5. Using money creation to pay for government spending Consider Kharkeez, a hypothetical country that produces only cakes. In 2019, a cake is priced at $4.00. Complete the first row of the table with the quantity of cakes that can be bought with $900. Hint: In this problem, assume it is not possible to buy a fraction of a cake, and always round down to the nearest whole cake. For example, if y calculations result in 1.5 cakes, the answer should be 1 cake. Year 2019 2020 Price of a Cake Cakes Bought with $900 (Dollars) (Quantity) 4.00 Suppose the government of Kharkeez cannot raise sufficient tax revenue to pay its debts. In order to meet its debt obligations, the government pa money. As a result, the money supply rises by 20% by 2020. Assuming monetary neutrality holds, complete the second row of the table with the new price of a cake and the new quantity of cakes that can be bought with $900 in 2020. The impact of the government's decision to raise revenue by printing money on the value of money is known as the

5. Using money creation to pay for government spending Consider Kharkeez, a hypothetical country that produces only cakes. In 2019, a cake is priced at $4.00. Complete the first row of the table with the quantity of cakes that can be bought with $900. Hint: In this problem, assume it is not possible to buy a fraction of a cake, and always round down to the nearest whole cake. For example, if y calculations result in 1.5 cakes, the answer should be 1 cake. Year 2019 2020 Price of a Cake Cakes Bought with $900 (Dollars) (Quantity) 4.00 Suppose the government of Kharkeez cannot raise sufficient tax revenue to pay its debts. In order to meet its debt obligations, the government pa money. As a result, the money supply rises by 20% by 2020. Assuming monetary neutrality holds, complete the second row of the table with the new price of a cake and the new quantity of cakes that can be bought with $900 in 2020. The impact of the government's decision to raise revenue by printing money on the value of money is known as the

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.2P

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1. Calculate the marginal utility per dollar for sodas.
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4. Assume that the following graph show the indifference curve and budget line for a consumer who is choosing between "all other items" and "hand sanitizer". All other items A Hand sanitizer We know that the preferences and demand for hand sanitizer increased dramatically starting in mid-March 2020 due to the coronavirus pandemic. How would you show a change in preferences for hand sanitizer on the graph given above? Would the budget line change, or would the position of the indifference curve change? You may assume that income and prices of all other items and hand sanitizers did not change. Please give an explanation and show the changes on the graph.
On the diagram to the right is plotted a single bundle of 2 books and 3 DVDS consumed per month. This bundle is a point on the consumer's budget constraint. 10- 9- If the price of one book is $135.00 and one DVD is $90.00, then the consumer's level of monthly income is $ (round your answer to the neareast dollar). 8- 7- 2- 0- 9 10 Books (per month) 15 tv MacBook Air esc 80 DIL F1 F2 F4 F5 F6 F7 FB ! @ $ & * 1 2 3 4 7 8. 9 Q W E T Y tab ps lock A S F H J X C V M control option command DVDS (per month) N * *
If we have money, we buy goods and services to satisfy our needs. In economics, thesatisfaction that we get from the consumption of goods and services is called utility. Usea utility graph to explain what happen to the utility when you keep on increasing thenumber of units consumed. Also explain what happens to the utility when you keep onincreasing the number of units consumed. Also explain what happens to the additionalutility (i.e. additional satisfaction) when you increase your consumption by one unit
5. Vera is an impoverished graduate student who has only $100 a month to spend on food. She has read in a government publication that she can assure an adequate diet by eating only peanut butter and carrots in the Öxed ratio of 2 pounds of peanut butter to 1 pound of carrots, so she decides to limit her diet to that regime. a) If peanut butter costs $4 per pound and carrots cost $2 per pound, how much can she eat during the month? b) Suppose peanut butter costs rise to $5 because of peanut subsidied introduced by a politically sensitive government. By how much will Vera have to reduce her food purchases? c) How much in food stamp aid would the government have to give Vera to compensate for the e§ects of peanut subsidy? d) Explain why Veraís preferences are of a very special type here. How would you graph them?
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1. If the consumer can only buy product x, how much will the consumer buy and what will be the total utility? 2.If the consumer buys both product x and product y, how much will the consumer buy of each to maximize utility? 3.When the consumer purchases the utility-maximizing combination of product x and product y, what is the total utility?
1. An individual's budget Suppose Musashi has a weekly budget of $24 to spend on juice and yogurt. Juice is priced at $2 per gallon, and yogurt is priced at $6 per container. If Musashi spends his entire $24 on juice, he can buy gallons of juice. If he spends his entire $24 on yogurt, he can buy containers of yogurt. Use the blue line (circle symbol) to plot Musashi's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of juice and yogurt that are affordable for Musashi. Finally, place the black point (plus symbol) on the point on Musashi's budget constraint that corresponds to a scenario in which Musashi spends $12 on each good. Note: Dashed drop lines will automatically extend to both axes. 24 22 20 BC, ($24) 18 16 Affordable Region 14 12 $12 on Each 6. 4 BC, ($48) 4 6. 8 10 12 14 16 18 24 JUICE (Gallons) 22 20 10 2) YOGURT (Containers)
You have 6 hours to study for 2 exams tomorrow. The relationship between the time studying and test scores is shown below. Economics Psychology Hours 0 1 2 3 134 4 5 6 Score 55 3 70 70 63 76 81 85 88 Hours 0 1 2 3 4 5 6 Score 55 16 70 73 75 75 66 76 a. Use the rule for determining optimal purchases to decide how many hours you should study each subject. Treat each point on an exam like 1 unit of utility and assume you are equally interested in doing well in economics and psychology. You should study economics for hours and psychology for hours.
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1. An individual's budget Suppose Darnell has a weekly budget of $32 to spend on ranch dressing and spinach. Ranch dressing is priced at $4 per bottle, and spinach is priced at $2 per container. If Darnell spends his entire $32 on ranch dressing, he can buy 16 containers of spinach. 8 bottles of ranch dressing. If he spends his entire $32 on spinach, he can buy Use the blue line (circle symbol) to plot Darnell's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of ranch dressing and spinach that are affordable for Darnell. Finally, place the black point (plus symbol) on the point on Darnell's budget constraint that corresponds to a scenario in which Darnell spends $16 on each good. Note: Dashed drop lines will automatically extend to both axes.