A restaurant offers a free dinner with a six-pound steak, potatoes, and all the trimmings, but only if the patron can eat it all. Otherwise, he must pay $80 for the steak dinner. What does this say about the likely marginal utility most people expect to get from the sixth pound of steak during that dinner?

a. If the changes in inventories in the second quarter of 2011 were mainly planned changes, what role did they play in shifting the AE curve and changing equilibrium expenditure? Use a two-part figure (similar to that on p. 654 to answer this question.

b. What do you predict will happen to unplanned inventory changes if exports and investment increase and real GDP returns to potential GDP?

The interest rate for the first three years of an $87,000 mortgage is 7.4% compounded semiannually. Monthly payments are based on a 20-year amortization. If a $4000 prepayment is made at the end of the sixteenth month:

a. How much will the amortization period be shortened?

b. What will be the principal balance at the end of the three-year term?