2.Give a graphical confirmation of the sign of the multiplieraQodfor the linear one-commodity market modelP=aQs + b(a>0, b>0)PcQ+d (c>0, d> 0)

P = aQs + b ...(i) P = -cQd + d ...(ii) Finding the equilibrium by equating prices in both…

Answered: Give a graphical confirmation of the…

Give a graphical confirmation of the sign of the multiplier od for the linear one-commodity market model P=aQs + b PcQ+d (a> 0, b>0) (c>0, d> 0)

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 that firm uses 3 units of labor (L) with 4 units of capital (K) in fixed proportion. Which of the following is correct? The law of diminishing MRTSLK holds and thus Lagrange multiplier method is applicable MRTSL,K is not well defined and thus Lagrange multiplier method is applicable The law of diminishing MRTSLK holds and capital and labor are perfect complements. O MRTSLK is not well defined and thus Lagrange multiplier method is not applicable
The formula for economic impact is I(r)=(A)/1-r The formula for impact change is ∆I= I'(r)*∆r The formula for percentage change is g(r)=(r)/1-r
Assume that specific functional forms are assumed for the consumption function and the investment demand function: C = c1(Y; – G;) + c2(Y;+1- G++1) – C3ri I = -dır: + d2At+1+ d3Kt Where c1, C2, c3, di, dzand d3are 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, dı = 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 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 between values. Find Y for each r:using an Excel sheet and draw the IS curve. Does it have the expected slope? Comment f) Find another version of the IS curve with A…
How many points (out of the 6 shown) can be explicitly plotted to form the IS curve given the goods market equilibrium?A goods market equilibrium is shown below: A, B, C, D, E, F 32- A goods market equilibrium is shown below: S₁ (Y= 400) 28- Real Interest Rate, r (%) S2(Y=600) S3 (Y = 800) 226 24- A 20- B C 16- 12- E 4- 0- 0 l(r) F 50 100 150 200 250 300 Desired national saving / desired investment We recommend that you drow out the IS curve before answering
(1)The following macroeconomic model describes the economy of Sunderland. 1. Y= C +I + G + NX 2. C = 220 + 0.63 Y 3. 1 = 1000- 2000R 4. G = Go 5. NX = 525-0.10Y-50OR 6. M (0.1583Y-1000R)P (a)ls it a fair characterization to refer to equation #2 as a "simple" consumption function? Explain. (b)Derive the expression for equilibrium real output, Y, for this economy. Note: In your final expression for Y, restrict coefficient values to three decimal points. (c) Suppose government spending is 1200 , money supply by the Central Bank is 900 and the price level is 1, find the value of GDP (Y) and equilibrium interest rate (R) for Sunderland. Income Identity Consumption function Investment function Government Expenditure Net export function Money market equilibrium (2)The questions in this section are related to the macroeconomic model of Sunderland. (a)The expression you are asked to derive in question #1b can be considered an aggregate demand curve. Do you agree? Explain your answer. (b)Sketch…
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Refer to the macroeconomic example, use Cramer's rule to compute Y* AND I*. The equilibrium values of Y and I evaluated at M₀=300, G₀=500, a=100, α=200, b=0.8, t=0.5, β=1, γ=0.4, and δ=1 are Y* =?, I*=?
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Read Kiyotaki (1998). Consider the model in section 2 of the paper. Suppose there is no borrowing constraint (i.e., assume is arbitrarily large). Also assume that a = 1.2, 3=0.9, y = 1.05, 8 = 0.1, and n = 4. (The notations of variables and parameters follow Kiyotaki (1998). Just in case, & denotes the lower case of Delta in the Greek alphabet.) Reference: Kiyotaki, N. (1998). "Credit and Business Cycles." The Japanese Economic Review, volume 49, issue 1, pages 18-35. (You can obtain a free electronic copy of this article through the university library's website. If you do not know how, please ask the librarians.) Answer the following questions. 1. What is the equilibrium value of the net interest rate in the steady state? Enter your answer in the blank box below. (For example, if your answer is 5% in percentage points, then enter 0.05 in the blank box below.) 2. Compute the ratio of aggregate borrowing (Bt+1/rt) to aggregate output (Yt + Y') in the steady state. (You can assume that…
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