...Chapter 3 2. a. The marginal propensity to save, s, equals 1 − c = 1 −. 6 =.4 b. Autonomous planned spending, Ap, equals Ca − cTa + Ip + G + NX = 1,500 − 10r −. 6 (1800) +2400 minus 50r + _2000_− 200 = − 60r. Therefore, at an interest rate equal to 3, autonomous planned spending equals 4620 − 60(3) = 4400. c. Since the marginal propensity to save equals. _.4________ and the equilibrium level of income equals Ap/s, the equilibrium level of income equals 4400 /. 4 = 11,100 given the interest rate equals 5. d. Since autonomous consumption changes by four percent of any change in household wealth and the decline in the housing market from 2006–09 and drop in the stock market from 2007-09 reduces household wealth by $3 trillion, the decrease in autonomous consumption that results from the decline in household wealth equals .04(_3T___) = 120 billion. e. Since the decrease in autonomous consumption that results from the decline in household wealth equals 120 billion, autonomous planned spending decreases by that amount as well. Therefore, the new amount of autonomous planned spending equals 4400− 120 = 4320. Therefore, the new equilibrium level of income equals 4320/. 4 =10,800 , given the interest rate equals 3. f. The multiplier, k, equals ΔY/ΔAp = (10,800 −11,100)/(4,320 −4400) = (−300)/(−120) =2.5. g. Since the multiplier equals 2.5 and income must increase by 300 billion to restore income to its initial equilibrium level of 11,100, fiscal or monetary...
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...How fiscal policy adversely affected the European 2012 economic crisis By I chose this topic, because it intrigued me that another nation could encounter the same issues as the United States. The information contained throughout, will encompass the developments in the Euro area, the Euro’s three crises and Economic recovery. The intent is to educate you on the reason for the crises in Europe and how it can be avoided in the future. First let’s take a look at the reason for the financial crises in Europe. According to one of my sources, “The financial crisis that erupted in 2007 originated in massive bank losses on US mortgage loans. It spread rapidly to the Euro Area and other parts of the world, and led to the worst global recession since the Great Depression” (European Economy 3). The result of these events caused a increase in government purchases and transfers of households and tax cuts. I remember that a number of banks applied for help and were bailed out by the government, to include some major car manufactures as well. According to (European Economy 3) Bank losses explain about a quarter of the fall in EA GDP and consumption in 2007-09, and more than three-quarters of the fall in private nonresidential investment. It also implies results suggest that government support for banks noticeably dampened the fall in EA GDP, consumption and investment during the crisis. In the short run, the rise in government consumption would...
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...Rose Sandeen Week 3 Homework Chapter 8 You are given the following equations for the aggregate demand (AD) and short-run aggregate supply (SAS) curves: AD: Y = 1.25Aᴩ + 2.5Mˢ/P SAS: Y = 11,250 - 20W + 1,000P where Y is real GDP, Aᴩ is the amount of autonomous planned spending that is independent of the interest rate, Mˢ is the nominal money supply, P is the price level, and W is the nominal wage rate. Assume that Aᴩ equals 5,000, Mˢ equals 2,000, W equals 50, and natural real GDP, Yᴺ, equals 11,250. Use the values for the amounts of autonomous planned spending that is independent of the interest rate and the nominal money supply to derive the equation for the aggregate demand curve. Compute the amount of aggregate demand when the price level equals 2.0, 1.25, 1.0, 0.8, and 0.5. Graph the aggregate demand curve. Answer: The equation for aggregate demand is Y = 6,250 + 5,000/P. See below graph for aggregate demand curve. Price Level |2.0 |1.25 |1.0 |0.8 |0.5 | |Aggregate Demand |8,750 |10,250 |11,250 |12,500 |16,250 | | Derive the equation for the short-run aggregate supply curve, given that the nominal wage rate equals 50. Compute the amount of short-run aggregate supply when the price level equals 2.0, 1.25, 1.0, 0.8, and 0.5. Graph the short-run aggregate supply curve. Answer: The equation for the short-run aggregate supply curve is Y = 10,250 + 1,000P. See below graph for short-run aggregate supply curve. Price Level |2.0 |1.25 |1.0 |0.8 |0.5 | |Short-Run...
