Answer:
Suppose the economy is experiencing an output gap of –3%
a. Monetary policy or fiscal policy can be used to raise actual output toward potential output when:
The government can increase its spending or reduce taxes, which will shift the IS curve to the right and increase GDP.
The Fed can reduce the interest rate, which will shift the MP curve down and increase GDP.
b. The policies identified in part a,
can be used together to raise actual output toward potential output.
Explanation:
Investment-Savings (IS) curve shows all the levels of interest rates and output (GDP) at which an economy's total desired investment (I) equals its total desired saving (S). This equilibrium can be achieved at a level of interest rate that maximizes output. The IS curve slopes downward, and to the right because at a lower interest rate, investment is higher, which produces more total output (GDP) for the economy.
Answer:
B). $12
Explanation:
As per the given data, the AFC(Average Fixed Cost) for employing 25 factors of labor and 16 factors of capital would be $12.
We are given the production function,
Q = 
where,
K = allotted input in short-term
Rental rate of each unit/factor(r) = $15
Wage per factor(w) = $5
As we know, the two inputs are labor, as well as, capital;
To find AFC, we need TC;
so,
TC = (Fixed cost + Variable cost)
TC = (240(15 * 16) + 125(25 * 5) = 365
Thus,
AFC = $ 12
Answer:
C. A situation where no economic agent would benefit by changing his or her behavior
Explanation:
An economic equilibrium is when the agents are optimizing their decisions and opposing market forces are equal. This point allows the economic agents to maximize their utility and any change from this point will cause all agents to move away from potential maximum benefits.
In a natural equilibrium there is usually no government intervention so option A is false. Option B gives only one agent potential benefits and as such there is no equilibrium. Option D is conditional and may or may not happen as when the agents find missing information they would optimize again and move to an equilibrium.
Hope that helps.
Answer:
The current price of the stock is $68.42
Explanation:
The dividends on a stock that pays a constant dividend and will cease paying dividend after a defined period can be treated as an annuity. The dividends are constant and are paid after equal interval of time and for a defined period of time. To calculate the price of the share today, we will use the formula for the present value of ordinary annuity. The formula is,
Present value = 9.8 * [ 1 - (1+0.11)^-14 / 0.11 ]
Present value or current price of the stock = $68.42
