PRINCIPLES OF MACROECONOMICS (LL)W/ACC.
7th Edition
ISBN: 9781264088980
Author: Frank
Publisher: MCG
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Question
Chapter 13, Problem 5P
(a)
To determine
The effect of an increase in government purchases from 1,500 to 1,600 on the short-run equilibrium output.
(b)
To determine
The effect of a decrease in tax collection of 100 on short-run equilibrium output.
(c)
To determine
The effect of a decrease in planned investment spending by 100 on the short-run equilibrium output.
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Consider the following intertemporal consumption problem with one good and two periods. The quantity of the good consumed in period 1 and period 2 are q1 and q2. The price of each unit of the good is $1 in both periods. The consumer’s income is I1=10 in the first period and I2=12 in the second period. The consumer can borrow or save money at the interest rate of 50%, that is, r=0.50. The consumer’s utility function is u(q1,q2)= q1q2.
The optimal choice of q1 is
a. 9
b. 10
c. 11
And the consumer will:
d. borrow 1
e. save 1
f. borrow 2
g, save 0
If Andrea’s disposable income increases from $600 to $700 and her level of personal consumption expenditures increases from $450 to $475. You may conclude that her marginal propensity to consume is:
Group of answer choices
0.5
0.1
0.75
0.25
Real interest
rate (percent)
C) an increase in corporate taxes
D) a decrease in tax credits for savings
Supply
D₁
L₁
4
Loanable funds
(dollars per year)
11) Refer to Figure above. A shift from D₂ to Di will result from which of the following?
A) an increase in expected future profits
B) an increase in net exports
A) an increase in the equilibrium real interest rate.
B) a decrease in the equilibrium real interest rate.
D₂
12) All else equal, an increase in net exports accompanied by a decrease in expected future
profits would definitely result in
C) an increase in the equilibrium level of saving and investment.
D) a decrease in the equilibrium level of saving and investment.
Chapter 13 Solutions
PRINCIPLES OF MACROECONOMICS (LL)W/ACC.
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