Suppose that the government proposes to eliminate unemployment insurance. Which model, the intertemporal-choice model of saving...

Suppose that the government proposes to eliminate unemployment insurance. Which model, the intertemporal-choice model of saving or the precautionary saving model, would predict the larger change in savings in consequence? Explain

Expert Solution

Rahul Sunny answered 2 years ago

Using the Real Intertemporal Model seen in class, suppose the government announces an increase in future...

Using the Real Intertemporal Model seen in class, suppose the government announces an increase in future government spending G’. 1. How will you expect the increase in G’ to affect the Ns, Nd, Ys, and Yd curves? Give the driver of each shift. 2. Assuming that the change in Yd is in absolute value more important than the change in Ys, what are the equilibrium effect on Y*? and r*? 3. Taking into account the final adjustment in the labour...

Suppose the government makes it more difficult to qualify for unemployment insurance, for example, by increasing...

Suppose the government makes it more difficult to qualify for unemployment insurance, for example, by increasing the duration of employment required before collecting UI benefits during an unemployment spell. Determine the effects of this change in government policy on the reservation wage and the long-run unemployment rate in the one-sided search model of unemployment.

1.Consider the monetary intertemporal model as discussed in the course. There is no inflation. Suppose that...

1.Consider the monetary intertemporal model as discussed in the course. There is no inflation. Suppose that the price of oil, an important input in production, doubles. Now suppose that nominal wages are sticky. Initially, the economy is at full employment. a) Derive the effect of the oil price shock in the Keynesian framework. b) What should the central bank do if its objective is to stabilize prices and what should it do if its objective is to speed up the...

3. Consider an intertemporal model. Suppose that supply and demand are equal initially in the goods,...

3. Consider an intertemporal model. Suppose that supply and demand are equal initially in the goods, labor, and money market. Due to COVID-19 consumers purchase only small amount of goods and services in the market, although firms can still produce output goods sufficiently. (a) Draw the labor market(Ns/ Nd), output goods market(Ys/ Yd) and money market graphs (Ms/ Md) and then determine the effect of COVID-19 on the output level(y), the real interest rate(r), the price level(P), employment(N), and real...

In the monetary intertemporal model, suppose the central bank issues money in exchange for capital, and...

In the monetary intertemporal model, suppose the central bank issues money in exchange for capital, and rents this capital out to firms each period, thus earning the market real interest rate r on the capital. Over time, as the central bank earns interest on its capital holdings, it uses these returns to retire money from the private economy. What are the long-run effects? Is the outcome economically efficient? Explain your results.

1.Suppose that in the next federal budget, the government decides to eliminate all (government) purchases that...

1.Suppose that in the next federal budget, the government decides to eliminate all (government) purchases that are financed by borrowing because the politicians worry about a budget deficit. What is wrong with this argument? Briefly discuss using the loanable fund market.

2. This question relates to the Fisher Intertemporal Consumption Model. Suppose Y1 = 200, Y2 =...

2. This question relates to the Fisher Intertemporal Consumption Model. Suppose Y1 = 200, Y2 = 250 and r = 0.03. a) Calculate the maximum amount of consumption in periods 1 and 2. Explain why these two values are different. b) Suppose r increases to 0.05, calculate the maximum amount of consumption in periods 1 and 2. Explain intuitively why the consumption values changed. c) Suppose Y1 increases to 300. Use r = 0.03 to answer this question. Explain numerically...

a) Why might the U.S. government, which funds Social Security, Medicare, and unemployment insurance programs by...

a) Why might the U.S. government, which funds Social Security, Medicare, and unemployment insurance programs by taxing wages, desire to find a way to reduce self-employment and inhibit the growth of the gig economy? b) Do you see the growth of the gig economy as a positive or negative trend in the economy? Explain. 1. In the first part, be sure to describe how these programs are funded to help support your position. 2. In the second part, briefly discuss...

Why might the US government, which funds social security, medicare and unemployment insurance programs by taxing...

Why might the US government, which funds social security, medicare and unemployment insurance programs by taxing wages, desire to find a way to reduce self-employment and inhibit the growth of the gig economy?

Suppose the government proposes a relief package in an urgent attempt to bail out virtually all...

Suppose the government proposes a relief package in an urgent attempt to bail out virtually all industries across the board and offset the economic damage unleashed by the 3-month long coronavirus [COVID−19] crisis episode, and indeed, keeps its promise. Required: By approximately what factor [in the long-run] are businesses likely to discount their negative cash flows, to work out how much is needed to level their current losses?

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