Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 8, Problem 2DQ
To determine
Behavioral economics and metal process.
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Exercise 5.
There are observed following behavioral equations in the economy:
C = Co + c(Y-T)
1 = 1o - WR
G = Go
T = To
where: Co > 0, lo > 0, Go > 0, To > 0, ce (0; 1), w > 0. Solve following problems:
a) Find IS Curve
b) Present graphically how change in government spending affects economy
c) Present graphically how change in autonomous tax affects economy
d) There is budget deficit in the economy. Government is able to reduce deficit either by
increasing taxes or by reducing government spending. Explain, which instrument should
be used to reduce budget deficit?
e) Government is able to change either taxes or government spending. Which instrument
should be used if government tends to increase aggregate income?
Answer the question on the basis of the following two schedules, which show the amounts of additional satisfaction (marginal utility) that a consumer would get from successive quantities
MUS
56
48
32
24
20
16
Units of J
1
2
3
4
5
6
7
Multiple Choice
O
O
What level of total utility is realized from the equilibrium combination of J and K, if the consumer has a money income of $36 and the prices of J and K are $4 and $4, respectively?
O
12
238 utis
40 utils
204
Units of K
1
2
3
4
5
6
7
MUK
32
28
24
20
12
10.
8
Find marginal utility for each consumption level for both products and please show your work in Table.
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