Consider the impact of a cut in the interest rate set by the central bank (the "policy rate"), which causes banks to lower interest rates for both borrowers and lenders. Select one or more: a. Borrowers like Julia will definitely be better off O b. Borrowers like Julia will definitely increase their current consumption O c. If Marco is a saver (not an investor) he will definitely be worse off O d. If Marco is a saver he will definitely decrease his consumption

Consider the impact of a cut in the interest rate set by the central bank (the "policy rate"), which causes banks to lower interest rates for both borrowers and lenders. Select one or more: a. Borrowers like Julia will definitely be better off O b. Borrowers like Julia will definitely increase their current consumption O c. If Marco is a saver (not an investor) he will definitely be worse off O d. If Marco is a saver he will definitely decrease his consumption

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the real interest rate is 0%. Daniel worked for 60 years and he retired for 20 years. When Daniel had a job, his annual income was $10,000. During retirement, the annual pension he received was $6,000. Suppose Daniel smoothed consumption completely. What was the amount of savings Daniel had when he retired? O $16,000 O $120,000 $600,000 $60,000
Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy's multiplier is 4. Instructions: Enter your answers as a whole number. a. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 3 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? Aggregate demand will initially shift rightward v by $ |billion. b. In what direction and by how much will it eventually shift? Aggregate demand will eventually shift rightward by $ billion.
2) Fred has income of $100,000 this year and $120,000 next year. Fred can borrow at an interest rate of 8% or lend at an interest rate of 2%. Draw Fred's budget constraint between spending this year and spending next year labeling all significant points.
True, False, or Uncertain: Consider a consumer choosing how much to consumer this year or next year. When the interest rate declines, consumption in the present increases? x O True: as the interest rate declines, consumption in this year increases because consumption this year becomes cheaper. False: True: as the interest rate declines, consumption this year declines because consumption in the present becomes more expensive. Uncertain: the effect on consumption in the present depends on the timing of income the timing of income. True: as the interest rate declines, consumption in this year increases because consumption this year becomes more expensive.
Which of the following will shift the consumption function upward? O a. An increase in disposable income O b. An increase in the interest rate O c. A decrease in disposable income O d. Expectations of lower prices in the future O e. A lower interest rate
Suppose that one day your rich aunt unexpectedly gives you $10,000 to use as you like, no strings attached. A fraction of that gift will be consumed (the marginal propensity to consume, MPC) or saved (the marginal propensity to save, MPS). If you are like the "average American," you will save less than 5% of your $10,0002. The money you don't save is consumed and is spent on purchasing goods and services. So, whether you spend the increased income on food, entertainment, paying off loans, or a new bicycle, that money goes back into the economy, where it generates revenue through taxes, and gets spent again. This is because an injection of extra income leads to more spending, which creates more income, and so on. In this way, your money is actually spent many times and it has the effect of stimulating the economy through what is known as the multiplier effect. Gifts from rich aunts are not the only way to stimulate the economy. Governments occasionally provide an economic stimulus by…
O Saving Propensity to Save Curve Dis-saving { Saving O a. Is negative. O b. Is zero. O c. None of the answers is correct. O d. Is positive. 4 Income According to the above diagram: when consumption is a positive amount, saving S
Below is some data for a hypothetical economy: C=0.56YX=50-0.06Y T = 50+ 0.3Y 1 = 60 G=240 Refer to the information above to answer this question. What is the value of MPE? O a. 0.3 O b. 0.4 O c. 0.5 O d. 0.56
QUESTION 6 Potential GDP Aggregate expenditure AE, 45° Y. Real GDP (Y) When real GDP is greater than Yo in the diagram above: O A. - inventories will decrease OB. ·Aggregate expenditure will be less than Real GDP OC. Aggregate expenditure will be equal to Real GDP OD. O D. inventories will increase QUESTION 7 Y G Xn $1,000 $1,400 1,400 1,400 1,400 1,400 $0 $800 -$200 2,500 5,000 7,500 10,000 2,300 3,800 5,300 6,800 1,000 1,000 1,000 1,000 -200 -200 -200 -200 Suppose you are given the data in the table above for a hypothetical economy. All data are in billions of dollars. Yis actual real GDP, and C, Ip, G, and Xn are the consumption, planned investment, government purchases, and net exports components of aggregate expenditures, respectively. Calculate the equilibrium GDP (give your answer in billions of $) Aggregate Expenditure
Suppose that Dell Corporation has 20,000 computersin its warehouses on December 31, 2019, ready tobe shipped to merchants (each computer is valued at$500). By December 31, 2020, Dell Corporation has25,000 computers ready to be shipped, each valuedat $450.a. Calculate Dell’s inventory on December 31, 2019.b. Calculate Dell’s inventory investment in 2020.c. What happens to inventory spending during theearly stages of an economic recession?
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