Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
expand_more
expand_more
format_list_bulleted
Question
Chapter 17, Problem 8E
(a)
To determine
Compute the value of housing prices for each case.
(b)
To determine
The sensitivity of condo prices to the expected
(c)
To determine
The sensitivity of the condo prices to the down payment rate.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
3. Supply and demand for loanable funds
The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable
funds, and the downward-sloping blue line represents the demand for loanable funds.
Supply
Demand
100
200
300
400
500
LOANABLE FUNDS (Billions of dollars)
A
INTEREST RATE (Percent)
m
0
0
600
During the 1980s, 1990s, and the first decade of the 20th century, the United States experienced a significant inflow of capital from abroad. For example, Toyota, BMW, and other foreign car companies built auto plants in the United States. Draw a diagram of the U.S. capital market, show the effect of this inflow on the rental price of capital in the United States and on the quantity of capital in use. Describe it in words.
b) Using a diagram of the U.S. labor market, show the effect of the capital inflow on the average wage paid to U.S. workers.
4. Supply and demand for loanable funds
The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable
funds, and the downward-sloping blue line represents the demand for loanable funds.
INTEREST RATE (Percent)
9
8
0
0
100
Supply
Demand
200 300 400 500 600 700 800 900 1000
LOANABLE FUNDS (Billions of dollars)
Chapter 17 Solutions
Macroeconomics (Fourth Edition)
Knowledge Booster
Similar questions
- The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds. 8 7 Supply 6 400, 4 Demand 100 200 300 400 500 600 700 800 LOANABLE FUNDS (Billions of dollars) INTEREST RATE (Percent)arrow_forwardSuppose your weekly allowance from your parents is $100 and your part-time job pays $10 per hour. The slope of the line plotting the relationship between the hours worked per week (the horizontal axis) and the income per week (the vertical axis) is $. (Enter your response as an integer.) Suppose you start with 10 hours of part-time work and then decide to increase your time working by 3 hour(s). By how much will your weekly income increase? $. (Enter your response as an integer.) Suppose you start with 10 hours of work and then decide you need additional income of $20 per week. How many additional hours would you have to work? hours. (Enter your response as an integer.)arrow_forwardAgain, the following graph depicts the market for loanable funds. An investment tax credit effectively lowers the tax bill of any firm that purchases new capital in the relevant time period. Suppose the government repeals a previously existing investment tax credit. Shift the appropriate curve(s) on the following graph to show the impact of this policy. INTEREST RATE (Percent) pemand Supply QTY OF LOANABLE FUNDS (Billions of dollars) The repeal of the previously existing tax credit causes the interest rate to and the level of investment toarrow_forward
- Josel owns two fields: Green 4. Joint PPF and quantity restriction field and Blue field. He can produce corn and wheat. Green field has 80 acres, and it takes 10 acres to produce 1 bushel of corn and 20 acres to produce 1 bushel of wheat. Blue field has 100 acres, and it takes 20 acres to produce 1 bushel of corn and 10 acres to produce 1 bushel of wheat. Suppose that the government imposes a quantity restriction on only corn. Specifically, A quantity restriction of 4 bushels of corn in Green field. That is, Green field is allowed to produce at most 4 bushels of corn, and A quantity restriction of 2 bushels of corn in Blue field. That is, Blue field is allowed to produce at most 2 bushels of corn. (a) Sketch the joint PPF. Clearly label your graph (i.e., indicate values for slopes, intercept(s), endpoint (s), and kink(s)).arrow_forwardConsider an economy with two goods, consumption c and leisure I, and a representative consumer. The consumer is endowed with 24 hours of time in a day. A consumer's daily leisure hours are equal to 1 = 24 - h where h is the number of hours a day the consumer chooses to work. The price of consumption p is equal to 1 and the consumer's hourly wage is w. The consumer faces an ad valorem tax on their earnings of T percent. The consumer also receives some exogenous income Y that does not depend on how many hours she works (e.g. an inheritance). The consumer's preferences over consumption and hours of work can be represented by the utility function: h'+p U(C,h) = c-B- 1+ p where ß> 0 and p > 0 are parameters. TENTO COITS ar answer aneren ananm pally. p (j) Suppose instead that the consumer's utility function was U(c, h) = min(c, -h). Would the EB from a unit excise tax be larger or smaller compared with the original utility function. Explain your answer in 4 sentences.arrow_forwardConsider an economy with two goods, consumption c and leisure I, and a representative consumer. The consumer is endowed with 24 hours of time in a day. A consumer's daily leisure hours are equal to 1 = 24 - h where h is the number of hours a day the consumer chooses to work. The price of consumption p is equal to 1 and the consumer's hourly wage is w. The consumer faces an ad valorem tax on their earnings of T percent. The consumer also receives some exogenous income Y that does not depend on how many hours she works (e.g. an inheritance). The consumer's preferences over consumption and hours of work can be represented by the utility function: U(C,h) = c-B- where ß> 0 and p > 0 are parameters. ‚h¹- P 1+ p a) What is this consumer's budget constraint? b) Solve for the consumer's utility maximizing hours of work h*(w, 1-T) and consumption c* (w, 1 - T, Y). c) What is the compensated own-price elasticity for the supply of hours of work? For parts (d) - (h), assume the following: w = $50,…arrow_forward
