I need help for my ECON homework

Assignment 4 answers

1. increase, decrease

2. Less than, decreases, rise

3. Consume, save

4. Inflationary, decrease

5. B

6. C

7. B

8. C

9. B

10. B

11. C

12. B (How to do this problem: First, you need to find the MPC. Remember from chapter 10 that MPC=change in consumption/change in real GDP. Moving among the different “levels” in the chart, you can see that for each $8 increase in consumption, GDP increases by $10. Therefore, the MPC is 8/10, or 0.8. You have to apply this number to the tax amount (see page 220 for further explanation). The government tax collection of $5 will reduce consumption by $4 (.8*5). Now you can plug your numbers into your standard GDP equation to find equilibrium. In this case, you don’t know what C and GDP are yet. Therefore, C + 6 + 0 + 10 – 4 = GDP. The “-4” accounts for the taxes. Now you know that C+12=GDP. Find a point on the consumption schedule where the difference between GDP and C is 12. Your answer is B, $310.)

13. C

14. A private, closed economy is one without international trade or government. This economy does not have imports or exports, and does not have government purchases or taxes.

15. The investment demand curve is a component that determines the amount of investment on an investment schedule. The investment schedule shows the amount of investment forthcoming at each level of GDP. The interest rate and investment demand curve determine this amount.

16. Demanded, negative

17. Consumer wealth, consumer expectation, household borrowing, personal taxes

18. Interest rates, expected returns on investment

19. Increases, decreases, positive

20. Greater than, surplus

21. Less than, shortage

22. Increase, decrease, increase, offsets

23. B

24. B

25. C

26. C

27. 1840, 100

28. 1940, 120

29. 2300, 180

30. 2350, 190

31. 2390, 200

32. 2490, 240

33. (1) there is fear of starting a price war, which hurts business profits and makes firms reluctant to cut prices for fear of starting one (2) firms are reluctant to change input prices if there are costs related to changing the price or announcing the change, called menu costs (3) wages determined largely by long-term contracts cannot be changed in the short run (4) if current wages are efficiency wages that maximize worker effort and morale, employers may be reluctant to lower wages because such changes reduce work effort and productivity (5) the minimum wage put a legal floor on the wages for the least skilled workers in the economy

34. An increase in aggregate demand in combination with an increase in aggregate supply from an increase in productivity due to technological change led to simultaneous strong economic growth, full employment, and very low inflation.