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Solved: Do the tests discussed in this section tell you

Calculus: Early Transcendentals | 2nd Edition | ISBN: 9780321947345 | Authors: William L. Briggs ISBN: 9780321947345 167

Solution for problem 8 Chapter 8.5

Calculus: Early Transcendentals | 2nd Edition

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Calculus: Early Transcendentals | 2nd Edition | ISBN: 9780321947345 | Authors: William L. Briggs

Calculus: Early Transcendentals | 2nd Edition

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Problem 8

Do the tests discussed in this section tell you the value of the series? Explain.

Step-by-Step Solution:
Step 1 of 3

Macroeconomics 3/18/2016  GDP= C + I + G + (Xg – M ) - C  Consumer Spending - I  Investment Spending  This is NOT Buying Stocks and Bonds  Spending by Businesses (mostly) 1. New tools, equipment, machinery, factories (new capital) 2. Residential Spending – (buying a new home) 3. Changes in Inventory - G  Government Spending  Spending by all levels of government  Excludes transfer payments (purely financial transactions) - Exports (gross Xg) :  Our stuff to others - Imports (M) :  Their stuff to us  Components of GDP - Consumptions - Consumer spending Is the biggest component of total spending 70 – 75% - Spending by households on: 1. Durable goods: 11% - goods that last 1-3 years computers, cars, appliances, cell phones, electronics, instruments, and books 2. Nondurables : 29% - consumables – less than a year : food, alcohol, tobacco, toiletries, medication, fuel products 3. Services : 60% - things you pay to do for you : legal services, personal grooming, home repair services, restaurants, car services  Factors that determine consumption 1. Income - Income is the most important determinant of consumer spending remember circular flow of economic activity - Output = income - Producing stuff generates income for people- consumers, businesses, and governments - Disposable income : income after savings - Disposable income: consumption + saving - Saving is not spending Macroeconomics 3/21/2016  Factors that determine consumption … Continued - Consumer spending 1. Income (continued…)  Disposable income: income after taxes  Disposable income = consumption + saving  More income means more consumption and more saving (less income = less of both) 2. Prices (Walmart and gas prices)  Higher prices reduce consumption  Lower prices increase consumption  You feel “richer” with LOWER prices 3. Wealth Effects: amount of accumulated wealth a person has will (may Should) affect a person’s ability and willingness to spend now  Changes in wealth can change consumer behavior  Wealth: value of financial assets such as stock portfolios and retirement accounts and value of real assets - - your home, car  VERY IMPORTANT: The best measure of wealth is net-worth- value of assets (home, bank, accounts, portfolio, etc.) MINUS liabilities (claims) {mortgages credit card, debt, loans – school Car}  Important accounting tool: balancing sheet Assets Liability (bank claim) and Owners equity 1) $200,000 $200,000 - “0” 2) $300,000 $200,000 3) $200,000 $200,000 - OWE $100,000 Asset example: VALUE OF HOME = $200,000 Liability: VALUE OF MORTGACE LOAN = $200,000 Assume you buy a home for $200,000 and borrow $200,000  Wealth effects using balance sheet 1. Home purchased using mortgage loan - Owner equity = 0 2. Assume home prices rise - Home equity loan or Second Mortgage ($100,000) 3. Home Prices Fall - You owe more than value of home {upside down or under water} 4. Credit Conditions - Availability of credit and interest rates, impact how much households spend- - Easy credit and low rates encourage consumption - Tight credit and high rates discourage consumption 5. Taxes- change disposable income - Increase taxes decrease consumption - Decrease taxes increase consumption 6. Expectations

Step 2 of 3

Chapter 8.5, Problem 8 is Solved
Step 3 of 3

Textbook: Calculus: Early Transcendentals
Edition: 2
Author: William L. Briggs
ISBN: 9780321947345

The full step-by-step solution to problem: 8 from chapter: 8.5 was answered by , our top Calculus solution expert on 12/23/17, 04:24PM. This textbook survival guide was created for the textbook: Calculus: Early Transcendentals, edition: 2. Since the solution to 8 from 8.5 chapter was answered, more than 242 students have viewed the full step-by-step answer. This full solution covers the following key subjects: . This expansive textbook survival guide covers 128 chapters, and 9720 solutions. The answer to “Do the tests discussed in this section tell you the value of the series? Explain.” is broken down into a number of easy to follow steps, and 15 words. Calculus: Early Transcendentals was written by and is associated to the ISBN: 9780321947345.

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Solved: Do the tests discussed in this section tell you