- Consider an economy with two goods, consumption c and leisure I, and a representative consumer. The consumer is endowed with 24 hours of time in a day. A consumer's daily leisure hours are equal to 1 = 24-h where h is the number of hours a day the consumer chooses to work. The price of consumption p is equal to 1 and the consumer's hourly wage is w. The consumer faces an ad valorem tax on their earnings of T percent. The consumer also receives some exogenous income Y that does not depend on how many hours she works (e.g. an inheritance). The consumer's preferences over consumption and hours of work can be represented by the utility function: h²+p U(c,h) = c-B- where ß> 0 and p > 0 are parameters. 1+ P a) What is this consumer's budget constraint? (e) Suppose now that the income tax liability is increased to T = 0.3. Calculate the consumer's utility at their new utility maximizing consumption and labour supply bundle after the tax change. (h) Using the excess burden formula, calculate…arrow_forwardRemember to illustrate diagramatically for some of these parts! 6. Assume you can work as many hours you wish at £12 per hour (net of tax). If you do not work, you have no income. You have no ability to borrow or lend, so your consumption, c, is simply equal to your income. a) Derive and plot the feasible set, between daily values of consumption c, and “leisure”, l. Label the values at the intercepts (the points where the feasible frontier cuts the two axes). b) Assume that your optimal choice of consumption and leisure is to work 8 hours per day. Illustrate this choice diagrammatically using the feasible set and indifference curves. c) Use indifference curves and the feasible set to show why, given the properties of the optimal choice in part b), it is not optimal to work, say, 10, or 6 hours per day. d) Now assume that you receive an income of £140 per week from an unknown benefactor. Show the impact on your feasible set, and show a new optimal choice in which consumption increases…arrow_forwardConsider an economy with two goods, consumption c and leisure I, and a representative consumer. The consumer is endowed with 24 hours of time in a day. A consumer's daily leisure hours are equal to 1 = 24 - h where h is the number of hours a day the consumer chooses to work. The price of consumption p is equal to 1 and the consumer's hourly wage is w. The consumer faces an ad valorem tax on their earnings of T percent. The consumer also receives some exogenous income Y that does not depend on how many hours she works (e.g. an inheritance). The consumer's preferences over consumption and hours of work can be represented by the utility function: h¹+p U(C,h) = c-B- where ß> 0 and p > 0 are parameters. 1+ p (d) Suppose the income tax rate is initially zero (i.e. T = 0). Calculate the consumer's utility at their utility maximizing consumption and labour supply bundle. (f) Calculate the change in the consumer's surplus (i.e. utility) following the tax change. i) Now suppose that p = 1…arrow_forward
- Consider an economy with two goods, consumption c and leisure l, and a representative consumer. The consumer is endowed with 24 hours of time in a day. A consumer's daily leisure hours are equal to l = 24 – h where h is the number of hours a day the consumer chooses to work. The price of consumption p is equal to 1 and the consumer's hourly wage is w. The consumer faces an ad valorem tax on their earnings of T percent. The consumer also receives some exogenous income Y that does not depend on how many hours she works (e.g. an inheritance). The consumer's preferences over consumption and It hours of work can be represented by the utility function U(c, h) = c- (a) What is this consumer's budget constraint? (b) Solve for the consumer's utility maximizing hours of work h*(w, 1 - T, Y) and con- sumption c*(w, 1 - T, Y). (c) Repeat part (b) for a consumer with the utility function U(c, h) = alog(c) - Blog(h).arrow_forwardConsider an economy with two goods, consumption c and leisure I, and a representative consumer. The consumer is endowed with 24 hours of time in a day. A consumer's daily leisure hours are equal to 1 = 24 h where h is the number of hours a day the consumer chooses to work. The price of consumption p is equal to 1 and the consumer's hourly wage is w. The consumer faces an ad valorem tax on their earnings of T percent. The consumer also receives some exogenous income Y that does not depend on how many hours she works (e.g. an inheritance). The consumer's preferences over consumption and hours of work can be represented by the utility function: h¹. P U(C,h) = c-B- where ß> 0 and p > 0 are parameters. 1+ p a) What is this consumer's budget constraint? b) Solve for the consumer's utility maximizing hours of work h*(w, 1-T) and consumption c* (w, 1-T, Y). c) What is the compensated own-price elasticity for the supply of hours of work?arrow_forward3) Consider the loanable funds market. Use the following supply and demand equations to answer the questions below. Assume that r is measured as a percentage and Q is the quantity of loans measured in billions. r = 20 - .006Q" r= .5+.004Q$ a) Assume that ↑ – G = 0, find the equilibrium interest rate and quantity of loans. b) Show equilibrium graphically, label all axes and intercepts. c) Suppose that T – G = -600 and the government borrows the entire amount domestically. Find the new demand equation for loanable funds. d) Find the new interest rate and quantity of loans.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education