A)
I) Jue a lende il not twn
to boner as he hil be wose ok
false as increases bomo wer can beome
bowea lende debernding en Subslhhuion
amd nome Effects
fov lenden tenet Yate inereases
Conswmption in peiod I fallo
ConsumþHon in peiod 1 ises.
Depends SEIE ’ conswm tio
ln þeio dl wil se or fall
tv) for boower as interst Tate 'nreases
nve
Consumphim in Peod 1 fall
oumptn in PetodI fall.
As for borower, golng up makes him poer].
Both SE eonsumphon in Peie d t fadls
Anwe re corTet |
A2) Ma ky
Money Demand debends On transa tio
Monay Supply
kY = Me
M Dutput dekermined
P.R In mone market ony
y= M$/pk
LM Cus ve ril be
veoteal (opHon D)
A3) ohen Shont
elastie,
aggregat supply is
the consshonding Shont wn Philips
wil be
wve
notcd that
faten
Hattex, tae given dis intatiom aises
b a bia blggar margin otput falo by
kighenoamount
Sacifie raio is wghee .
Samfa Ratio wil be highe in A ophon A
A) ntereot ato in US 3ntent at in UK .
inteest concli tin. One
heck that ound is eapccded ta depriat aita
to us dolar opion B)
A.
A5)
)T=To
c(Y-To) + Io t Go
Iot Go- coTo.
I- dy =
Balanced budget dadTo]
dGcodTo
dallet
dY
d
9n clonomy By
ty (ropoional Jas)
7 Io t Go.
I o t Go
1--t),
I ot Go.
y-c + ct) = Iot Go ’(0)
Nou, bot Sader
halanced budgh da dT = 4dY t Yd
from l
dy d= 1
folleus that Balanced budget multipiu is 1
Dion A
lnde skcky wage hypotheais, AS AS cucunve is upwasd
LRAS (longrun)
9n
slahing
stheky wage P faus
SRAS
eshort un)
1eal inheases
Aori zontal)
Premaind
As GaoP fala
inm denaand l s laboy P=p
exes Aut}y i genenated i AN
AD
Labor mankelkand momnal
wage fely Real wage falle
Obtion e
) Guren the IS cunre an L AD wu be
AA given al in bnite CaUses a big fall in the
interest ak
to the intent ot Abig fall in intett oises
privat ineabneut amaunan AD ises
aelatvey by bi mengin he AD cuswe tend t
he ftatte
demand ise elastic iH is seaper
given fzl in TealMe
hises fall in bnterat
9t2.
Mdmore elast'e)
Ma (le elashie)
MS 'M$e
p
Wecan See thoat
alemand is lem elast'c AD Is fatte
is posike exteunahy that
or chad qela faom bee hives
+ l0
Tis s what
ea h orchad owner
Save
D her wis e he need
Worth 4O$
to do atfat
pouinah en
Soial Maginal Cost = |0+5
Social opHmum
lo +5 S0
oY58 = 4
faption e)
Cuven an an's cost
Now tle)=z-ioo)
9. = z-loo) each fiam
L1+Joc).
Averag cost AC=
2.
mi niised at
Avenage cost
dAC )
qloD
Aheek Soe at q zlo, t sho wd b
minimnum A e
S=4 P= (00.4
L800
l00o
(opion A)
18
MC= ]0.
B6
dr
da
= 8 - D-s) &- 104
At compethive
Price Marginal cott
p= lR- os/l6)
Gan' Conou
4x82 32
Area Bco 16.
Gain in Comer 32+16
=48 (obion D
