EBK PRINCIPLES OF ECONOMICS
EBK PRINCIPLES OF ECONOMICS
7th Edition
ISBN: 8220102958395
Author: Mankiw
Publisher: CENGAGE L
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Chapter 34, Problem 2PA

(a):

To determine

Liquidity preference theory to explain the impact of the policy.

(b):

To determine

Impact of change in interest rate on output and price.

(c):

To determine

Change in price due to change the short run equilibrium to long run equilibrium.

(d):

To determine

Impact of change in the price level on demand for money and interest rate.

(e):

To determine

Real effect of money

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3. Consider the market for paper. The process of producing paper creates pollution. Assume that the marginal damage function for pollution is given by: MDF = 3E where damages are measured in dollars and E is the level of emissions. Assume further that the function describing the marginal abatement cost of emissions is given by MAC 120-E where benefits are measured in dollars and E is the level of emissions. a. Graph the marginal damage function (MDF) and the marginal abatement cost function (MAC). b. What is the unregulated level of emissions Eu? What is the social welfare of this emissions level? c. Assume an existing emission quota limits emissions to E = 60. Show on the graph why this policy is inefficient. What is the deadweight loss caused by this policy?
show written calculation for B
Problem 1: 1. If a stock is expected to pay an annual dividend of $20 forever, what is the approximate present value of the stock, given that the discount rate is 5%? 2. If a stock is expected to pay an annual dividend of $20 forever, what is the approximate present value of the stock, given that the discount rate is 8%? 3. If a stock is expected to pay an annual dividend of $20 this year, what is the approximate present value of the stock, given that the discount rate is 8% and dividends are expected to grow at a rate of 2% per year?
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