Homework Answers
a) An increase in the saving during the recession will lead to a even lower demand In the economy and that will lead to a deeper recession, this will shift the aggregate demand to the left, further decreasing the employment in the economy, this will also reduce the interest rate in the market and that can act as a catalyst for higher investment if the market sentiments turned good.
b) An improvement In the technology will increase the investment in the market and shift the demand for the investment to the right, and that will further increase if the interest rates are low, the new equilibrium will be at a higher investment and no change in the interest rate.
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A lt Consumers increase their savings during a recession describe the complete effect that this u have on the econo...
--- - - -- 3. During times of recession, households tend to increase their savings out...
--- - - -- 3. During times of recession, households tend to increase their savings out of current disposable Income. How does this effect the size of the spending multiplier?
1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a....
1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a. an increase in taxes and/or an increase in government spending b. an increase in taxes and/or a decrease in government spending! c. a decrease in taxes and/or an increase in government spending d. a decrease in taxes and/or a decrease in government spending e. a decrease in government purchases and/or a decrease in transfer payments 2. An increase in income tax rates: a. makes...
2.) How do improvement in the level of technology and a decrease in the market interest rate affect the Investment...
2.) How do improvement in the level of technology and a decrease in the market interest rate affect the Investment function?
1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a....
1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a. an increase in taxes and/or an increase in government spending b. an increase in taxes and/or a decrease in government spending c. a decrease in taxes and/or an increase in government spending d. a decrease in taxes and/or a decrease in government spending e. a decrease in government purchases and/or a decrease in transfer payments 2. An increase in income tax rates: a. makes...
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...
Assume you have $100,000 in savings. Pick a stock, bond, or mutual fund that you would...
Assume you have $100,000 in savings. Pick a stock, bond, or mutual fund that you would invest your money into. You can choose one investment or multiple. Share their current prices (value of stock/mutual fund/bond) as listed in the newspaper. *This information can be found online. What objectives do you have for this investment? Was it chosen to maximize short-term gains, long-term stability, or some other objective? Explain how each of the following economic events would affect the value of...
An increase in consumption, combined wiht an increase in exports, would have what effect on aggregate...
An increase in consumption, combined wiht an increase in exports, would have what effect on aggregate demand? a. AD would increase b. AD would decrease c. AD would stay the same d. AD could either increase or decrease, depending on which change was of greater magnitude Which of the following helps explain the downward slope of the aggregate demand curve? a. the real wealth effect b. the interest rate effect c. the open economy effect d. all of the above...
Let’s assume that parameter b in the investment function is small. How an increase in the...
Let’s assume that parameter b in the investment function is small. How an increase in the rental price (or interest rate) will affect the level of investment in the economy? Why? Explain and use the models and graphs.
answer these 4 . will rate after The direct effect of an increase in the money...
answer these 4 . will rate after
The direct effect of an increase in the money supply is that O people will save the money, causing an increase in bank deposits with the result that interest rates will increase. O people will spend the extra money, causing the aggregate demand curve to shift to the right and resulting in a boost to economic activity. O people will spend the extra money, causing the aggregate demand curve to shift to the...
In response to concerns about a future recession, the government decides to give consumers a tax...
In response to concerns about a future recession, the government decides to give consumers a tax rebate (this is the same as a tax decrease). Answer the following using the graphical IS-LM model. a. Draw a graph illustrating the impact of the tax decrease on equilibrium output and the interest rate. b. Now suppose that the central bank does not believe that a recession is looming and determines that it would like to maintain Y at the pre-rebate level. What...
--- - - -- 3. During times of recession, households tend to increase their savings out of current disposable Income. How does this effect the size of the spending multiplier?
1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a. an increase in taxes and/or an increase in government spending b. an increase in taxes and/or a decrease in government spending! c. a decrease in taxes and/or an increase in government spending d. a decrease in taxes and/or a decrease in government spending e. a decrease in government purchases and/or a decrease in transfer payments 2. An increase in income tax rates: a. makes...
2.) How do improvement in the level of technology and a decrease in the market interest rate affect the Investment function?
1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a. an increase in taxes and/or an increase in government spending b. an increase in taxes and/or a decrease in government spending c. a decrease in taxes and/or an increase in government spending d. a decrease in taxes and/or a decrease in government spending e. a decrease in government purchases and/or a decrease in transfer payments 2. An increase in income tax rates: a. makes...
answer these 4 . will rate after
The direct effect of an increase in the money supply is that O people will save the money, causing an increase in bank deposits with the result that interest rates will increase. O people will spend the extra money, causing the aggregate demand curve to shift to the right and resulting in a boost to economic activity. O people will spend the extra money, causing the aggregate demand curve to shift to the...
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