxes rise by $t×1. Derive the government spending multiplier under this setup, i.e. derive ?Y /?G.
Assume that the aggregate demand curve is P=120 - Q, where P is price level and Q is real output. If the short-run aggregate supply curve
Some firms have a large share of the market while others are just starting. A firm can often create a brand name which gives them market power. Market power is defined as the ability to raise prices without losing all demand. How do you think your fi..
Explain the relationship between Cola Magic and Lemon Heaven Soda and explain what affect a 10% increase in the income of the targetmarket would be on the demand for the Cola Magic?
What counts as GDP (II)? By how much does GDP rise in each of the following scenarios? Explain. (a) A computer company buys parts from a local distributor.
According to theory, if you lower interest rates, business investments and consumer purchases of large durable goods are supposed to increase. In return, this is to help pull us out of a recession. However, this policy of extraordinarily low inter..
Assume that a 1% change in the inflation rate causes a 1% increase in nominal interest rates, which in turn causes a 1% drop in real growth the following year.
Explain the concept of culture. Why is it important to avoid ethno-centricity and gain cultural literacy? In an international business context, what strategies would you apply to achieve your stated goals?
How much revenue will be collected from the tariff? Calculate the increase in consumer surplus under free trade, compared to autarky.
Global integration has given many firms access to new. What are the dimensions of a strategy to capture this lower cost and greater availability of capital?
Assume a bank has $200,000 in deposits, a needed reserve ratio of 10%, and bank reserves of $50,000. Then the bank can make new loans in the amount of?
describes the market structures of oligopoly and monopoly in terms of number of producers, types of products produced, barriers to entry, and whether profit can be made in the short or long run.note whether oligopolies and monopolies are bad or..
question 1a. what is adverse selection? how does it harm the economic process?b. what is moral hazard? what are its
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