Macro and Micro Economics - 2 Case Study Example | Topics and Well Written Essays - 500 words

large and Micro Economics - 2 - Case Study ExampleFederal Reservess efficacy to increase the money supply because when the FRB lowers the reserve requirements, the excess reserves increase automatically. The commercial banks would have to a greater extent freedom in lending out money and money supply would increase.The MPC of the economy is 1/3. The hail government spending is $20 one million million. This means that out of $20 billion, $6.66 billion would be spent and the ease would be saved. This $6.66 billion would become the income of subsequent consumers, who would spend $2.22 billion and save the rest. This is a geometric improvement and its sum can be found out by the formula 1/1-r. Since MPC is 1/3, mononuclear phagocyte system becomes 2/3 or 0.66. The multiplier becomes 1.5 (1/0.66). Therefore, the total impact of initial increase of $20 billion is $30 billion ($20 billion* 1.5).A. Irving Fishers equation of exchange is derived from the equation of upper (V) which is number of times in a year that a dollar is used to purchased goods and services. Firstly, GDP is inevitable to be calculated. Then, the quantity of money in the economy (M) is to be calculated. GDP is divided by M to calculate V. It is given as followsB. In the stock securities industry, the timing of investment decisions is of paramount importance. When a study market correction is expected, people look to sell their stocks and increase their holding of money because of the possibility that the market might soon turn into a bear market. During a market correction, the values of the stocks fall and losings are suffered. Therefore, it is better to sell the stock before the correction arrives.A. Imposition of tariffs saves the local producers from the competition of orthogonal producers. It also brings tax revenue and helps in decreasing the imports of undesirable items. Importantly, it serves for the betterment of balance of trade.Quotas tend to be more protective than tariffs. T hey require a lot of paperwork and are hard to administer. Tariffs are easier to manage and dissimilar quotas,