4. Madeleine is a high school graduate deciding whether to go to university. She (like everyoneelse) lives for two periods after high school. In the first period, she can work (withoutuniversity) for a salary of YH, or she can attend university. If she attends university, she mustpay $5,000 in fees (tuition, books), but she will also earn $5,000 from a summer job. In thesecond period, she will continue to earn Y, if she did not attend university, or she will earn Yuif she went to university. The interest rate at which money can be borrowed or invested is r.Show that she will attend university if:Yu > (2+r)YHExplain how an increase in the interest rate will affect her decision to attend university.

Step 1: Step 2:Explanation An increase in interest rate will amke it moe likely that she will…

Answered: 4. Madeleine is a high school graduate…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Tamika is lending Juan $1,000 for one year. The CPI is 1.60 at the time the loan is made, and they both expect it to be 1.68 in one year. If Tamika and Juan agree that Tamika should earn a 3 percent real return for the year, the nominal interest rate on this loan should be percent.
1. According to part A of Table 5-1, what education level loses most (i.e., has the greatest decrease in wage) from immigration to the United States? Does this result depend on keeping the rental on capital constant? Explain why or why not. 2. Suppose that computers use 2 units of capital for each worker, so that KC = 2 • LC, whereas shoes use 0.5 unit of capital for each worker, so that KS = 0.5 • LS. There are 100 workers and 100 units of capital in the economy. a. Solve for the amount of labor and capital used in each industry. Hint: The box diagram shown in Figure 5-7 means that the amount of labor and capital used in each industry must add up to the total for the economy, so that Use these two equations to solve for LC and LS, and then calculate the amount of capital used in each industry using KC = 2 • LC and KS = 0.5 • LS. b. Suppose that the number of workers increases to 125 due to immigration, keeping total capital fixed at 100. Again, solve…
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At the beginning of the year, you have a saw worth $2,000 and a bunch of trees. says it will pay you $4,000 to not cut down your trees. Freaks4Environment Instead, you hire Lei to use your saw to cut down all of the trees. At the end of the year: you sell trees Lei cut down for $27,000; you pay Lei $15,000; and your saw is now worth $1,000. Based on this information, how much GDP has been created? Round to two decimal places. Do not enter the currency symbol, but enter the negative sign if appropriate. If your answer is -$1.125, enter -1.13. 27,000
5. Interest, inflation, and purchasing power Suppose Diamond is a fan of young-adult fiction and buys only young-adult books. Diamond deposits $2,000 into a savings account that pays an annual nominal interest rate of 10%. Assume this interest rate is fixed, and so it will not change over time. On the day she makes her deposit, suppose that a young-adult book has a price of $20.00. Initially, Diamond's $2,000 deposit has a purchasing power of young-adult books. For each of the annual inflation rates given in the following table, first determine the new price of a young-adult book, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Diamond's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest young-adult book. For example, if you find that the deposit will cover 20.7…
5. Interest, inflation, and purchasing power Suppose Amy is a cinephile and buys only movie tickets. Amy deposits $2,000 in a bank account that pays an annual nominal interest rate of 5%. Assume this interest rate is fixed-that is, it won't change over time. At the time of her deposit, a movie ticket is priced at $20.00. Initially, the purchasing power of Amy's $2,000 deposit is movie tickets. For each of the annual inflation rates given in the following table, first determine the new price of a movie ticket, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Amy's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest movie ticket. For example, if you find that the deposit will cover 20.7 movie tickets, you would round the purchasing power down to 20 movie tickets under…
In 2013, Adanac produced 20 kilos of apples and 30 kilos of bananas. Both fruits were used exclusively for final consumption and nothing else was produced. In 2013, a kilo of apples sold for $7 while a kilo of bananas sold for $10. In 2014, Adanac produced only 10 kilos of apples but produced 45 kilos of bananas. In 2014, prices were $8 per kilo of apples and $8 per kilo of bananas. Using 2013 prices, economists estimate that potential GDP is $700 in 2014 The output gap in 2014 is OA. $180. OB. $360. O C. -$360. OD. -$180. Et
4. Do you think that incomes and purchasing power are related? Are companies required to pay their employees more to compensate for higher costs of living?
David and Morgan are farmers. Each one owns a 12-acre plot of land. The following table shows the amount of zucchini and watermelon each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing zucchini or watermelon or to produce zucchini on some of the land and watermelon on the rest. David Morgan WATERMELON (Pounds) 120 On the following graph, use the blue line (circle symbol) to plot David's production possibilities frontier (PPF), and use the purple line (diamond symbol) to plot Morgan's PPF. 108 96 84 72 60 48 36 24 Zucchini (Pounds per acre) 6 12 8 Watermelon (Pounds per acre) 2 4 David's PPF Morgan's PPF ?

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