Chapter 4
Consumption, Saving, and Investment
Learning Objectives
I.
Goals of Chapter 4
A) Examine the factors that underlie economywide demand for goods and services
B) Assumes closed economy (for now)
C) Focuses on consumption and investment
D) Equival
Chapter 13
Exchange Rates, Business Cycles, and
Macroeconomic Policy in the Open Economy
Learning Objectives
I.
Goals of Chapter 13
A) Two primary aspects of interdependence between economies of different nations
1. International trade in goods and servi
Chapter 5
Saving and Investment in the Open Economy
Learning Objectives
I.
Goals of Chapter 5
A) Develop the idea that a countrys spending need not equal its production in every period, due to
foreign trade
B) The fundamental determinants of a countrys t
Example 1
MARR
n
P
F
0.14 minimum acceptable rate of return expressed as a decimal
6 number of periods until F occurs
Present value
20,000 future vallue
P
factor
P
P
$9,111.73
0.456
$9,111.73
$9,111.73
Example 2
Option 1
Option 2
0.09 interest rate
0.09
ASSUMPTIONS
Cost per Fixture
Number of Fixtures
Total Cost
% Financed
3,400.00 .
1000
3,400,000.00 .
75%
Current Consumption Kwh
Proposed System Consumption kwh
Cost Per KwH
Current Montly Bill
Savings Factor
Savings
Financing Rate
Number of Years
Total L
Ahmad Damaj  201791016
PrGr601  Assignment 5
Question 1
Required Answer
Initial cost = X =
8155.934
Given
salvage value
0.1X
i
n
A
0.07
20
750
Calculate the PV of the system by adding Annuity of $750 for 20 years and the present value of the salvage cos
Example 1
n
A
i
factor
P
P (excel)
20
2000
0.11
7.9633281174
15926.656235
$15,926.66
Example 2 Unifrom Gradient
n
A1
i
C
Uniform Amount increase (4 dollars)
15
100
0.12
4
4.9803034
119.92121
$816.77
33.920171
$816.77
Example 3 Geometric Gradient
formul
ASSUMPTIONS
Cost per Fixture
Number of Fixtures
Total Cost
% Financed
3,400.00 .
1000
3,400,000.00 .
75%
Current Consumption Kwh
Proposed System Consumption kwh
Cost Per KwH
Current Montly Bill
Savings Factor
Savings
Financing Rate
Number of Years
Total L
E964 06: X1. USING THE BCR TO EVALUATE A
i
Investment (I)
n
Loan
Loan i
n
Steps
BCR=
(BC)/I
I > given $2M
Step No.
6
Calculating B (benefits) "PV"
Resale Value
Rental Revenue
Tax Saving (due to depreciation)
4
5
2
Calculating C (Costs) "PV"
Investment Co
     r
 
   

f
Interest and Equivalence
t
I
f
r
Going Up in Smoke
State governmentsthroughoutthe United States agreed to a largefinancialwindfall in 1998.
Tobaccocompaniesagreedto pay in perpetuityto settleclaims arisingfromthe health effects
Assignment 5: Life Cycle Cost Analysis
Question 1
I.V (P)
?
"PV"
P=750(P/A,I,n)+0.1P(P/F,I,n)
Po.1(P/F,I,n)P=750(P/A,I,n)
P=750(P/A,I,n)/(10.1(P/F,I,n)
Value
Type
750 AV
0.1 FV
B
S.V (% of P)
i
n
Factor
PV
10.5940142 7945.5106841
0.258419 0.0258419003 *
Q
Givens
A
i
n
Diagram (a)
Required Values
R=F
($464.10)
Values
100
0.1
4
(F/A, i,n)
F
(F/A, i,n)
factor
F
($464.10)
4.6410
464.1
D
Givens
Values
50
0.1
4
G
i
n
Excel Formula
(P/G,i,n)
factor
P
Manual Formula
`
II
Diagram (a)
Givens
F1
F3
F5
i
Values
Give
Chapter 6
LongRun Economic Growth
Learning Objectives
I.
Goals of Chapter 6
A) Identify forces that determine the growth rate of an economy
1. Changes in productivity are key
2. Saving and investment decisions are also important
B) Examine policies gove
Chapter 7
The Asset Market, Money, and Prices
Learning Objectives
I.
Goals of Chapter 7
A) What money is and why people hold it
B) The decision about money demand is part of a broader portfolio decision
C) Equilibrium in the asset market occurs when mone
Chapter 8
Business Cycles
Learning Objectives
I.
Goals of Part 3
A) What causes business cycles?
B) How should policymakers respond to cyclical fluctuations?
1. Classical economists see little need for government action
2. Keynesian economists think gove
Chapter 10
Classical Business Cycle Analysis:
MarketClearing Macroeconomics
Learning Objectives
I.
Goals of Chapter 10
A) Use the ISLM model with rapidly adjusting wages and prices to present the classical model
B) Examine the relationship between mone
Chapter 9
The ISLM/ADAS Model: A General
Framework for Macroeconomic Analysis
Learning Objectives
I.
Goals of Chapter 9
A) Combine the labor market (Chapter 3), the goods market (Chapter 4), and the asset market
(Chapter 7) into a complete macroeconomi
Chapter 12
Unemployment and Inflation
Learning Objectives
I.
Goals of Part 4
A) How macroeconomic policy works and how it can best be used
1. Unemployment and inflation (this chapter)
2. Policy in an open economyinternational trade and finance (Ch. 13)
3
Chapter 15
Government Spending and Its Financing
Learning Objectives
I.
Goals of Chapter 15
A) Examine fiscal policy and its macroeconomic effects
B) Look at definitions and facts about the governments budget
C) Discuss fiscal policy issues
1. Effects of
Appendix A
Some Useful Analytical Tools
Answers To Textbook Problems
1.
Two points of the function Y = 3X + 5 are: (1) when X = 0, Y = 5; (2) when X = 5, Y = 20. These
points are shown on Figure A.1. The slope of the line between these two points is Y/ X
Chapter 2
The Measurement and Structure
of the National Economy
Learning Objectives
I.
Goals of Chapter 2
A) National income accounts; relationships among key macroeconomic variables (Sec. 2.1)
B) Gross domestic productthe main measure of output (Sec. 2.
Chapter 14
Monetary Policy and the Federal Reserve System
Learning Objectives
I.
Goals of Chapter 14
A) Look at how the nations money supply is determined
B) Explore the question: How should the central bank conduct monetary policy?
1. Should the central
Chapter 3
Productivity, Output, and Employment
Learning Objectives
I.
Goals of Part 2: The Macroeconomics of Full Employment
A) Analyze factors that affect the longerterm performance of the economy
B) Develop a theoretical model of the macroeconomy
1. T
Chapter 1
Introduction to Macroeconomics
Learning Objectives
I.
Goals of Part I
A) Introduce students to the main concepts in macroeconomics (Ch. 1)
B) Introduce national income accounting and major economic magnitudes (Ch. 2)
II.
Goals of Chapter 1
A) M