Assume that specific functional forms are assumed for the consumption functionand the investment demand function:C = c1(Y; – G;) + c2(Y;+1- G++1) – C3riI = -dır: + d2At+1+ d3KtWhere c1, C2, c3, di, dzand d3are fixed parameters governing the sensitivity ofconsumption and investment to different relevant decision factors.a) Find an algebraic expression of the IS (Investment-Savings) curve.b) Use the above expression to find the slope of the IS curve.C) Assume that the parameter values are: C1 = 0.6, c2 = 0.5, c3 = 10, dı = 20, d2 = 1and d3 = 0.5. Assume that Yt+1 = 15, Gt = 10, Gt+1 = 10, At+1 = 5 and Kt = 15.Assume that rt = 0.1. Find the product in the current period.d) Now suppose ri = 0.15. Find the product Y in the current period.(e) Create a range of values of r, between 0.01 to 0.2, with 0.001 intervals betweenvalues. Find Y for each r:using an Excel sheet and draw the IS curve. Does it have theexpected slope? Commentf) Find another version of the IS curve with A t+1 = 7, and graph both curves, forAt+1= 5 and for At+1 = 7. How does the increase in A t+1 impact the position of the IScurve? Explaing) For the IS curve founded at a), assume that the parameter values are c1=0.5, c2=0.4,C3=1, d1=20, d2=0.5 and d3=0.1. Assume further that Y+1 = 1.2, G=0.2, Gt+1=0.2,At+1=1 and K;=15. Find the IS curve.

The IS curve shows all combinations of interest rates and output levels that result in equilibrium…

Assume that specific functional forms are assumed for the consumption function and the investment demand function: Ct = C₁ (Yt − Gt) + C₂ (Yt+1 − Gt+1) − C3rt It = −d₁rt + d₂At+1 +d3Kt Where C1, C2, C3, d1, d2 and d3 are fixed parameters governing the sensitivity of consumption and investment to different relevant decision factors. a) Find an algebraic expression of the IS (Investment-Savings) curve. b) Use the above expression to find the slope of the IS curve. c) Assume that the parameter values are: c₁ = 0.6, c₂= 0.5, c3 = 10, d₁ = 20, d₂ = 1 and d3= 0.5. Assume that Yt+1 = 15, Gt = 10, Gt+1 = 10, At+1 = 5 and Kt = 15.

Assume that specific functional forms are assumed for the consumption function and the investment demand function: Ct = C₁ (Yt − Gt) + C₂ (Yt+1 − Gt+1) − C3rt It = −d₁rt + d₂At+1 +d3Kt Where C1, C2, C3, d1, d2 and d3 are fixed parameters governing the sensitivity of consumption and investment to different relevant decision factors. a) Find an algebraic expression of the IS (Investment-Savings) curve. b) Use the above expression to find the slope of the IS curve. c) Assume that the parameter values are: c₁ = 0.6, c₂= 0.5, c3 = 10, d₁ = 20, d₂ = 1 and d3= 0.5. Assume that Yt+1 = 15, Gt = 10, Gt+1 = 10, At+1 = 5 and Kt = 15.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

