hw3m11 - Homework 3 Principles of Macroeconomics ECO 212...

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Unformatted text preview: Homework 3 Principles of Macroeconomics: ECO 212 Due: Tuesday, June 21, 2011 Question 1. Suppose a decrease in interest rates. Explain what happens to: a. Consumption. b. Investment spending. c. Exports. d. Imports. e. Net Exports. f. Income. g. The nominal exchange rate. Be sure to explain each step of the intuition. Question 2. Suppose a student waiter gets an unusually good night of tips, making $180 more than usual. Suppose further that r = 0 and the student is 20 years old and expects to live to 80. The marginal propensity to consume is 0 . 9. a. According to the permanent income hypothesis, what is the change in consumption and savings for the waiter in the first year after receiving the extra tips? b. According to the model with a constant MPC, what is the change in consumption and savings for the waiter in the first year after receiving the extra tips? Question 3. Suppose that, due to the mortgage crises, businesses expect the economy will not do well next year....
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This note was uploaded on 01/08/2012 for the course ECO 212 taught by Professor Lorca,m during the Summer '08 term at University of Miami.

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hw3m11 - Homework 3 Principles of Macroeconomics ECO 212...

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