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The multiplier comes from the solution to the goods market equilibrium. In economics everything is endogenous. Increase in income increases consumption that increases demand, demand increases production and production increases income. However, as an echo in a cave the initial increase in income gets 'weaker' as it cycles through the economy and the result 1/...


2

The above answer by Regio covers most of the answer Just to emphasize further : Consider a 2 goods case. We define MRS as the opportunity cost of consuming one more unit of good 1. Opportunity cost means "What Am I Giving Up ?". Since you are consuming only two goods, you are giving up some amount of good 2 in order to consume this one more unit of good 1. ...


2

It is implicit in the interpretation: Mas-Collel: the amount that must be given (+) to compensate for a reduction (-). Reny: The rate at which good j can be exchanged (+ & -) for good i. The derivation from total differentiation only requires the utility to be constant, so the derivative must be negative to express that if the quantity of good $i$...


2

Hint: Suppose the price of the goods is $P$ so that $N=100/P$ goods can be afforded in total. Now consider which of the following yields more utility: a) $x=y=z=N/3$. b) $x=z=N/4$ and $y=N/2$.


2

Let $\min\{x,z\}=\Omega$, where $P_\Omega=P_x+P_z$. Now the problem becomes $U(y,\Omega)=y\Omega$, which is a standard Cobb-Douglas with degree 2 of homogeneity. Now in this case the choice for each good is: $y^*=\frac{\alpha_y100}{P_y(\alpha_y+\alpha_\Omega)}\implies y^*=\frac{100}{2P_y}\;\;\;\;\;\;\;$in this case $\alpha_y=\alpha_\Omega=1$ For $\Omega$: $\;...


1

I have not seen this in any textbook of mine, but here's my attempt: Since the utility function (1) is the product of the quantity of y and the minimum quantity of either x or z (so, $min \{x,z\}$ is a singular value, say 15 units or 27 units, etc.) and (2) $x=z$ for every value of x or z, the utility function turns into: $U(y, x=z)=yx$, or $U(y, z=x)=yz$ ...


1

But I don't believe that the plot will shift like this in response to such bad news, it seems to contradict what I learned about microeconomic autonomous spending (I believe that the same must be true for aggregate autonomous spending). It's spending that you just WON'T reduce, they are too critical. You will tap into your savings, you will borrow or ask for ...


1

“I” would be called private domestic investment. (https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey) Firm and household expenditures for investment both count as private investment. (https://courses.lumenlearning.com/boundless-economics/chapter/measuring-output-using-gdp/) Any investment ...


1

You are correct in stating that if MPS increases, then MPC decreases. But the question doesn't actually say that MPS increases. What it says is that saving increases at each level of income. That's consistent with a scenario such as the following in which MPS does not change while autonomous consumption falls from $10$ to $5$: $\qquad$Before: $S = -10 + 0....


1

Well first of all the story why we only record final consumption is not completely straight - it’s not because we only care about activity of “real person” or consumer. But because counting it all the way would mean we double count the value of the good. For example imagine the following situation. A wood is produced and sold for 15\$ to furniture company ...


1

in relation to things people would be buying anyway, doesn't boycotting Black Friday just amount to paying full price (or finding other sales) at some other time of the year versus taking advantage of these sales? Yes. Regarding necessities or scheduled expenditures, participating in BND requires a time-shift in consumption that may carry a higher price ...


1

The expenditure measure of GDP counts final expenditure, i.e. consumption by individuals and government and foreigners (exports) plus all capital formation (i.e. investment), and then subtracts imports since that part of final expenditure is not satisfied by domestic production. The salaries of government employees count as government consumption in the ...


1

For case 1, you can argue $z$ will be unique by contradiction: Suppose ad absurdum there is another $z'$ that is feasible (i.e. $p^Tz' =w$) optimal and $z'\neq z$. Then you can consider a convex combination of $z$ and $z'$: $\bar z = \beta z + (1-\beta) z'$, for $\beta\in(0,1)$. Notice that $\bar z$ is still feasible (because it is a combination of two ...


1

Luxury goods tend to be Veblen goods, so reducing taxes on them doesn't make them more attractive. They also tend to be goods whose value is mainly based on scarcity, so increasing demand doesn't increase the amount supply, it just increases the equilibrium price. If diamonds were cheaper, would there be significantly more diamond jobs? There's the ...


1

You interpreted the passage you read as essentially saying that "with log preferences, the Marshallian demand for the good does not depend on its price." That doesn't sound very plausible, don't you think? But the passage clearly refers to an intertemporal choice problem, it is about log-preferences over a single good and over time, it does not relate to ...


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