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The answer to Aggregate demand
You have been appointed economic advisor to Examland. The mpc is 0.6; investment is $1000; government spending is $8000; consumption is $10000; and next exports are $1000.a. What is the level of income in the country?b. Net export increases by $2000. What will happen to income?c. What will happen to unemployment? (Remember Okun's rule of thumb)
Let D be the quantity of demand, S be the quantity of supply and P be the price in US dollars. The relationship between Quantity of demand and price can be represented by:D = 10 - 2*P, While the relationship between supply and price is S = 2 + 3*P
a. What is the equilibrium price? What is the equilibrium quantity of supply and demand?
b. If the government set the price to 3, will there be surplus supply or surplus demand? What is the quantity of surplus demand or surplus demand?
Show graphically the amount of the change that is due to the substitution effect and the amount of the change that is due to the income effect.
Illustrate what are the long-run effects on prices, output, and profits in monopolistic and monopolistically competitive industries.
Answer the following Multiple choice questions.
With the help of an AD-AS diagram, explain the effect on the price level and real GDP. Use an upward sloping AS curve and be clear about the interconnections among markets.
Suppose if the discount rate for the stock is 12 percent, at what price will the stock sell.
Which one shirts or sweaters, has a demand-elasticity which allow you to increase the price, sell fewer units BUT still increase your revenues.
Illustrate what is the current expected price of the stock. What is the expected price of the stock at Year 6.
Compute the premerger Herfindahl-Hirschman index (HHI) for this market. Suppose that any two of these firms merge. What is the postmerger HHI.
The following quotations are from an article in the Financial Times on November 9, 2007:
Illustrtae what is the profit-maximizing level of price and quantity for this monopolist.
Suppose the demand curve for a product is given by Q = 300-2P+4I where 'I' is average income measured in thousands of dollars. The supply curve is Q = 3P - 50.
What money supply must the Bank of Canada set next year if it wants to keep the price level stable? What money supply must the Bank of Canada set next year if it wants inflation of the ten percent?
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