Macroeconomics and Money - 1584 Words

Economics 736 Business Conditions Analysis Kashian Quiz #1- Spring 2006 1. Suppose that the economy is characterized by the following equations: C = 160 + 0.6 Yd I = 150 G =150 T = 100 a. Solve for GDP (Y) Y = C+I+G Y=160+0.6(Y-100)+150+150 Y = 400 + 0.6Y Y = 1000 b. Disposable Income (Yd) 900 = Y - T c. Consumption Spending C = 160 + 540 = 700 d. If output is equal to 900, calculate total demand. Are we at†¦show more content†¦b. C0 is often called autonomous consumption. What does represent? Anything else (besiders income—such as population or taste) that affects consumption is assumed to enter through autonomous consumption—this shirts the consumption function. c. What does the lower case c called? What does it represent? Does it face any particular restrictions? It represtents the marginal propensity to consume. It is the fration of income which is consumed and it lies between 0 and 1. d. Suppose there was a shift in tastes of consumption. How could that be represented in the equation above? The consumption function would shift as autonomous consumption shifted. 6. Consider the Investment Function: I = I0 − br a. What is I0? What does it represent? It represent autonomous investment (anything that affects investment other than the real interest rate). b. What is b? What does it represent? Are there any parameter restrictions on b? It represents that interest elasticity of investment. It is assumed to be positive (as rates rise, investment falls—note the negative sign) c. What is the intution for the negative relationship between investment and real interest rates? What assumption have we made? The real interest rateShow MoreRelatedEndogenous Money : Implications For The Money Supply Process, Interest Rates, And Macroeconomics Abstract1389 Words   |  6 PagesEndogenous Money: Implications for the Money Supply Process, Interest Rates, and Macroeconomics Abstract Endogenous money represents a mainstay of Post Keynesian (PK) macroeconomics. PK theory challenged monetarism’s description of the money supply process. The focus of PK endogenous money theory is the mechanics of the money supply process. PK theory is itself divided between â€Å"horizontalist† and â€Å"structuralist† approaches to the money supply. Horizontalists believe the behavior of financial institutionsRead MoreThe Reserve Bank Of Australia ( Rba ) Introduced A New Monetary Policy786 Words   |  4 Pagesobjectives of macroeconomics and how do they effect and change the supply of money with interest rate? To make a decision the RBA must examine the economic growth and what guarantees long- run economic growth? 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Course Schedule: Workshop 1 = January 30, 2014 Workshop 2 = February 6, 2014 Workshop 3 = February 13, 2014 Workshop 4 = February 20, 2014 Workshop 5 = February 27, 2014 Instructor contact information: Jack Abbott Cell phone, 714-337-6092 Email, jbabbott@cox.net Course Description This course provides studentsRead MoreNew Classical Macroeconomics Arose From The Monetarism And Rational Expectation School Essay922 Words   |  4 PagesIntroduction New Classical Macroeconomics arose from the Monetarism and Rational Expectation School in the 1970s and follows the tradition of classical economics. If the market mechanism is allowed to play its role spontaneously, which could solve the unemployment, recession and a series of macroeconomic issues. Keynesian economists believe that changes in the money supply will lead to changes in effective demand that will changes in the total economy. 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