6. Consider the following news headline: "Increase in consumer confidence leads to increase in spending". Which of thefollowing correctly describes the likely effect in our simple macro model?Select one:a. Both the consumption function and the AE function shift upward.b. The consumption function shifts upward.c. The consumption function gets flatter.d. The consumption function shifts downward.e. The AE function shifts upward.7. Suppose the Bank of Canada increases its target for the overnight interest rate by 0.25 percentage points. In thissituation, the Bank will likely need to accommodate the resulting change in the demand for money bySelect one:a. maintaining the current supply of money which will increase the effectiveness of the change in the overnight interestrate.b. increasing the supply of money by buying government securities on the open market.c. decreasing the supply of money by selling government securities on the open market.d. decreasing the supply of money by buying government securities on the open market.e. incre the supply of money by selling government securities on the open market.8. The unemployment rate will understate the true amount of unemployment ifSelect one:a. the official unemployment figure excludes discouraged workers who have stopped actively looking for workb. crime, divorce, and social unrest are all positively correlated with unemploymentc. the actual unemployment rate is greater than the natural rate of unemploymentd. the unemployment rate is risinge. the labour force has grown more rapidly than output9. Investment expenditure is theassociated with business-cycle fluctuations.Select one:volatile component of GDP, and changes in investment area. most; weaklyb. least; notc. least; weaklyd. most; stronglye. least; strongly9. Suppose the NAIRU for Canada is 6.5%, and the actual unemployment rate is 5%. If the Bank of Canada reduces itstarget for the overnight interest rate,Select one:a. it will move real GDP back toward potential GDP.b. it will increase the unemployment rate.c. it will worsen the existing inflationary gap..d. the AD curve will shift to the left.e. the AS curve will shift upward.10. Suppose the Bank of Montreal wants a 4% real rate of return on all its loans, and anticipates an annual inflation rate of6%. It should therefore lend its money at a nominal interest rate ofSelect one:a. 4%b. 5%c. 1%d. 10%e. 9%11. Suppose the unemployment rate is 8.5% and we know that frictional and structural unemployment together accountfor 5.5%. The cyclical unemployment rate is thenSelect one:a. 14%b. 8.5%c.-3.0%d. 5.5%e. 3.0%

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6. Consider the following news headline: "Increase in consumer confidence leads to increase in spending". Which of the following correctly describes the likely effect in our simple macro model? Select one: a. Both the consumption function and the AE function shift upward. b. The consumption function shifts upward. c. The consumption function gets flatter. d. The consumption function shifts downward. e. The AE function shifts upward. 7. Suppose the Bank of Canada increases its target for the overnight interest rate by 0.25 percentage points. In this situation, the Bank will likely need to accommodate the resulting change in the demand for money by

6. Consider the following news headline: "Increase in consumer confidence leads to increase in spending". Which of the following correctly describes the likely effect in our simple macro model? Select one: a. Both the consumption function and the AE function shift upward. b. The consumption function shifts upward. c. The consumption function gets flatter. d. The consumption function shifts downward. e. The AE function shifts upward. 7. Suppose the Bank of Canada increases its target for the overnight interest rate by 0.25 percentage points. In this situation, the Bank will likely need to accommodate the resulting change in the demand for money by

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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On the graph of the consumption function, the horizontal axis measures vertical axis measures A. real GDP; real aggregate expenditure B. real consumption spending; real national income C. real national income or real GDP; real consumption spending D. real disposable income; real national income The graph on the right shows a consumption function, C₁. The current income-consumption combination is shown by point A. while the Suppose the level of income increases. 1.) Use the point drawing tool or the line drawing tool (as appropriate) to show the impact of the increase in income. Label the new income-consumption combination 'B' or the new consumption function, if any, C₂. Suppose there is an increase in expected future income. 2.) Use the line drawing tool to show the impact of such an increase. Label the new consumption function C3. Carefully follow the instructions above, and only draw the required objects. O 10,000- 9,000+ 8,000- 7,000- 6,000- 5,000- 4,000- 3,000- 2,000- 1,000- 0- A…
Suppose now that country's national income increases to $35 billion. Assuming the amount paid in taxes is fixed at $12 billion and MPC = 0.7, what will be the new household consumption? $22.3 billion $21.6 billion $23.7 billion $19.5 billion
Which of the following is true concerning the relationship between the business cycle and aggregate investment spending? O When the economy is in recession, unemployment rises and income falls. Firms will be less likely to purchase new equipment and expand their productive capacity because planned aggregate expenditure has fallen. O When the economy is in recession, unemployment rises and income falls. Firms will be more likely to purchase new equipment and expand their productive capacity because planned aggregate expenditure has risen. O When the economy is in recession, unemployment falls and income rises. Firms will be more likely to purchase new equipment and expand their productive capacity because planned aggregate expenditure has risen. O When the economy is in recession, unemployment falls and income rises. Firms will be less likely to purchase new equipment and expand their productive capacity because planned aggregate expenditure has fallen.
Q1: Refer to the information provided in the Table below, answer the questions that follow: Aggregate Income ($billion) Aggregate Saving -100 150 -85 300 -70 450 -55 600 -40 a. What is the society's Marginal propensity to consume (MPC)? b. If MPC is constant, at income level of $900 billion, what would be the aggregate consumption level? c. What is the simple multiplier for this economy?
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3. Consumption function and non-income determinants The following graphs show an economy's initial position at point A along its consumption function (C). Suppose there is a decrease in the interest rate households pay for items bought on credit, such as cars or housing. On the graph, shift either the consumption curve or the initial point on the consumption function to show the impact of a decrease in the interest rate. (Note: In the scenario where the curve shifts, only shift the curve and do not adjust the position of the point.) RE AL CONSUMPTION (Billions of dollars) C REAL DISPOSABLE INCOME (Billions of dollars) Now suppose that disposable income increases. A On the following graph, shift either the consumption curve or the initial point on the consumption function to show the impact of an increase in disposable income. (Note: In the scenario where the curve shifts, only shift the curve and do not adjust the position of the point.)
Which of the following would be most likely to increase consumption spending? Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer. a A reduction in consumer credit card debt b A drop in stock prices c A higher interest rate d The expectation of lower future prices
Assume that the marginal propensity to consume is 0.75 and that taxes are exogenous. Imagine that government expenditure increases by $10m. Begin by assuming that the interest rate and prices stay fixed. 1. What is the value of the aggregate expenditure multiplier (k)? 2. How would the change be represented in an AD-AS diagram? 3. How would the change differ if the interest rate could change (assuming prices remain fixed)? 4. How would the change differ if the price level could also change?
Explain how each of the following actions will affect the level of planned investment spending and unplanned inventory investment. Assume the economy is initially in income–expenditure equilibrium. a. The Federal Reserve raises the interest rate. b. There is a rise in the expected growth rate of real GDP. c. A sizable inflow of foreign funds into the country lowers the interest rate.
Refer to the information provided in table below to answer the questions that follow. Y C S 0 100 180 190 1. Find the consumption, if the consumption function is: C= 120 +0.2Y. 2. Find aggregate saving. 3. Illustrate that by graph from the information provided in table.
Is 3. Consumption function and non-income determinants The following graphs show an economy's initial position at point B along its consumption function C. Suppose disposable income suddenly and unexpectedly decreases. On the graph, shift either the C curve or the initial point on the C curve to show the impact of a fall in disposable income. Real Consumption Spending (Bilions of dollars) 0 Disposable Income (Billions of dollars) C 16 с 0 B Now suppose that there is an increase in the interest rate households are paid on money they save. On the following graph, shift either the C curve or the initial point on the C curve to show the impact of an increase in the interest