EBK MACROECONOMICS
10th Edition
ISBN: 9780134896571
Author: CROUSHORE
Publisher: VST
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Question
Chapter 10, Problem 1AP
a)
To determine
The effect of increase in the expected future MPK, using the IS-LM model on the following:
- Current output
- The real interest rate
- Consumption
- investment
- the
price level
b)
To determine
The effect of increase in the expected future MPK, using the AD-AS model on the following:
- Current output
- The real interest rate
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Hello Professor,
A rise in consumption in the economy would cause an increase in aggregate demand. Therefore, when consumers spend money on everyday goods and services, it not only helps to stimulate economic growth, but it could also present potential issues like unsustainable debt levels or inflation. I believe that it would be beneficial to consider such factors and adopt a purchasing strategy to help navigate the challenges posed by inflation or unsustainable debt levels.
First, do you think our business will be affected because inflation is rising? How?
Yes, I do believe that the business will be affected because of inflationary pressures. Inflation rising will affect the cost of goods, services, and labor, which could lead to higher operating expenses. The potential reduction of profit margin because of inflation could lead to a smaller percentage of revenue being retained as profit. Therefore, inflation rising will force us to raise prices for…
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