10. Using money creation to pay for government spending Consider Snackistan, a hypothetical country that produces only burritos. In 2017, a burrito is priced at $2.00. Complete the first row of the table with the quantity of burritos that can be bought with $900. Hint: In this problem, assume it is not possible to buy a fraction of a burrito, and always round down to the nearest whole burrito. For example, your calculations result in 1.5 burritos, the answer should be 1 burrito. Price of a Burrito Burritos Bought with $900 Year (Dollars) (Quantity) 2017 2.00 2018 Suppose the government of Snackistan cannot raise sufficient tax revenue to pay its debts. In order to meet its debt obligations, the government prints money. As a result, the money supply rises by 40% by 2018. Assuming monetary neutrality holds, complete the second row of the table with the new price of a burrito and the new quantity of burritos that can bought with $900 in 2018. The impact of the government's decision to raise revenue by printing money on the value of money is known as the

10. Using money creation to pay for government spending Consider Snackistan, a hypothetical country that produces only burritos. In 2017, a burrito is priced at $2.00. Complete the first row of the table with the quantity of burritos that can be bought with $900. Hint: In this problem, assume it is not possible to buy a fraction of a burrito, and always round down to the nearest whole burrito. For example, your calculations result in 1.5 burritos, the answer should be 1 burrito. Price of a Burrito Burritos Bought with $900 Year (Dollars) (Quantity) 2017 2.00 2018 Suppose the government of Snackistan cannot raise sufficient tax revenue to pay its debts. In order to meet its debt obligations, the government prints money. As a result, the money supply rises by 40% by 2018. Assuming monetary neutrality holds, complete the second row of the table with the new price of a burrito and the new quantity of burritos that can bought with $900 in 2018. The impact of the government's decision to raise revenue by printing money on the value of money is known as the

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.2P

See similar textbooks

Similar questions

Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can either call her on the land-line phone for five cents per minute or he can drive to see her, at a roundâ€”trip cost of 2 in gasoline money. He has a total of 10 per week to spend on staying in touch. To make his preferred choice, Jeremy uses a handy utilimometer that measures his total utility from personal visits and from phone minutes. Using the values in Table 6.6, figure out the points 011 Jeremys consumption choice budget constraint (it may be helpful to do a sketch) and identify his utility-maximizing point.
5. Vera is an impoverished graduate student who has only $100 a month to spend on food. She has read in a government publication that she can assure an adequate diet by eating only peanut butter and carrots in the Öxed ratio of 2 pounds of peanut butter to 1 pound of carrots, so she decides to limit her diet to that regime. a) If peanut butter costs $4 per pound and carrots cost $2 per pound, how much can she eat during the month? b) Suppose peanut butter costs rise to $5 because of peanut subsidied introduced by a politically sensitive government. By how much will Vera have to reduce her food purchases? c) How much in food stamp aid would the government have to give Vera to compensate for the e§ects of peanut subsidy? d) Explain why Veraís preferences are of a very special type here. How would you graph them?
When Pam's income increased by 10 percent, she bought 5% fewer containers of yogurt. What kind of good does Pam consider yogurt? O A normal luxury O A normal necessity O An inferior good O Substitute for eggs
If we have money, we buy goods and services to satisfy our needs. In economics, thesatisfaction that we get from the consumption of goods and services is called utility. Usea utility graph to explain what happen to the utility when you keep on increasing thenumber of units consumed. Also explain what happens to the utility when you keep onincreasing the number of units consumed. Also explain what happens to the additionalutility (i.e. additional satisfaction) when you increase your consumption by one unit
Who determines how much utility an individual will receive from consuming a good?
As a college student you work at a part-time job, but your parents also send you a monthly allowance. Suppose one month your parents forgot to send the check. Show graphically how your budget constraint is affected. Assuming you only buy normal goods, what would happen to your purchases of goods?
If a 10 decrease in the price of one product that you buy causes an 8 increase in quantity demanded of that product, will another 10 decrease in the price cause another 3 increase (no more and no less) in quantity demanded?
If the price of a pie is 12, what is the maximum number of pies she could buy in a week?
Would you expect total utility to rise or fall with additional consumption of a good? Why?
Explain all the reasons why a decrease in a products price would lead to an increase in purchases.
If the price of a magazine is 4 each, what is the maximum number of magazines she could buy in a week?
The following table shows Madison's utility from consuming popcom and Coke Suppose that Madison han income of $21.00, the price of popcom is 6.00 and the price of Coke in $4 50 FMadson wants to maiire her y how much popcom and Coke should she buy? ITT Popcorn Marginal Unity 192 144 Coke Marginal Uity 144 100 72 36 18 Quantity 48 24 12 Madison should buy boxes of popcom and cans of Coke Enter your reponses as negers)