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Question: Joe buys a Buick. To keep it simple, ignore the sales tax. In all cases the cash price of the new car is $25,000. Show how components of consumption and investment are affected if Joe:

(A) Pays cash.

(B) Pays cash but has a $10,000 trade-in.

(C) Pays over time, 48 monthly payments of $625.

(D) Leases the car, 36 monthly payments of $400.

(E) His corporation, Shifty Tax Consultants Inc., buys the car.

(F) Buys car personally but uses it 50% for business.

(G) Rents car from Hertz at a cost of $1,200 per month (which includes all insurance and maintenance). Now redo (A)-(G) under the assumption Joe buys a Toyota produced in Japan. Transportation costs are $1,000 and gross dealer margin is $2,000. Show how consumption, investment, and net exports are affected in each case.

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M93113834

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