Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
1. Xanadu's desired national saving can be expressed as:
O. Sd = 20 + 200r
O. Sd = 10 + 200r
O. Sd = 10 + 100r
O. Sd = 15 + 200r
2. Xanadu's desired investment can be expressed as
O. Id = 20 – 100r
O. Id = 32 – 200r
O. Id = 75 – 200r
O. Id = 30 – 200r
![Consider an economy called Xanadu for which desired aggregate consumption
depends on income, Y , and the real interest rate, r', according to
Cª = 100 + 0.7Y – 200r.
%3D
Xanadu's GDP is Y = 1000and government spending on goods and services is
G =
= 180. Xanadu's desired future capital stock is given by
K* = 140 – 100uc
where ucdenotes the user-cost of capital. The price of capital is PK = 2, the
physical depreciation rate isd = 0. 1and the existing capital stock is
Ko = 50.T
evolves according to
%3D
apital stock between any period t and the following period t+1
K+1 = I; + (1 – d)K,
wherel is the level of investment. Assume throughout that net factor payments
from abroad (NFP) is equal to zero.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Feab19b59-ca62-4d3a-b330-d2ceaed4ac27%2F9095b457-ef04-44ed-bdce-607db7ce1e15%2Fqn3a16m_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider an economy called Xanadu for which desired aggregate consumption
depends on income, Y , and the real interest rate, r', according to
Cª = 100 + 0.7Y – 200r.
%3D
Xanadu's GDP is Y = 1000and government spending on goods and services is
G =
= 180. Xanadu's desired future capital stock is given by
K* = 140 – 100uc
where ucdenotes the user-cost of capital. The price of capital is PK = 2, the
physical depreciation rate isd = 0. 1and the existing capital stock is
Ko = 50.T
evolves according to
%3D
apital stock between any period t and the following period t+1
K+1 = I; + (1 – d)K,
wherel is the level of investment. Assume throughout that net factor payments
from abroad (NFP) is equal to zero.
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