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# hw9 - C,I and G d Repeat parts b and c for Jane and Sally e...

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Economics 108 Landsburg Homework #9 week of 11/27/06 RECOMMENDED READING: www.landsburg.com/108reading1.pdf 1. In Lower Slobbovia, there are three people, two ﬁrms, and no government (hence no taxes!). Apples, pears and oranges all sell for \$1 apiece in this economy, and must be eaten on the day they’re grown. One day: Dick grows 7 apples, keeps one for himself, sells the others, buys 2 pears and 2 oranges. Jane grows 6 pears, sells them all, and buys 8 oranges. Sally grows 15 oranges and eats nothing. Answer the following questions: a) How many apples, pears and oranges are used by the ﬁrms for investment? b) When Dick’s income is divided as C + S + T , what are the values of C,S and T ? c) When Dick’s output is divided as C + I + G , what are the values of
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Unformatted text preview: C,I and G ? d) Repeat parts b) and c) for Jane and Sally. e) In the aggregate equation C + S + T = C + I + G , what are the values of all the variables? 2. Suppose the demand for consumption falls. What happens to the interest rate? What happens to the quantity of investment? Use a graph to illustrate your answers. 3. Suppose the demand for investment falls. What happens to the interest rate? What happens to the quantity of consumption? Use a graph to illustrate your answers. 4. Suppose government spending is reduced. What happens to the interest rate? What happens to the quantity of consumption? What happens to the quantity of investment? Use a graph to illustrate your answers....
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