THE ECONOMIC ENVIRONMENT OF BUSINESS
 |
| Spring 2017 |
|
|
Graduate (S) Business Administration 509 THE ECONOMIC ENVIRONMENT OF BUSINESS |
|
|
|
| | HOME | SYLLABUS | CALENDAR | ASSIGNMENTS | ABOUT PROF. GIN | |
The homework should be written on 8 1/2 by 11 or A4 paper. When calculations are required, you must show all work unless the answer is obvious. The homework is due on Tuesday, March 21. Please make a copy of your homework before you turn it in.
.
1. Suppose the marginal propensity to consume is 0.80, the marginal propensity to invest is 0.10, and the marginal propensity to import is 0.15.
a. Calculate the multiplier in this case.
b. If autonomous investment increases by $200 billion due to increased confidence, what would be the eventual impact on the national income, using the multiplier calculated in (a).
.
2. Suppose the reserve requirement in the U.S. is 0.20. Also suppose that the currency deposit ratio is 0.05 and the excess reserve ratio is 0.10.
a. Calculate the simple deposit multiplier and the money multiplier.
b. Suppose the Fed wanted to decrease the money supply by engaging in $600 million in open market operations. What would it do?
c. Using the money multiplier calculated in (a), how would the money supply ultimately be affected by this action?
d. Suppose the Fed wanted to ultimately increase the money supply by $24 billion. What should it do in terms of open market operations, using the money multiplier calculated in (a)?