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Consider the utility function u(x1, x2) = x1x2. (a) Graph the indifference curves for utility levels 1 and 2. (They are symmetric hyperbolas Asymptotic to both axes). (b) Graph the
Explain the production function and discuss why it is important? Explain diminishing returns to an input and give an example? Discuss why a firm's cost curve might be different in
Q. What do you mean by Supply of money? Supply of money The supply of money is an exogenous variable in the IS-LM model Money supply is enti
Interest rate determination The real interest rate r will be equal to the equilibrium real interest rate In the classical model we define equil
If equilibrium price falls and the equilibrium quantity of the good purchased decreases, what has happened to either the supply curve or to the demand curve? a. Demand decreased
The circular flow of income in an open economy An open economy is one in which international trade exists. Assume also that there is government spending and taxation. Thus
Draw the PPC model of peace time goods and war time goods and describe its characteristics. Label point A as being more toward peace time goods than war time goods and show graphic
how to calculate it
Store of value - Economic functions of money If you are a fisherman and have a temporary surplus of fish that you want to store for the future, storing the fish might not b
RATCHET EFFECT
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