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Most countries, including the United States, import substantial amounts of goods and services from other countries. Yet the chapter says that a nation can enjoy a high standard of living only if it can produce a large quantity of goods and services itself. Can you reconcile these two facts?
True/False/Uncertain. Why? (Justify your answer with a short argument.)
Evidence suggests that happiness in rich countries increases with output per person
Evidence suggests that happiness in rich countries increases with output per person
Discuss the evolution of banks and the functions of the financial system.
Given the following data, calculate NDP at FC.
Particulars
(In Lakhs)
1. Wages
10,000
2. Rent
5,000
3. Interest
400
4. Dividend
3,000
5. Mixed income
400
6. Undistributed profit
200
7. Contribution to social security schemes (employer)
400
8. Corporation Profit tax
400
1. Explain the effect of contractionary monetary and fiscal policy on income and interest rate based on the following cases. And support your explanation using graphs.
a. There is fixed exchange rate regime and perfect capital mobility.
Based on absorption approach, discuss how an economy can improve its trade balance.
Suggest how the problems of price control can be resolved without having the government to intervene in the market and actions that can be taken by both consumers and producers.
Suppose that you are the member of the Board of Governors of
the State Bank. The economy is experiencing the severe
unemployment. What changes in
A. The Reserve Ratio
B. The Discount Rate
C. Open Market Operations
would you recommend? Explain in each case how the change you
advocate would affect the money supply, interest rate and aggregate
demand and authenticate your arguments with monetary transmission
mechanism diagram.
An economy following a flexible exchange rate regime is in its long run equilibrium while suffering from a trade deficit. Would a reduction in government spending be helpful in eliminating the trade deficit? Explain indicating all co-movements both in the short run and the long run (assuming that Ricardian Equivalence holds)? How would this policy affect the trading partner of the home country? Use the IS-LM-FE and the foreign exchange market diagrams to explain.
