Consider a closed economy. The introduction of new technology and an increase in the marginal propensity to consume of households will decrease real interest rates and the equilibrium quantity of saving supplied and demanded in this economy. Answer true or false. Please briefly explain your answer.
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- Consider the impact of a cut in the interest rate set by the central bank (the "policy rate"), which causes banks to lower interest rates for both borrowers and lenders. Select one or more: U a. Borrowers like Julia will definitely be better off O b. Borrowers like Julia will definitely increase their current consumption O c. If Marco is a saver (not an investor) he will definitely be worse off O d. If Marco is a saver he will definitely decrease his consumptionDuring the 2007–2009 recession, the value of commonstocks in real terms fell by more than 50%. How mightthis decline in the stock market have affected aggregatedemand and thus contributed to the severity of therecession? Be specific about the mechanisms throughwhich the stock market decline affected the economy.1. Let's use the Euler equation two ways. First, to find out the optimal consump- tion path, taking the interest rate as given (Chapter 9 of GLS) and then to find out the equilibrium interest rate that wil Choose sidebar display for saving and investment, taking the consumption path as given (Chapter 11 of GLS). Both times, the utility function will be the same: Uln(c)+0.9ln(+1) So the future counts 90% as much as the present. In Part 1, income each period is 100, and the interest rate is 20%. In Part 2, consumption in each period is 100-in other words, income each period is 100, but income isn't storable (it's "manna"), so you have to consume it or lose it. Answer the following questions. Part 1: What is optimal consumption each period? In period t of this two- period world, will this person be borrowing or saving or neither? ⚫ Part 2: What is the equilibrium interest rate between these two periods? If the equilbrium interest rate were lower than that level, would that create a…
- 1. Use a saving-investment diagram to explain what hap- pens to saving, investment, and the real interest rate in each of the following scenarios in a closed economy. ek ja. Current output rises due to a temporary produc- tivity increase. V b. The tax code changes so that business firms face ehigher tax rates on their revenue (offset by other eb on lump-sum tax changes so there's no overall change in tax revenue).Consider a closed economy. A decrease in the price of goods that firms produce and anincrease in the marginal propensity to save of households will decrease the equilibriumreal interest rate and equilibrium investment in this economy. ture or false or uncertainSuppose that Dell Corporation has 20,000 computersin its warehouses on December 31, 2019, ready tobe shipped to merchants (each computer is valued at$500). By December 31, 2020, Dell Corporation has25,000 computers ready to be shipped, each valuedat $450.a. Calculate Dell’s inventory on December 31, 2019.b. Calculate Dell’s inventory investment in 2020.c. What happens to inventory spending during theearly stages of an economic recession?
- hich theory of consumption best explains the consumption behavior of consumers of our economy? Question No: 02 [Marks: 10] If the State Bank started printing large quantities of Pakistani Rupees (Rs), what would happen to the number of Pakistani Rupees a dollar could buy? Why? Question No: 03 [Marks: 10] Deseribe the difference batuuean foreian diract investmet and foraion nortfolie invastment Who is mora likelu toEconomics Assume in a simple economy that the level of saving is -$800 when aggregate output equals zero and that the marginal propensity to save is 0.25. 4.400 Derive the saving function and the oonsumption function. 3800 45 ne 3.200 OA S-800 +0.25Y and C-800 •0.75Y OB S- B00 -0.26Y and C B00 +0.75Y OC. B-800 -0.25Y and C-800 -0.75Y OD. S-800-0.025Y and C800 -0.075Y U 2.000 1400 Draw a graph showing these functions. 00 1.) Using the ine drawing toot, draw the consumption tunction. Label your line C. 200 2.) Using the ine drawing tool, draw the saving function. Label your ine S. ebo o 1do0 2400 000 do 400- Note: Carefully folow the instructions above and only draw the required abjects. Aggregate income. Y The consumption curve crosses the 45-degree line at a level of output of S (Enter your response as an integer)Fill in the aggregate saving column in the following table. (Include a minus sign if necessary.) Aggregate Income, Y $0 100 200 300 400 500 600 Aggregate Consumption, C $200 250 300 350 400 450 500 The value of the MPC is one decimal place.) T Aggregate Saving, S $-200 150 100 50 0 50 100 (Round your response to CXIE DE Aggregate consumption, C Aggregate saving, S 700- 600- 500- 400 300- 200 100- 0 -100- -200- 300- -400- 100 200 300 400 500 Aggregate income, Y 600
- Other things equal, a decrease in the Z factors the equilibrium interest rate and equilibrium output. Select one: O a. increases; increases O b. increases; decreases Oc decreases; decreases O d. decreases; increasesSuppose that interest rates fall. This will cause: the present values of investment projects to fall; this will cause investment to rise a. Ob. the present values of investment projects to fall; this will cause investment to fall Oc the present values of investment projects to rise; this will cause investment to rise the present values of investment projects to rise; this will cause investment to fall Od.1. According to the Bureau of Economic Analysis, during therecession of 2007–2009, household saving as a fraction of dis-posable personal income increased from a low of just over1 percent in the first quarter of 2008 to 5 percent in the secondquarter of 2009. All else equal, what impact would this changein saving have on the MPC, MPS, and multiplier? How wouldthis change affect equilibrium output when planned invest-ment changes? 2. Assume in a simple economy that the level of saving is –500 whenaggregate output equals zero and that the marginal propensity tosave is 0.2. Derive the saving function and the consumption func-tion, and draw a graph showing these functions. At what level ofaggregate output does the consumption curve cross the 45° line?Explain your answer and show this on the graph.