Equilibrium Income

Suppose that the aggregate consumption function is C = 100 + 0.80(Y - T), taxes are T = 10 + .05Y, imports are M = 5 + 0.10Y, investment is $400, government expenditures are $200, and exports are $100. Part a - Calculate Equilibrium Income (Y) Part b - Calculate Consumption (C) Part c - Calculate Taxes (T) Part d - Calc ...continues

IS / LM Analysis

A macroeconomic model of Econoland can be summarized as follows: C = 100 + 0.5(Y - T) I = 0.25 Y - 500(r) G0 = 300 T0 = 100 X0 = 200 M0 = 200 M D = 10Y - 20,000(r) M S0 = 200 Part a - Derive the equation for the IS Schedule Part b - Derive the equation for the LM Schedule Part c - Calculate the equilibrium interes ...continues

Bond Values and Stock Prices

Part a Assume you hold a corporate bond with a $1,000 par value paying a 7 ⅝ coupon rate that has two years left until maturity. Calculate the value of the bond if the current market interest rate on a bond of this risk is 9 %. Part b Assume that you hold a share of common stock that will pay a dividend of $5.00 ...continues

Geometric Mean

Growth rates in real GDP for the past 5 periods are as follows Period % Growth Real GDP 1 +3.5% 2 +4.25 % 3 -2.0% 4 +2.5% 5 +4.5% Calculate the geometric mean rate of growth.

Multiple Choice questions on commercial banks and money supply

1. The fundamental explanation of why commercial banks can create money lies in: A)fractional reserves. B)The Federal Reserve or other central banks. C)Private ownership. D)The consumption function. E)Maintaining a marginal propensity to consume less than 1. 2. A reduction in reserve requirements of member banks ...continues

Crowding out private domestic investment

How might federal deficits crowd out private domestic investment? How does this crowding out affect future living standards?

Financing of government budget deficits by foreign sources

Suppose that government budget deficits are financed to a considerable extent by foreign sources. How does this create a potential burden for the domestic economy in the future?

(The Twin Deficits)

How is the U.S. budge deficit related to the trade deficit?

(Balance of Payments)

The following are hypothetical data for the U.S. balance of payments. Use the data to calculate each of the following: a. Merchandise trade balance b. Balance of goods and services c. Balance of current account d. Capital account balance e. Statistical discrepancy Billions of Dollars Mercha ...continues

(Balance of Payments)

Explain where in the U.S. balance of payment an entry would be made for each of the following: a. A Hong Kong financier buys some U.S. Corporate stock. b. A U.S. tourist in Paris buys some perfume to take home. c. A Japanese company sells machinery to a pineapple company in Hawaii. d. U.S. Farmers make a gift of food to ...continues