Using the AS-AD and IS-LM models, show the effects of an increase in consumer confidence on the position of the AD, AS, IS, and
1 answer:
Answer: hello your question has some missing information below is the missing information
Suppose the economy begins with output equal to its natural level. Then there is an increase in consumer confidence and households attempt to consume more for a given level of disposable income.
answer :
Attached below
Explanation:
IS-LM modeling curves intersects and it also defines the value of r and Y where r ( rate of interest ) Y( output level )
The AS-AD modeling is in equilibrium where aggregate demand curve and short run and long run aggregate supply curves intersects each other defining P and Y
p ( price level ) , Y ( output level )
<em>Note : Increase in aggregate demand shifts IS outward , raises interest rate and output level</em>
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Answer: The dividend payout ratio is 46.19%.
We follow these steps in order to arrive at the answer:
We begin with the DuPont identity of RoE.
<u>DuPont Identity:</u>
Now,
And Debt Ratio is also expressed as:
where D/E represents the Debt-Equity Ratio.
Substituting the value of D/E ratio from the question in the debt ratio formula above we get,
----(1)
Substituting (1) in the equity multiplier formula above we get,
Substituting Equity Multiplier from above and the relevant numbers from the question in the DuPont identity we get,
The relationship between RoE and earnings growth rate g is given by the following formula:
, where p is the dividend payout ratio.
Plugging in the values in the formula above we get,
p = 0.461988304 or 46.19%