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Homework answers / question archive / 1)Calculate the present worth economically equivalent to the cash flow series shown
1)Calculate the present worth economically equivalent to the cash flow series shown. i=10% per year. * Round off to the nearest whole number and do not include a decimal point in your answer. (e.g. 123.4567 — 123 1234.5 1235) The equivalent Present Worth is | I $ 50 $ 0 1 2 3 4 5 6 7
2)An interest rate of 10% per 6 months, compounded quarterly is equivalent to what nominal rate for 3 years? *Round off to the nearest whole number and do not include a decimal point in your answer. (e.g. 123.4567 123 1234.5 → 1235) The answer is 96
3)
The demand for this Fall’s Intro Micro courses to be: P = 10,000/ Q
where P is the price and Q is the number of students
What is the arc price elasticity of demand between a price of
a $8000 and $6000?
b $6000 and $4000?
c $2000 and $0?
What happens to the elasticity as the price drops?
If this were a for-profit business, can you give the university any advice based on your answer to #1?
4)Let the economy be at potential output. Then we see a rise in GDP, a decrease in unemployment, and high inflation. Note what type of shock will cause these symptoms and show it on the aggregate demand and supply model by graphing it. Emphasize as well the short run and long run for the shock. State the goals of the fed and what they will do to stabilize the economy. Further emphasize on how the fed will respond to stable prices and maximum employment for there response. Also, explain what would happen if either a fiscal policy or a monetary policy will respond to these shocks. Please explain either monetary or fiscal process and explain how it is put back into our graph to offset the shock given. We are looking for a graph at a new equilibrium that explains the graph. If you are explaining the monetary process, it also must be in the lens of the fed's goals.
Please use this google drive link to download the answer file.
answer 1.https://drive.google.com/file/d/1PJtoBcTPAuM2LdChTPFQXU0uJwQR5WlO/view?usp=sharing
answer 3.https://drive.google.com/file/d/1PJtoBcTPAuM2LdChTPFQXU0uJwQR5WlO/view?usp=sharing
answer 4.https://drive.google.com/file/d/1UAK3JCi7QGSOLcztyQRE6KgmjSQk8ZQT/view?usp=sharing
Note: If you have any trouble in viewing/downloading the answer from the given link, please use this below guide to understand the whole process.
https://helpinhomework.org/blog/how-to-obtain-answer-through-google-drive-link
2)Semi annual Interest rate = 10% every 6 months compounding done quarterly
Effective semi annual interest rate = [1 + (Semi annual interest rate / 2)]^2 = [1 + (10% / 2)]^2 = 10.25%
It is equivalent to nominal rate [1 + 0.1025]^6 = 1.7958 which is 79.58 which is 80% for 6 semi annual or 3 years.
4)
The economy be at potential output "at the equilibrium level of "E1". Then a positive demand shock a rise in GDP, a decrease in unemployment, and high inflation. A positive demand shock shift the AD curve right (outward) from "AD1" to "AD2". The new equilibrium point is "E2" where GDP and price level both increase from "Y1" to "Y2" and "P1" to "P2" respectively. This is a short-term effect. It means in short-run a positive demand shock increase real GDP and price level and reduce unemployment. But in the long the the workers demand for higher wages to compensate their wages for increasing price level (inflation). So, in the long run rise in nominal wages decrease SRAS and SRAS shift from SRAS1 to SRAS2 and the economy reach back to potential output (Y1) with increasing price level from "P2" to "P3".
Graphical representation:
Reducing output level will increase unemployment and other side price level increase further from "P2" to "P3". So its increase increase inflation level in the economy. So, here the central bank will focus on reducing and stabilizing the inflation rate and tightening monetary policy (contractionary. monetary policy). Here the central bank will decrease money supply and decreasing money supply will increase interest rate. Increasing interest rate will decrease the demand for money that decrease the spending level or consumption. Decreasing consumption level will decrease price level and inflation will decrease. Here decreasing consumption will decrease AD and AD curve shift left to AD3 . Decreasing AD will reduce the price level. Increasing unemployment and decreasing price level will decrease wages and decreasing nominal wages shift the SRAS curve outward to SRAS3. Here price level (inflation) decrease but output at the potential level.
