MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
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Chapter 8.4, Problem 1YTE
To determine
Stock market prediction after the attack based on consumption and investment function.
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Which of the following would not cause shift in the investment demand curve as the above graph shows?
Select one:
a. Business taxes
b. Expectations
c. Changes in real interest rates
d. Acquisition, maintenance, and operating costs
e. Technological change
Derive the investment function (using the neoclassical model of investment). Explain how investment responds to changes in Marginal Product of Capital and interest rate.
Explain the short-run and long-run effects of an exogenous decrease in investment by explanation and using graphical analysis.
Chapter 8 Solutions
MACROECONOMICS FOR TODAY
Ch. 8.4 - Prob. 1YTECh. 8 - Prob. 1SQPCh. 8 - Prob. 2SQPCh. 8 - Prob. 3SQPCh. 8 - Prob. 4SQPCh. 8 - Prob. 5SQPCh. 8 - Prob. 6SQPCh. 8 - Prob. 7SQPCh. 8 - Prob. 8SQPCh. 8 - Prob. 9SQP
Ch. 8 - Prob. 1SQCh. 8 - Prob. 2SQCh. 8 - Prob. 3SQCh. 8 - Prob. 4SQCh. 8 - Prob. 5SQCh. 8 - Prob. 6SQCh. 8 - Prob. 7SQCh. 8 - Prob. 8SQCh. 8 - Prob. 9SQCh. 8 - Prob. 10SQCh. 8 - Prob. 11SQCh. 8 - Prob. 12SQCh. 8 - Prob. 13SQCh. 8 - Prob. 14SQCh. 8 - Prob. 15SQCh. 8 - Prob. 16SQCh. 8 - Prob. 17SQCh. 8 - Prob. 18SQCh. 8 - Prob. 19SQCh. 8 - Prob. 20SQ
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- Problem Set 4: Saving and Investment Economists in Fantasialand, a closed economy, have collected the following information about the economy for a particular year: Y = 9000; C = 6000; T = 1500; G = 1700. The economists also estimate that the investment function is: I = 3300 - 100r, where r is the country’s real interest rate, expressed as a percentage (i.e. r = 1 means interest rate is one percent). Calculate private saving, public saving, national saving, investment, and the equilibrium real interest rate.arrow_forwardIf planned investment (I) goes up by 20 initially and is sustained at this higher level, an increase of output of 20 will not restore equilibrium. Explain why?arrow_forwardHow will planned investment spending change as the following events occur? a) The interest rate falls as a result of Federal Reserve policy. b) The U.S. Environmental Protection Agency decrees that corporation must upgrade or replace their machinery in order to reduce their emissions of sulfur dioxide. c) Baby boomers begin to retire in large number and reduce their savings, resulting in higher interest rates. Thank you very much for your help.arrow_forward
- The policies of the federal government influence the outcomes of the various activities in that economy. When government policies change or unplanned events occur, the resulting economic events or activity will usually change. Listed below is a policy or event that affect the performance of the economy: The level of investment decreases because of a lack of confidence in the economy. for the question above, describe what would be the likely outcome in the economy. Use the appropriate tools of analysis, such as aggregate demand and aggregate supply where appropriate, to justify and explain your answer.arrow_forwardTrue or False: To economists, investment means buying stocks and bonds. True Falsearrow_forwardQUESTION 8 As a result of entering the world economy, Neverland experiences economic boom and its GDP goes up to y– 13250: The function that describes consumption is the same, cdr) = 5000 – 1000r + 0.25Y. but the investment curve shifted to the right: jd()=550-– 1800r + 0 2y. This is because firms expect growth to continue in the future and want to invest more. Government spending is also the same: G- 1800: The world interest rate is 5%. What is Neverland's current account balance? Note: Type in your answer approximated to two decimal points, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard will automatically delete it and you should not do anything about it.arrow_forward
- QUESTION 5 Neverland is a closed economy that severed all links to the outside world. Its economy can be described by the following consumption and investment curves: Ca(r) = 5000 – 1000r+0.25Y and 1d (r) = 500 – 1800r +0.2Y: Its output is y=13000 and government spending is G = 8000: What is the equilibrium interest rate (in percent)? Note: Type in your answer approximated to two decimal points, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard will automatically delete it and you should not do anything about it.arrow_forwardIf saving dropped sharply in the economy, what would likely happen to investment? Why?arrow_forwardAssume that the United States economy is currently in a recession in a short-run equilibrium. When interest rates fall, what is the impact on each of the following? (i) Investment (ii) Economic growth rate. Explainarrow_forward
- QUESTION 8 As a result of entering the world economy, Neverland experiences economic boom and its GDP goes up to y- 13250: The function that describes consumption is the same, cd(r) = 5000 – 1000r +0.25Y, but the investment curve shifted to the right: 1d(r) = 550 – 1800r + 0.2Y: This is because firms expect growth to continue in the future and want to invest more. Government spending is also the same: G- 180o0. The world interest rate is 5%. What is Neverland's current account balance? Note: Type in your answer approximated to two decimal points, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard will automatically delete it and you should not do anything about it.arrow_forwardExplain what the consumption function shows, and describe what is held constant along the consumption function. Describe what happens when firms and workers underestimate future prices in the economy. Focus your answer on what would happen to actual output as opposed to the expected potential output.arrow_forwardThe life cycle model of consumption argues that people consume and save in different proportions as they age. Seniors tend to consume more than save as their lives adjust to the realities of old age. Assuming the hypothesis is true, how would the aging of the very large baby boomer generation affect consumption and income?arrow_forward
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