Suppose that as a result of the recent economic turmoil in financial markets, the expectations of...
Suppose that as a result of the recent economic turmoil in financial markets, the expectations of an upcoming recession have risen. As a result, people become more thrifty and save more and consume less.
A) For a given interest rate and a fixed price level, what happens to employment and output when this happens? What happens to private savings?
B) Redo the above analysis when the interest rate is allowed to adjust. Now what happens to private savings? Is there a paradox of thrift (savings)?
C) In general, can there be a paradox of thrift in the market clearing model – where the price level is allowed to adjust? Explain.
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Suppose that as a result of the recent economic turmoil in
financial markets, the expectations of...
Suppose that as a result of the recent economic turmoil in financial markets, the expectations of...
Suppose that as a result of the recent economic turmoil in financial markets, the expectations of an upcoming recession have risen. As a result, people become more thrifty and save more and consume less. A) For a given interest rate and a fixed price level, what happens to employment and output when this happens? What happens to private savings? B) Redo the above analysis when the interest rate is allowed to adjust. Now what happens to private savings? Is there...
On the planet Zorp, consumers consume mechanically based on the following consumption function ? = ?0...
On the planet Zorp, consumers consume mechanically based on the following consumption function ? = ?0 + 0.6? − 500?, where C is consumption, C0 is a constant, Y is consumers’ income (equivalent to GDP), and i is the interest rate written in decimal terms (i.e. a 5% interest rate gives i=0.05). Investors invest based on the following function: ? = ?0 − 1000?, where I is investment and I0 is a constant. There is no government in Zorp, so...
just answers 19 An increase il SI00. Which of the foll the MPC is 0.5 and...
just answers
19 An increase il SI00. Which of the foll the MPC is 0.5 and the increase in invesu the MPC is 0.5 and the increase in investment wd the MPC is 0.75 and the increase in investment was 25 the MPC is 0.75 and the increase in investment was 20 Assuming the new equilibrium income level is $400 and the level of full employment income is S600, there would be a: deflationary gap of $50 deflationary gap of...
What role deres money have in the under Classical economic the Money serves as a catalyst...
What role deres money have in the under Classical economic the Money serves as a catalyst to increase savings and, as a result, investment b) Money has a direct influence only on the level and direction of interest rate c) Money indirectly affects output, employment and inflation. d) Money has a direct influence only on potential inflation 3) When the current market rate is greater than the original coupon rate of a bond, the price of the hand will bond...
32. The rational expectations hypotheses implies that discretionary macroeconomic policy is: a. relatively effective in both...
32. The rational expectations hypotheses implies that discretionary macroeconomic policy is: a. relatively effective in both the short run and long run b. relatively effective in the short run but ineffective in the long run c. relatively ineffective in both the short run and long run d. effective in the long run since decision makers will continually make predictable, systematic errors 33. The modern view of the Phillips curve suggests that a. when inflation is less than anticipated, unemployment will...
1. Which of the following is true regarding spending and saving? a. Money that is spent...
1. Which of the following is true regarding spending and saving? a. Money that is spent cannot be saved. b. Spending is good for the economy; saving is bad for the economy. c. Spending money on items that are on sale is the same as saving money. d. Saving money and spending the same dollars has become easier with online banking. 2. If savers were to decrease the level of savings in an economy, what would happen in the loanable...
1. Financial institutions in the U.s. economy Suppose Eric would like to use $10,000 of his savings to make a finan...
1. Financial institutions in the U.s. economy Suppose Eric would like to use $10,000 of his savings to make a financial investment. One way of making a financial investment is to purchase stock or bonds from a private company Suppose RoboTroid, a robotics firm, is selling bonds to raise money for a new lab-a practice known as finance. Buying a bond issued by RoboTrold would give Eric the firm. In the event that RoboTroid runs into financial difficulty, will be...
1. Financial institutions in the U.S. economy Suppose Edison would like to use $3,000 of his...
1. Financial institutions in the U.S. economy Suppose Edison would like to use $3,000 of his savings to make a financial Investment. One way of making a financial investment is to purchase stock or bonds from a private company. Suppose TouchTech, a hand-held computing firm, is selling stocks to raise money for a new lab-a practice known as finance. Buying a share of Touch Tech stock would give Edison the firm. In the event that TouchTech runs into financial difficulty,...
1. Financial institutions in the U.S. economy Suppose Van would like to use $3,000 of his...
1. Financial institutions in the U.S. economy Suppose Van would like to use $3,000 of his savings to make a financial investment. One way of making a financial investment is to purchase stock or bonds from a private company Suppose TouchTech, a hand-held computing firm, is selling bonds to raise money for a new lab-a practice known as finance. Buying a bond issued by TouchTech would give Van the firm. In the event that TouchTech runs into financial difficulty, will...
1. Financial institutions in the U.S. economy Suppose Yakov would like to use $1,000 of his...
1. Financial institutions in the U.S. economy Suppose Yakov would like to use $1,000 of his savings to make a financial investment. One way of making a financial investment is to purchase stock or bonds from a private company. Suppose Robo Troid, a robotics firm, is selling bonds to raise money for a new lab-a practice known as finance. Buying a bond issued by Robo Troid would give Yakov the firm. In the event that RoboTroid runs into financial difficulty,...
just answers
19 An increase il SI00. Which of the foll the MPC is 0.5 and the increase in invesu the MPC is 0.5 and the increase in investment wd the MPC is 0.75 and the increase in investment was 25 the MPC is 0.75 and the increase in investment was 20 Assuming the new equilibrium income level is $400 and the level of full employment income is S600, there would be a: deflationary gap of $50 deflationary gap of...
What role deres money have in the under Classical economic the Money serves as a catalyst to increase savings and, as a result, investment b) Money has a direct influence only on the level and direction of interest rate c) Money indirectly affects output, employment and inflation. d) Money has a direct influence only on potential inflation 3) When the current market rate is greater than the original coupon rate of a bond, the price of the hand will bond...
1. Financial institutions in the U.s. economy Suppose Eric would like to use $10,000 of his savings to make a financial investment. One way of making a financial investment is to purchase stock or bonds from a private company Suppose RoboTroid, a robotics firm, is selling bonds to raise money for a new lab-a practice known as finance. Buying a bond issued by RoboTrold would give Eric the firm. In the event that RoboTroid runs into financial difficulty, will be...
1. Financial institutions in the U.S. economy Suppose Edison would like to use $3,000 of his savings to make a financial Investment. One way of making a financial investment is to purchase stock or bonds from a private company. Suppose TouchTech, a hand-held computing firm, is selling stocks to raise money for a new lab-a practice known as finance. Buying a share of Touch Tech stock would give Edison the firm. In the event that TouchTech runs into financial difficulty,...
1. Financial institutions in the U.S. economy Suppose Van would like to use $3,000 of his savings to make a financial investment. One way of making a financial investment is to purchase stock or bonds from a private company Suppose TouchTech, a hand-held computing firm, is selling bonds to raise money for a new lab-a practice known as finance. Buying a bond issued by TouchTech would give Van the firm. In the event that TouchTech runs into financial difficulty, will...
1. Financial institutions in the U.S. economy Suppose Yakov would like to use $1,000 of his savings to make a financial investment. One way of making a financial investment is to purchase stock or bonds from a private company. Suppose Robo Troid, a robotics firm, is selling bonds to raise money for a new lab-a practice known as finance. Buying a bond issued by Robo Troid would give Yakov the firm. In the event that RoboTroid runs into financial difficulty,...
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