1)

A. Determine the impact of an increase in government spending of $9000 when the MPC is .75

( show your work )

B. Determine the impact of an increase in taxes of $2400 when the MPC is .8

( show your work )

C. Determine the net impact upon the nation's economy that results from a decrease in spending of $1600 and an increase in taxes os $3000 when the MPC is .9

( show your work )

Q.4  The following relationships hold in economy of Matata Island:

? = 320 + 0.4(? − ?)

? = 150

? = 275

? = 200

a) Explain the concepts of marginal propensity to consume (MPC) and marginal propensity to save (MPS).

b) What is the MPC for this economy?

c) Explain the concepts of the autonomous spending and tax multipliers.

d) What is the autonomous spending multiplier for this economy?

e) What is the equilibrium level of income for this economy?

suppose you are hired by the Canadian government to give advice on capital spending with the goal of improving economic growth.
Given the many types of capital,how would you allocate $1000000 of capital spending among the types of capital? provide a short explanation to justify your allocation.
You may make assumptions about the canadian econmony as i do not expect you to have full information.

The table to the right gives the per capita gross national product and the per capita expenditure on defense for eight developed countries. Gross domestic product​ (GDP) is a measure of the total economic output of a country in monetary terms. Per capita GDP is the GDP averaged over every person in the country. Complete parts a though c.

H            45,758                          1700

A. Make a scatter diagram for the data.

A.

200005500002000GDPDefense Spending

A scatterplot with a horizontal axis labeled G D P from 20000 to 55000 in increments of 5000 and a vertical axis labeled Defense Spending from 0 to 2000 in increments of 200 contains 8 points. (37500, 900); (32500, 800); (35000, 500); (35000, 1300); (35000, 300); (47500, 1200); (35000, 1000); (45000, 1700). All coordinates are approximate.

B.

200005500002000GDPDefense Spending

A scatterplot with a horizontal axis labeled G D P from 20000 to 55000 in increments of 5000 and a vertical axis labeled Defense Spending from 0 to 2000 in increments of 200 contains 8 points. (32500, 800); (32500, 650); (35000, 600); (35000, 1450); (35000, 100); (35000, 1400); (35000, 1000); (35000, 1700). All coordinates are approximate.

C.

200005500002000GDPDefense Spending

A scatterplot with a horizontal axis labeled G D P from 20000 to 55000 in increments of 5000 and a vertical axis labeled Defense Spending from 0 to 2000 in increments of 200 contains 8 points. (37500, 1700); (32500, 500); (35000, 1000); (35000, 800); (35000, 900); (47500, 300); (35000, 1300); (45000, 1300). All coordinates are approximate.

D.

200005500002000GDPDefense Spending

State whether the two variables appear to be​ correlated, and if​ so, state whether the correlation is​ positive, negative,​ strong, or weak.

A.

The two variables appear to be correlated and the correlation is strong and positive.

B.

The two variables appear to be correlated and the correlation is weak and negative.

C.

The two variables appear to be correlated and the correlation is weak and positive.

D.

The two variables appear to be correlated and the correlation is strong and negative.

E.

The two variables do not appear to be correlated.

C. Suggest a reason for the correlation or lack of correlation.

A.

The higher a​ country's per capita​ GDP, the less it can spend on per capita national defense.

B.

The higher a​ country's per capita​ GDP, the more it can spend on per capita national defense.

C.

There is no correlation between a​ country's per capita GDP and spending on per capita national defense.

Question 8: According to Classical economists, how are recessionary gaps and inflationary gaps eliminated?

A) Recessionary gaps are automatically eliminated as resource market and labor market surpluses put downward pressure on resource prices and wages, resulting in a rightward shift of the short-run aggregate supply curve.

Inflationary gaps are automatically eliminated as resource market and labor market shortages put upward pressure on resource prices and wages, resulting in a leftward shift of the short-run aggregate supply curve.


B) Recessionary gaps are automatically eliminated as resource market and labor market surpluses put downward pressure on resource prices and wages, resulting in a leftward shift of the short-run aggregate supply curve.

Inflationary gaps are automatically eliminated as resource market and labor market shortages put upward pressure on resource prices and wages, resulting in a rightward shift of the short-run aggregate supply curve.


C) Recessionary gaps are automatically eliminated as resource market and labor market surpluses put downward pressure on resource prices and wages, resulting in a rightward shift of the aggregate demand curve.

Inflationary gaps are automatically eliminated as resource market and labor market shortages put upward pressure on resource prices and wages, resulting in a leftward shift of the aggregate demand curve.


D) Recessionary gaps are automatically eliminated as resource market and labor market shortages put upward pressure on resource prices and wages, resulting in a leftward shift of the aggregate demand curve.

Inflationary gaps are automatically eliminated as resource market and labor market surpluses put downward pressure on resource prices and wages, resulting in a rightward shift of the aggregate demand curve.


Question #9: According to Keynes, how are recessionary gaps and inflationary gaps eliminated?

