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In: Economics

Quiz 9 1)Suppose that I earn $250,000; I spend $230,000 and I save $20,000. According to...

Quiz 9

1)Suppose that I earn $250,000; I spend $230,000 and I save $20,000. According to theKeynes, what wouldhappen with the $20,000 that I saved?

a.All $20,000 would be loaned out and spent

b.Some of the money might be loaned out and spent, but probably not all of it.

2)Suppose that I earn $250,000; I spend $230,000 and I save $20,000. According to the Classical Economists, what would happen with the $20,000 that I saved?

a.All $20,000 would be loaned out and spent

b.Some of the money might be loaned out and spent, but probably not all of it.

3)Right now, the market for loanable funds operates at equilibrium. But, interest rates are not flexible at all and are fixed at 3.0%. If I suddenly save $50,000, how much of that $50,000 will be borrowed?

a.All$50,000 will be borrowed

b.Between $0 and $50,000 will be borrowed

c.$0

4)The current minimum wage is $7.25. Suppose the US government decides to place a $12 minimum wage just for the month of August as an experiment with the minimum wage returning to $7.25 in September. If this occurs, what can we expect will happen on August 1st? Answer this question using Classical Economic theory.

a.SRAS will shift right

b.SRAS will shift left

c.LRAS will shift right

d.LRAS will shift left

e.SRAS and LRAS will shift right

f.SRAS and LRAS will shift rig

Solutions

Expert Solution

1)Suppose that I earn $250,000; I spend $230,000 and I save $20,000. According to theKeynes, what wouldhappen with the $20,000 that I saved?

b.Some of the money might be loaned out and spent, but probably not all of it.

2)Suppose that I earn $250,000; I spend $230,000 and I save $20,000. According to the Classical Economists, what would happen with the $20,000 that I saved?

a.All $20,000 would be loaned out and spent

3) Right now, the market for loanable funds operates at equilibrium. But, interest rates are not flexible at all and are fixed at 3.0%. If I suddenly save $50,000, how much of that $50,000 will be borrowed?

b.Between $0 and $50,000 will be borrowed

4)The current minimum wage is $7.25. Suppose the US government decides to place a $12 minimum wage just for the month of August as an experiment with the minimum wage returning to $7.25 in September. If this occurs, what can we expect will happen on August 1st? Answer this question using Classical Economic theory.

b.SRAS will shift left

Rahul Sunny answered 2 years ago
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