Question

-Why do oligopolists have the incentive to fix prices? What are the obstacle to succesful collusion?...

-Why do oligopolists have the incentive to fix prices? What are the obstacle to succesful collusion?

- Suppose that the marginal propensity to consume in the economy is 0.75. Assuming that prices are constant, what effect would a $50 million increase in investment spending have on the equilibrium real GDP?

- Use the model of aggregate demand and aggregate supply to show the differences between demand-pull inflation and cost-push inflation.

- Why is crowding out an important issue in the debate over the merits of discretionary fiscal policy? Is crowding out equally likely to occur during all phases of the business cycle?

Homework Answers

Answer #1

2. Change in GDP = Change in Investment spending / (1 - MPC)

Change in GDP = 50 million / (1 - 0.75)

Change in GDP = 50 million / 0.25 = $ 200 million

So, Equilibrium real GDP will increase by $ 200 million.

3. Demand-pull inflation: It is inflation which occurs due to increase in aggregate demand. Increase in AD occurs when there is increase in consumption expenditure, investment, government spending, increase in exports or reduction in imports.

Cost-push inflation: It is inflation which occurs due to increase in cost of firm.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
23-The relationship between households' planned consumption expenditures and households' level of disposable real income is called...
23-The relationship between households' planned consumption expenditures and households' level of disposable real income is called the investment function. the savings function. the household aggregate demand function. the consumption function. 25-Of the relationships below, which is the least stable? Investment Net exports Consumption Saving 28-In the multiplier process successive rounds of spending get smaller and smaller because the mps equals 0. mps is negative but less than -1. mps is positive and equals 1. mps is positive and less than...
1) If the stock market crashes, then aggregate demand increases, which the Fed could offset by...
1) If the stock market crashes, then aggregate demand increases, which the Fed could offset by increasing the money supply. aggregate demand increases, which the Fed could offset by decreasing the money supply. aggregate demand decreases, which the Fed could offset by increasing the money supply. aggregate demand decreases, which the Fed could offset by decreasing the money supply. 2) In order to avoid entering a recession, the government of Batavia spent $300 billion improving infrastructure around the country. Assuming...
Question 14. In 2016, the U.S. trade deficit was $500B. In order to reduce its anticipated...
Question 14. In 2016, the U.S. trade deficit was $500B. In order to reduce its anticipated future trade deficit, the U.S. could implement which of the following trade policies: (Use the Mankiw framework discussed in class). a. Import Quota. b. Tariff. c. Voluntary export restriction. d. None of the above. Using to the aggregate-demand and aggregate-supply model, a decrease in the money supply will have the following long-run effects on price level and real GDP: a. A decrease in both...
The crowding out effect is zero if Select one: a. the LM-curve is vertical b. the...
The crowding out effect is zero if Select one: a. the LM-curve is vertical b. the central bank conducts open market sales following fiscal expansion c. income is stimulated via a tax cut rather than an increase in government spending d. the central bank conducts open market purchases following fiscal expansion e. the LM-curve is horizontal An asset (other than money) is considered to be more liquid if Select one: a. it can be quickly and cheaply transferred into money...
What tools could AA leaders have used to increase their awareness of internal and external issues?...
What tools could AA leaders have used to increase their awareness of internal and external issues? ???ALASKA AIRLINES: NAVIGATING CHANGE In the autumn of 2007, Alaska Airlines executives adjourned at the end of a long and stressful day in the midst of a multi-day strategic planning session. Most headed outside to relax, unwind and enjoy a bonfire on the shore of Semiahmoo Spit, outside the meeting venue in Blaine, a seaport town in northwest Washington state. Meanwhile, several members of...
Argentina and Ecuador: Understanding the Currency Crisis While fiscal policy is never far from the mind...
Argentina and Ecuador: Understanding the Currency Crisis While fiscal policy is never far from the mind of your average Argentine, who remembers the tough times and hyperinflation of the 1980s, the events of 2001 and 2002 have brought fiscal policy back to the forefront of public concern. Though the early 1990s may have been characterized by financial optimism, Argentina has been in a recession since Brazil's 1998 monetary crisis sent shockwaves across the regional and global markets. In early 2002,...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT