Suppose a country's MPC is 0.8, and in this country, government seeks to boost real GDP by either increasing government purchases by $50 billion or by reducing taxes by the same amount.

Instructions: Round your answers to one decimal place when appropriate. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers.

a. If it increases government purchases, real GDP will increase by $ ____billion, suggesting an expenditures multiplier of _____.

     If the government instead lowers taxes, real GDP will increase by $ ____billion, suggesting a tax multiplier of____ .

b. Now suppose another country's MPC is 0.6, and in this country, government seeks to reduce real GDP by either decreasing government purchases by $50 billion or by raising taxes by the same amount.

    If it decreases government purchases, real GDP will decrease by $___billion, suggesting an expenditures multiplier of____ .

    If the government instead raises taxes, real GDP will decrease by $ _____billion, suggesting a tax multiplier of ____.

c. Which of the following statements best explains the difference in magnitude of the multiplier effects between the expenditures multiplier and the tax multiplier?

• a) The tax multiplier is smaller since some of the extra disposable income is saved with a tax cut.

• b) The tax multiplier is larger since households spend more and spend better than governments do.

• c) The tax multiplier is smaller since all governments inevitably spend more than they say they will.

• d) The multiplier effect is exactly the same since both involve government policy.

The Kretovich Company had a quick ratio of 0.8, a current ratio of 4.0, a days' sales outstanding of 36.0 days (based on a 365-day year), total current assets of $870,000, and cash and marketable securities of $95,000.

What were Kretovich's annual sales? Do not round intermediate calculations. Round your answer to the nearest cent.

a) Baxter International has an equity beta of 0.8, a risk-free rate of 3% and a market portfoli return of 11%. The firm has a debt-to-equity ratio of 0.5 with the cost of debt at 6%. The marginal tax rate is 40%. What is the cost of capital of the firm, if CAPM holds?

b) Suppose the firm is also considering a warehouse renovation costing $60 million that is expected to generate cost savings of $12 million per year for six years. Should the firm undertake this project?

c) We know the discount rate for the firm is 7.48%. What would the NPV of the project be?

A turntable of 0.8 m in diameter is spinning about its axis with an initial angular velocity of 4 rad/s. If it experiences a constant angular acceleration of 3 rad/s 2 , find: A) The angle through which the turntable has travelled from 0 sec to 2 sec. B) The arc length the turntable’s rim has travelled from 0 sec to 2 sec. C) The tangential speed of the turntable’s rim at t=2 sec. D) The tangential acceleration of the turntable’s rim at t=2sec. E) The radial acceleration of the turntable’s rim at t=2sec

4.   Stock A has a beta of 1.3, Stock B has a beta of 0.8, the expected rate of return on an average stock is 11%, and the risk-free rate of return is 6.5%. By how much does the required return on the riskier stock exceed the required return on the less risky stock? (Work needed)

c = 100 + 0.8 (y - t)

i = 500 - 50r

g = 400

t = 400

M^d = P(0.2y + 500 – 25r)

Price level is fixed at 1.

The money supply is 520

1. The government increases taxes by one unit.

1. Calculate the shift of the IS curve.
2. What is the change in the level of aggregate demand?
3. What is the change in the interest rate and investment?
4. What is the change in disposable income and consumer expenditure?
   e. What is the change in the government’s budget balance?

Consider a hypothetical economy where: • C(Yd) = 105 + 0.8 × (Y − T)

• I(r) = 74 − 1 × r

• G = 65 • T = 50

1. Using the information above, write out the planned Aggregate Expenditure equation.

2. Write down an expression for the Investment-Savings (IS) Curve.

3. Assume that inflation is zero, so that i = r. This economy’s central bank follows a given Monetary Policy Rule: r = i = 0.003 × Y + 0.001 × P where P is the price level. Given this and the expression for the IS Curve, write down an expression for the Aggregate Demand Curve.

4. Suppose that the price level (P) is 1000. What is the equilibrium value of aggregate income, Y ?

5. What are the equilibrium values of the interest rate, r, and investment, I?

6. Suppose that the price level (P) falls to 500. What is the equilibrium value of aggregate income, Y ?

7. What are the new equilibrium values of the interest rate, r, and investment, I?

8. Discuss why the change in the price level has the identified impacts on Y , r and I