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Homework answers / question archive / 1)What leads to cost-push inflation in an economy? Select one: a
1)What leads to cost-push inflation in an economy? Select one: a. A decrease in productivity b. A decrease in wages C. A decrease in interest rates d. A decrease in profit margins
2)pts Refer to the figure to answer the following questions. Price level (P) LRAS, LRAS2 A SRAS, E 18 SRAS2 D C AD2 AD Real GDP (Y) Based on the figure, which of the following would cause the long-run equilibrium point to change from point B to point D? The population has aged and there are fewer people in the labor force Firms and workers expected the price level to rise. The economy experienced an increase in government spending The economy was in an expansion and has adjusted. The country's overall productivity increased
3)Investment Plan Optimization (Oil and Gas Industry in the United States) A global investment company would like to make an investment on several Oil and Gas Companies in the United States. Total annual expected return (in thousands) and cost for block of shares (investment costs in thousands) are given in Table 1. Table 1. Company name, expected annual return and cost for block of shares EXPECTED COST FOR COMPANY NAME ANNUAL RETURN BLOCK OF SHARES (LOCATION) (IN THOUSANDS) (IN THOUSANDS) Trans-Texas Oil (Texas) $ 50 $ 480 British Petro (Foreign) $ 80 $ 540 Dutch Shell (Foreign) $ 90 $ 680 Houston Drilling (Texas) $120 $1,000 Lone Star Petro (Texas) $110 $ 700 San Dieago Oil (California) $ 40 $ 510 California Petro (California) $ 75 $ 900
Considering the above table and the investment constraints, a) Please formulate your LP model and explain why our decision variables are binary (10 points)
4)Car dealerships offer various financing options including 0.0% APR for 72 months ($13.89 for every $1000 borrowed) and 1.9% APR for 36 months ($28.60 for every $1000 borrowed). a) Show how the amounts for every $1000 borrowed were calculated. b) You are in the market for a new car and can afford a monthly payment of $400. How much money can you borrow under each financing option (round to the nearest thousand)?
1)A decrease in interest rates will lead to cost push inflation in an economy.Cost push inflation .Cost push inflation is experienced in the economy when there is high increase in the price .Higher increase in price is due to the high cost of the production and the cost of supply of raw materials will also increases.The supply side factors determines the cost push inflation in economy.when there is higher prices in the economy the aggregate supply curve will shift towards left and it will lead to slow economic growth.Decrease in interest rate is a reason for cost push inflation
The other reasons for cost push inflation are increase in wages,higher food prices,higher taxes etc..In option b it is given that the decrease in wages leads to cost push inflation.This is not correct increase in the wages lead to cost push inflation.The other options given decrease in productivity and decrease in profit margin will not lead to cost push inflation.
2)The country’s overall productivity increased.
Here both the short run and long run aggregate supply curve is shift to right. The long run aggregate supply curve is inelastic and exogenously determined. Thus the rise in productivity will cause rightward shift of the LRAS. The increasing productivity will increase the level of total output and reduce the price level also. Thus the equilibrium point will shift from B to D with higher level of output and low level of price level. If the aged population increase, it will reduce the overall productivity through a reduction in the overall work force. Thus the production will be reduced and fall down in the economy. If the workers and firms believed that the price will fall down, this will results that the consumption will reduced and the price level will increased. Expansion and adjustment will increase aggregate demand also.
3)please see the attached file for the complet solution.
4)
(a) In first case the APR= 0.0% for 72 months and the amount to be borrowed is $1000
Therefore monthy installments= 1000/72= $13.89/month
In the second case the APR is 1.9% for 36 months and the amount to be borrowed is $ 1000
Therefore we will calculate monthly installments using the formula:
where
E is Easy Monthly Installments
P is Principal Loan Amount,
P=$1000
r is rate of interest calculated on monthly basis. (i.e., r = Rate of Annual interest/12/100.)
r=1.9/(12*100)= 0.0015833
n is loan term / tenure / duration in number of months
n=36months
Therefore, EMI= [ 1000* 0.0015833* (1+0.0015833)36]/ ((1+0.0015833)36-1)
= 1.67609/0.0586068
= $28.60/month
(b) Given that we can afford a monthly paymrnt of $400.
In first case the APR= 0.0% i.e. no interest is charged for 72 months and the amount to be borrowed is:
Therefore,
400*72= $28,800
In the second case the APR is 1.9% for 36 months and the amount to be borrowed is:
(Using the formula given above)
400=[ P*0.0015833* (1+0.0015833)36]/ ((1+0.0015833)36-1)
400= P*0.00167609218 /0.0586068
P= 400/0.02859
P= $13,986.54