A) Recessionary gaps are eliminated by increases in aggregate spending, resulting in a rightward shift of the short-run aggregate supply curve. Inflationary gaps are eliminated by decreases in aggregate spending, resulting in a leftward shift of the short-run aggregate supply curve.

B) Recessionary gaps are eliminated by increases in aggregate spending, resulting in a leftward shift of the short-run aggregate supply curve. Inflationary gaps are eliminated by decreases in aggregate spending, resulting in a rightward shift of the short-run aggregate supply curve.

c) Recessionary gaps are eliminated by increases in aggregate spending, resulting in a rightward shift of the aggregate demand curve. Inflationary gaps are eliminated by decreases in aggregate spending, resulting in a leftward shift of the aggregate demand curve.

d) Recessionary gaps are eliminated by decreases in aggregate spending, resulting in a leftward shift of the aggregate demand curve. Inflationary gaps are eliminated by increases in aggregate spending, resulting in a rightward shift of the aggregate demand curve.

There is quite a bit of controversy over raising the Minimum Wage.

Proponents say it will bring the disadvantaged out of poverty, and increase spending which will be good for the economy.

Opponents say it will increase business costs that will in turn be passed on to consumers resulting in higher prices for goods and services, and will actually eliminate jobs.

What is your opinion on the Minimum Wage?

1. Find one article supporting increasing the Minimum Wage and copy and paste some of the more compelling arguments into the discussion.  Be sure to copy the source of your article.

2. Find another article that opposes increasing the Minimum Wage and copy and paste highlights of that article into this discussion.  Be sure to copy the source of your article into the post.

3. (300 words) Take a stand - are you in favor of raising the Minimum Wage, or opposed to it? Defend the arguments in the article you post, be it for or against raising the minimum wage. Also, dispute the argument for the other side - state WHY the article is incorrect.

Practice Questions The Azusa Better, Inc. has compiled the following information:

Begin End

Sales $3,813 $4,019

Long-term debt 1,555 899

Interest paid 121 143

Common stock 1,500 2,150

Accounts receivable 498 402

Depreciation 306 393

Cash 413 911

Inventory 1,516 1,533

Accounts payable 387 460

Retained earnings 1,700 1,550

Cost of goods sold 2,123 2,609

Net fixed assets 2,715 2,213

Other costs 391 514

Taxes paid 305 126

For End year, find the cash flow from assets, the cash flow to creditors and to stockholders.

Operating cash flow =

Change in net working capital =

Net capital spending =

Cash flow from assets =

Cash flow to creditors =

Addition to retained earnings =

Net income =

Dividends paid =

Cash flow to stockholders =

Cash flow from assets =

Short answer: Answer each of the questions in Section B. Answers should typically be no more than 2-3 sentences in length.

1. In the Mundell-Fleming model, what are the two endogenous variables that appear in the goods-market equilibrium condition (after substituting in all relevant functions, e.g., C = C(Y ? T), etc.)? How does this compare to the case in the (closed economy) IS-LM model? Be sure to explain the reason for any differences

2. Briefly describe how “debt deflation” works; that is, how this mechanism might cause an unexpected fall in the price level to produce a large fall in output (e.g., in the Great Depression).

3. Consider the IS-LM model, and suppose G increases by ?G units. In general equilibrium, does output increase by more, less, or the same amount as µG × ?G (where µG is the government spending multiplier)? Be sure to explain why this is the answer.

Question 2 ) Begin with the economy at full employment. Now assume that there is a decrease in Government purchases of goods and services. Analyze verbally the differing effects of this decrease in G in a i) Classical model and in a ii) fixed nominal wage Keynesian Model. Analyze what will be the effects on labor supply, labor demand, the level of unemployment, the level of prices, and the level of output? Show the effect in the labor market, the IS-LM model and the AS-AD model. In your answer explain fully why AD shifts or does not shift in each case. Explain both the short-run effect and the long-run effects in the Keynesian model.

Question 3) - Look at the variables you were asked to examine in question 2. What would happen to these variables in the Classical and Keynesian model had there been an increase in the money supply rather than a decrease in government spending as in question 2? Be sure to discuss the neutrality of money in your answer.

solve only question 3

1. As manager, you have decided that it’s time for some price discrimination to benefit your firm. There are typically three different “degrees” of price discrimination to choose from. Describe each “degree” of price discrimination, and then explain the specific “degree” you would use that has the greatest applicability to a range of goods that consumers typically purchase from your firm.

Again, no hedging your bet. :-) Select only one specific degree. Do not select more than one degree or combinations of degrees.

2. Being an intelligent manager of an electric utility company, you decide to take advantage of what’s called capacity utilization rates provided by the Federal Reserve to help you decide if more or less spending is a wise course to take. This month’s capacity utilization rate applicable to your company is 82%. Based on this information, what will you specifically advise the company to do in order to either expand or contract capacity? Explain why.