13. Consider the case of two tourists visiting Charlottetown. One is from Montreal, and the other is from Summerside (PEI). a) How will the spending of each of these tourists affect the GDP of PEI? (be specific) b) Which of these tourists (all else equal) is likely to have a larger impact on the GDP of PEI? c) Will the multiplier effects be different for these tourists?
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- 6) Suppose the economy is closed and is characterized by the following behavioral equations: C=C₁+C₁YD Y₁ = Y-T I=b₁ + b₂Y a. Government spending and taxes are constant. Solve for the equilibrium output. What is the value of the multiplier? How does the relationship between investment and output affect the value of the multiplier as compared to the case when investment was exogenous? For the multiplier to be positive what condition must (c₁ +b₁ ) satisfy? Explain your answers? b. Suppose that the parameter bo, sometimes called business confidence, increases. How will the equilibrium output be affected? Will investment change by more or less than the change in bo? Why? What will happen to national saving?3) Suppose the economy is closed and is characterized by the following behavioral equations: C=C₁₂ +G₁Y₂ Y₂=Y-T 1=b₂ + b₂Y a. Government spending and taxes are constant. Solve for the equilibrium output. b. What is the value of the multiplier? How does the relationship between investment and output affect the value of the multiplier as compared to the case when investment was exogenous? For the multiplier to be positive what condition must ( + b) satisfy? Explain your answers? bo C. Suppose that the parameter sometimes called business confidence, increases. How will the equilibrium output be affected? Will investment change by more or less than the change in bo? 'Why? What will happen to national saving?1) Suppose the U.S. government wants to stop importing foreign cars. They believe by not importing cars from other countries they will have absolute advantage in manufacturing cars, and this will help the U.S. economy. Explain what is wrong with this idea. Use a graph to illustrate your point.
- 130.) Fred Durst and Carson Daly are lost in the Amazon wilderness. Other than their evening discussions about Christina Aguilera, they have to find food on which to subsist. The only two edible items they are able to find are bananas and crickets. Due to Carson’s big eyes, he is able to catch 40 crickets in a day if he spends his entire day hunting them down. If he picks bananas all day he can collect 10. Fred is much better at picking bananas. If he spends his entire day picking bananas, he can pick 30. If he spends his entire day hunting down crickets, he can find 60. Both Fred and Carson can choose to produce any linear combination above. Who is the low-cost producer of bananas? Fred Durst, because he only has to give up 1/2 Crickets in order to get an additional banana Fred Durst, because he only has to give up 2 Crickets in order to get an additional banana Carson Daly, because he only has to give up 1/4 Crickets in order to get an…(1.)Telecommuting refers to a system under which employees work at home for one or more days per week and use personal computers and telephone lines to interact with people in the office. Consider an office firm that must decide whether to locate in the Central Business District or along a suburban beltway (to be closer to its suburban workforce). Discuss the effects of telecommuting on the relative attractiveness of the CBD. (2.)Consider a modern city in which office employment has been steadily shifting from the city center to suburban locations along beltways. Suppose that the city improves its mass-transit system, decreasing the monetary and time costs of radial travel. Assume that the improvement in the transit system does not affect the spatial distribution of residents. Will the improvement in the system speed up or slow down the movement of office firms to the suburbs?7. Models: Apply the supply-and-demand model to the following markets. In each case, state the key endogenous variables in the market as well as some important exogenous variables or parameters. Also, express each model as a system of mathematical equations. As an example, Q = F(P, X) might be the demand curve in the computer market, where X captures some exogenous variables like the availability of the iPad or computer games. How many equations are there within each example? How many unknowns? 1. The computer market. 2. The market for your favorite music. 3. The market for a particular currency, such as the dollar, the yen, or the euro. (Hint: This last example suggests an important point about "exogenous variables": what is exogenous in one model, as in a narrow study of the supply and demand for dollars, may be endogenous in a richer model-like a study of the entire U.S. macroeconomy.)
- 4. Suppose that you are an airline executive and you come to work one morning to find a memorandum on our desk indicating that the Boeing 747 that your company leased to fly between New York and London is bringing in revenues of $200,000 per day. You also know that the direct operating expenses (wages for the flight crew, aviation fuel, and that awful airline food) are $180,000 per day. Lastly, suppose you calculate that the interest cost of the loan to pay for the airplane was $40,000 per day. Should you continue to fly the plane? Why might your answer depend on the decision time frame, and what additional information would you need?4) Suppose the economy is closed and is characterized by the following behavioral equations: a. b. C. d. C=C₂+GY₂ Y₂ = Y-T 1=b₂ + b₂Y Government spending and taxes are constant. Suppose that consumers decide to consume less (and therefore to save more) for any given amount of disposable income. Specifically assume that consumer confidence () falls. What will happen to output? As a result of the effect on output you determined in part (a), what will happen to investment? What will happen to public saving? What will happen to private saving? Explain. What is the effect on consumption? Suppose that consumers had decided to increase consumption expenditure, so that Co had increased. What would have been the effect on output, investment, and private saving in this case? Explain. What would have been the effect on consumption? Comment on the following logic: "when output is too low, what is needed is an increase in demand for goods and services. Investment is one component of demand, and…Often, Americans are surprised to learn that _______ of the value of U.S. consumption comes from other countries. A) about 30 percent B) about 35 percent C) about 15 percent D) about 25 percent E) about 20 percent
- 9.) Suppose that Bob still has 10 hours and can produce 10 hamburgers in 1 hour or 2 plates of pasta in one hour. Jimmy also has 10 hours. He can produce 4 hamburgers in 1 hour or 1 plates of pasta in one hour. Which of the following is TRUE? a.) Jimmy has absolute advantage in production of pasta b.) Jimmy has absolute advantage in production of hamburgers c.) Jimmy has comparative advantage in production of pasta d.) Jimmy has comparative advantage in production of hamburgers 10.) If Bob and Jimmy from question 9 were to trade and mutually benefit, then: a.) Bob should specialize in making pasta b.) Jimmy should specialize in making pasta c.) The terms of trade would have to be ¼ plate of pasta per hamburger d.) It is impossible for Bob and Jimmy to mutually benefit from trade5. Consider the following is the economy of Country Z: C = 200 + 0.85Y I = 100 Answer the following questions: (a) Calculate the equilibrium level of output algebraically using the saving-investment (S-I) approach. (b) What is the value of saving at the equilibrium output from part (a)? (c) Suppose the investment increases to 200. What is the new equilibrium level of output? Calculate the value using the multiplier approach.1. Use the following information from a fictional economy: Consumption, C = 250 + 0.8 Yd Investment, I = 200 Government Spending, G = 100 Taxes, T = 0.2 Y Net Exports, NX = 50 - 0.4 Y Disposable Income, Yd = Y-T %3D Real GDP = Y %3D (a) What is equilibrium Real GDP (Y) for this economy? (b) What is equilibrium C for this economy? (c) What is equilibrium NX for this economy? (d) What is equilibrium T for this economy? (e) What is equilibrium YD for this economy?