it provides evidence that fiscal stimulus will not permanently restore full employment. In Farmer ’s model‚ as in the Keynesian model‚ employment is demand determined. But aggregate demand depends on wealth‚ not on income. Roger Farmer UCLA Department of
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CHAPTER 9 BALANCING DEMAND AGAINST PRODUCTIVE CAPACITY FLUCTUATING DEMAND • A major challenge for many types of capacity-constrained service organizations • Play havoc with efficient use of productive assets‚ thus eroding profitability • 2 basic approaches: (1) adjust the level of capacity to meet variations in demand (2)manage the level of demand using marketing strategies ➢ Services are perishable; ➢ Most acute among services are process people or physical possessions
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C = $100 + .8Y. Assume that Y = $1000 what is the level of consumption at this income level. C = $100 + .8($1000) = $100 + $800 = $900. 1. Using the above figure calculate the marginal propensity to consume between the aggregate income levels of $80 and $100. Also explain why this consumption function is linear. The marginal propensity to consume is equal to $15/$20 = .75. The consumption function is linear because the marginal propensity to consume is constant
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| USING THE KEYNESIAN INCOME-EXPENDITURE MODEL ANALYZE THE IMPACT OF THE RECENT EUROZONE CRISIS ON THE UK ECONOMY | | PRINCIPLES OF ECONOMICS (MACROECONOMICS) BMAN10002 COURSEWORK ASSIGNMENT | | USING THE KEYNESIAN INCOME-EXPENDITURE MODEL ANALYZE THE IMPACT OF THE RECENT EUROZONE CRISIS ON THE UK ECONOMY | | PRINCIPLES OF ECONOMICS (MACROECONOMICS) BMAN10002 COURSEWORK ASSIGNMENT | The Eurozone crisis is a major issue among academia and society‚ which is having
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was given independence over monetary policy in the UK. It was given the role of setting interest rates on a monthly basis for the purpose of achieving an inflation target of 2% (+/-1%) as measured by the CPI. The diagram above shows a short run aggregate supply curve and how an increase in interest rates may affect it. If the change is successful consumption‚ investment‚ and exports will decrease and imports will increase. This will result in the AD curve shifting left and a contraction of the equilibrium
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Explain the evolution of the Monetarist and New Classical theories. The monetarist analysis of the economy places a great deal of stress on the velocity of money‚ which is defined as the number of times a dollar bill change hands‚ on average‚ during the course of a year. The velocity of money is the rates of nominal GDP to the stock of money‚ or V=GDP/M= (P x Y) (M. Alternately‚ M x V=P x Y). The New Classical model‚ firms are assumed to be perfectly aggressive “price takers”‚ with no control
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Chapter 22 The Demand for Money T 1) Multiple Choice The quantity theory of money is a theory of (a) how the money supply is determined. (b) how interest rates are determined. (c) how the nominal value of aggregate income is determined. (d) all of the above. Answer: C Question Status: Previous Edition 2) Because the quantity theory of money tells us how much money is held for a given amount of aggregate income‚ it is also a theory of (a) interest-rate determination. (b) the demand for money
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(a) Aggregate Output/Income 2‚000 2‚500 3‚000 3‚500 4‚000 4‚500 5‚000 5‚500 Consumption 2‚100 2‚500 2‚900 3‚300 3‚700 4‚100 4‚500 4‚900 Planned Investment 300 300 300 300 300 300 300 300 Saving –100 0 +100 +200 +300 +400 +500 +600 Unplanned Inventory –400 –300 –200 –100 0 +100 +200 +300 Equilibrium Output Y* = 4‚000. When Y < 4‚000‚ inventories are lower than desired (unplanned investment is negative). Firms will increase production to increase their inventories‚ causing aggregate output/income
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dividend of $40 for the current year‚ what is the approximate present value of this stock‚ given at discount rate of 5% and a dividend growth rate of 3%? Answer: P = $40/(0.05 - 0.03) = $40/0.02 = $2‚000 Topic 2: Supply and Demand 1) Suppose that the demand for oranges increase. Explain the long -run effects of the guiding function of price in this scenario. Answer: In the long run‚ the higher price of oranges will signal more firms to enter the orange market‚ as it will seem
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ECO/372 Week 2 Knowledge Check – Quiz Quiz Questions with 100% Correct Answers: 1. 2. 3. 4. 5. 6. 7. 8. The globalized AS/AD curve is the standard AS/AD model with an added According to Say’s Law‚ people A shift in the long-run aggregate supply curve will change The hypothesis about the macroeconomy that sees the recent problems with the U.S. economy directly related to the structural problems caused by globalization is referred to as the __________ hypothesis. The central difference between the
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