= 9.12. Consider the model of investment with kinked adjustment costs in Section 9.8. Describe the effect of each of the following on the ġ O locus, on the area where K = 0, on 9 and K at the time of the change, and on their behavior over time. In each case, assume 9 and K are initially at Point E+ in Figure 9.13. (a) There is a permanent upward shift of the π(•) function. (b) There is a small permanent rise in the interest rate. (c) The cost of the first unit of positive investment, c+, rises. (d) The cost of the first unit of positive investment, c+, falls.
Suppose that with all exogenous variables, including G and M at their original values, business becomes less confident about the future and reduce their autonomous level of investment from 500 to 200. Solve for the new values of e, Y and NX. With the help of graphs, explain very carefully the mechanisms by which a new equilibrium is reached.
Note : Hand written solution is not allowed.
Please could you help me answering this question, based on if you created a Virtual Reality game. Please make sure that your answer is very detailed throughout each step of the answer
A firm faces the following production function, Y = AKL¹-a (1) Here Y is output, K is capital, L is fixed labour, and A is a measure of technology. The firm uses an optimal amount of capital determined by the condition, MPK = r + 8 (2) Where MPK is the marginal productivity of capital, r is the real interest rate, and 8 is the depreciation rate. (a) Using equations (1) and (2) find an expression for K*, the optimal amount of capital the firm should use. (b) Referring to you result from part (a), comment on what happens to K* when each of the following variables change (holding other variables constant), The measure of technology (A) falls The depreciation rate (8) increases The real interest rate (r) increases (i) (ii) (iii) [Hint: For each of parts (i)-(iii) you are being asked to comment on what happen to K* if just the variable mentioned in the question changes. Your answers should state whether K* increases, decreases, or stays the same. This should be accompanied for each part by…
Functions like the one below are well known to economists: f(x,y) = 520 - max(24.6x,42.8y) Each level curve of this function has a "corner point". Plot at least three of the function's level curves. Then find and enter below the slope (dy/dx) of the line where we find the "corner point" of every level curve of function f. Answer:
Constrained Optimization using Lagrange Multiplier: Cost MinimizationA clothing company produces two goods namely pants (P) and sweaters (S) whose combined cost function is C = 6P2 + 10S2 − PS + 30.In a day, the clothing company is limited by a production quota of 34 units of output only. Inequation form: P + S = 341. State the cost minimization problem of the clothing company.2. Set-up the Lagrange equation and determine the quantity of pants (P) and sweaters (S) that the firm should produce daily to minimize cost.3. What is the effect on cost if the company decides to increase the production quota by 1 more unit?
= Questions 1.6 and 1.7 refer to a consumer with preferences over lotteries represented by the Bernoulli utility function u(x) √4x, who receives two job offers, X and Y, that pay wages that depend on whether the economy enters a boom (A), maintains its actual growth (B) or enters a recession (C). Specifically, X pays (A, B, x℃) = (64, 16,0) and Y pays (YA, YB, YC) = (36, 16, 16). The probabilities of scenarios A, B and C are pA = 1/4, PB 1/2 and pc = 1/4, respectively. = 1.6. Identify the expected utilities of X and Y for this individual. □Eu(X) = 9, Eu(Y) = 8 □Eu(X) = 9, Eu(Y) = 10 Eu(X) = 8, Eu(Y) = 9 □Eu(X) = 8, Eu(Y) = 10. 1.7. Identify the certainty equivalents of X and Y for this individual. □CE(X) = 25, CE(Y) = 16 □ CE(X) = 25, CE(Y) = 20.25 CE(X) = 16, CE(Y) = 25. □ CE(X) = 16, CE(Y) = = 20.25 20.25
Suppose that a consumer/investor has an initial endowment only for the current period, which is Eo =450. She may consume today or in the next period only (two-period model). The interest rate for borrowing and lending in the capital market is 5% (a)Depict the budget constraint for the investor in an inter-temporal consumption diagram! What is the maximum amount the consumer is able to consume in the next period? (b)The consumption preferences of the consumer/investor are best described by a square root function, defined over current and future consumption. What is his optimal consumption plan? Show your calculations! Depict the results in appropriate diagram. Which amount is invested in the capital market?
1
I need some help, Also can you show me all the steps, please? Lizards of a valuable breed (Alligator lizards) have been introduced onto Lizard Island and their population is growing. The Population (P) is modelled by the differential equation dp/pt=-k(p-m) where t is the number of years that have passed since January 2022, M is an upper bound on the population due to limitations on the island’s natural resources, and k is a constant relating to the net population growth rate. Customers (Paying tourists) of the island seeing some lizards is essential for the business, so the operator is keen for the number of lizards to reach 75% of M in January 2028 (a) Use the separation of variables technique to formulate a solution to the differential equation. (b) In January 2022, there were 50 lizards and in January 2023 there were 60. Current scientific research estimates k as 0.05, but M is unknown. Estimate M from this data. (c) The business wants to start feeding the lizards vitamins from…
HighFlyer Airlines wants to build new airplanes with greatly increased cabin space. This will allow HighFlyer Airlines to give passengers more comfort and sell more tickets at a higher price. However, redesigning the cabin means rethinking many other elements of the airplane as well, like engine and luggage placement, and the most efficient shape of the plane for moving through the air, which requires investment spending. The table below shows the level of R&D spending necessary to achieve different rates of return (due to higher ticket revenue). Private Rate of Return Level of R&D Spending 12% $100 10% $200 8% $300 6% $400 4% $500 If the opportunity cost of financial capital for HighFlyer Airlines is 6%, how much should the firm invest in R&D? Assume that the social rate of return for R&D is an additional 2% on top of the private return; that is, an R&D investment that had a 7% private return to HighFlyer Airlines would…