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...Homework Week 6 Answers The homework is worth 20 points, so each answer will have points distribution at the instructor’s discretion. Chapter 14 1. a. Given that the interest rate has been 4 percent for the last ten quarters, then for IS curve I, real GDP equals 8,800 − 25(4) − 25(4) − 25(4) − 25(4) − 20(4) − 20(4) − 20(4) − 15(4) − 15(4) − 10(4) = 8,000. For IS curve II, real GDP equals 8,400 − 5(4) − 5(4) − 5(4) − 5(4) − 10(4) − 15(4) − 15(4) − 15(4) − 20(4) = 8,000. b. For IS curve I, real GDP in the first quarter equals 8,800 − 25(3) − 25(4) − 25(4) − 25(4) − 20(4) − 20(4) − 20(4) − 15(4) − 15(4) − 10(4) = 8,025. Using the same IS curve, it is easy to show that for quarters two through ten, real GDP equals 8,050, 8,075, 8,100, 8,120, 8,140, 8,160, 8,175, 8,190, and 8,200, respectively. For IS curve II, real GDP in the first quarter equals 8,400 − 5(3) − 5(4) − 5(4) − 5(4) − 5(4) − 10(4) − 15(4) − 15(4) − 15(4) − 20(4) = 8,005. Using the same IS curve, it is easy to show that for quarters two through ten, real GDP equals 8,010, 8,015, 8,020, 8,025, 8,035, 8,050, 8,065, 8,080, and 8,100, respectively. c. Real GDP increases by 200 billion for IS curve I. The increase in real GDP for IS curve II equals 100 billion. d. For IS curve I, it takes four quarters, or twelve months, for real GDP to increase by 100 billion or one-half of the total increase in real GDP. For IS curve II, it takes seven quarters, or twenty-one months, for real GDP to increase by 50 billion...
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...Homework Week 3 Answers The homework is worth 20 points, so each answer will have points distribution at the instructor’s discretion. Chapter 8 (a through e) Problem 1 a. Given that the nominal wage rate equals 50, the equation for the short-run aggregate supply curve is Y = 11,250 – 20(50) 1,000P = 10,250 + 1,000P. The amount of short-run aggregate supply when the price level equals 2 is 10,250 + 1,000(2) = 12,250. The amount of short-run aggregate supply when the price level equals 1.25 is 10,250 + 1,000(1.25) = 11,500. The amount of short-run aggregate supply when the price level equals 1 is 10,250 + 1,000(1) = 11,250. The amount of short-run aggregate supply when the price level equals .8 is 10,250 + 1,000(.8) = 11,050, and it equals 10,250 + 1,000(.5) = 10,750 when the price level equals .5. The points on the short-run aggregate supply curve are: (10,750, 0.5); (11,050, 0.8); (11,250, 1.0); (11,500, 1.25); and (12,250, 2.0). b. Given that the nominal wage rate equals 50, the equation for the short-run aggregate supply curve is Y = 11,250 – 20(50) + 1,000P = 10,250 + 1,000P. The amount of short-run aggregate supply when the price level equals 2 is 10,250 + 1,000(2) = 12,250. The amount of short-run aggregate supply when the price level equals 1.25 is 10,250 + 1,000(1.25) = 11,500. The amount of short-run aggregate supply when the price level equals 1 is 10,250 + 1,000(1) = 11,250. The amount of short-run aggregate supply when the price level equals .8 is...
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...Federal Government Housing Policy Park University EC301 A crucial role is played by the federal government in supporting the construction of housing financially and offering ownership as well as rental support for households with lower income since the 1930s. In the recent period, numerous programs are being funded by the Congress in order to meet up to the housing requirements for the population that is poor and susceptible. The plans are mainly controlled by the Department of Housing and Urban Development (HUD). The contemporary housing assistance plans involve the comparatively flexible grants for the state as well as the local governments. This is done so as to assist the homeless people, build up reasonably priced housing and offer support to the first-time buyers. This was also done to encourage community development as well as more planned, direct support programs that would assist in providing low-priced apartments and even rental vouchers to the deprived families, managed through quasi-public, local public and the private intermediaries (McCarty & Et. Al., “Overview of Federal Housing Assistance Programs and Policy”). The main objective of the paper is to analyze the housing policies adopted by the federal government related to the mortgage and funding system. With this concern, the discussion of the paper will intend to identify the strategies implemented by the federal government persuade lenders and low-income borrowers in dealing with highly...
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