ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- U(C1, C2) = c₁0.8 20.4 where c₁ is the quantity of current consumption goods and c₂ is the quantity of future consumption goods. Consider a consumer whose income is y₁ = 100 in the current period and y₂ = 140 in the future period. The consumer pays lump-sum taxes t₁ and t₂ == = 20 in the current period 10 in the future period. The real interest rate is r = 0.1, or 10%, per period. (a) Write down the consumer's budget constraint for each period and derive the consumer's lifetime budget constraint. What is the value of the consumer's lifetime wealth? [Note: Lifetime wealth is the present value of the consumer's lifetime disposable income] (b) Draw the lifetime budget line on the (C1, C2) plane with c₁ on the horizontal axis and C₂ on the vertical axis. Include the values of the intercepts and the endowment point in your graph. What is the slope of the budget line? (c) What are the two conditions that the consumer's optimal choice of (C1, C2) must satisfy? Find the consumer's optimal…arrow_forwardHarper is a short-lived human who only lives for two years: current year and next year. In the current year, Harper has an income of $189 and has to pay $36 in taxes. Harper expects that he can receive an income of $132 and has to pay $27 in taxes next year before he dies. The real interest rate between current and next year is 7%. What is Harper's lifetime wealth (in $)? Round your answer to at least 2 decimal placesarrow_forwardplease answer part 3arrow_forward
- The Boeing Company buys $3 million worth of steel, $2.5 million worth of computer hardware and software, and $1 million worth of mechanical tools to manufacture a certain model of aircraft. Boeing sells this particular model of aircraft at $10 million. What is the value added by Boeing equal to?arrow_forward4. An economy has government purchases of 1000. Desired national saving and desired investment are given by gd=200+5000r+0.10Y-0.20G jd=1000-4000r When the full-employment level of output equals 5000, calculate the real interest rate that clears the goods market.arrow_forward44. An increase in the general price level in the economy a) Will increase the purchasing power of consumers' wealth and decrease consumption spending. b) Will increase demand for, and decrease supply of loanable funds, causing the interest rate to increase which in turn will cause investment spending to fall. c) Makes domestic goods more expensive than foreign goods than before which will tend to decrease exports and increase imports, thus lowering net exports. d) All the above e) Only (b) and (c) are truearrow_forward
- 1. Suppose you are given the following data: Government Purchases $ 6.0 billion Imports $ 0.3 billion Transfer Payments $ 2.3 billion Consumption $11.9 billion Depreciation $ 2.2 billion Exports $ 0.5 billion Investment $ 3.7 billion Taxes $ 6.4 billion a) Calculate the value of government public savings. b) Calculate the value of household private savings. (arrow_forwardABC Computer Company has a $20 million factory in Silicon Valley in which in builds computer components. During the current year, ABC's costs are labor (wages) of $1.1 million; interest on debt of $0.2 million; and taxes of $0.1 million. ABC sells all its output to XYZ Supercomputer for $2.0 million. Using ABC's components, XYZ builds four supercomputers at a cost of $0.800 million each, which comes from $0.500 million worth of components, $0.2 million in labor costs, and $0.1 million in taxes per computer. XYZ has a $30 million factory. XYZ sells three of the supercomputers to other businesses for $1.0 million each. At year's end, it had not sold the fourth. The unsold computer is carried on XYZ's books as a $0.800 million increase in inventory. According to the product approach, the total GDP contribution of these companies is $ 3.8 million. According to the expenditure approach, since the three supercomputers are sold to businesses, XYZ's sales are counted as investment computer is…arrow_forwardUsing the following information, what is the amount of gross profit? $33,779 6,886 576 551 Purchases Merchandise inventory, September 1 Administrative expenses Rent revenue Oa. $86,957 Ob. $24,048 Oc. $55,982 Od. $25,007 Selling expenses Merchandise inventory, September 30 Sales Interest expensearrow_forward
- ) A college is considering investing $6 million to add 10,000 seats to its football stadium. The athletic department forecasts it can sell all these extra seats at each game for a ticket price of $20 per seat, and the team plays six home games per year. If the school can borrow at an interest rate of 14%, should the school undertake this project? (Show your math!) What would happen if the school expected a losing season and could sell tickets for only 5,000 of the seats?arrow_forwardDepreciation equals ________. a. capital minus gross investment b. capital minus net investment c. net investment minus gross investment d. gross investment minus net investmentarrow_forwardCalculate the value of consumption of fixed capital from the following:- NNP at FC = 4,000 GDP at MP = 5,000 Net indirect taxes = 300 Net factor income from abroad = 200arrow_forward
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