Macroeconomics Answers

4. A country faced an unexpected build-up of foreign exchange earning following a positive price shock on the country’s main export in the international market. This gain was, however, accompanied by a soaring inflation. How and under what conditions, if any, can the build-up of the foreign exchange reserve trigger inflation?

1. In the traditional macroeconomic framework (under open or closed economy), all macroeconomic variables can somehow be categorized as part of the aggregate demand and aggregate supply with equilibrating prices. List as many macroeconomic variables as possible and categorize them under sub-equilibrium and eventually under demand supply

framework. [Hint: Use the goods market, the money market, the labor market equilibrium, and technology].

42. On the structural transformation:

(a) Define structural transformation.

(b) List and discuss at least three stylized facts of structural transformation.

(c) Are high growth in per capita income and high rate of capital accumulations the sufficient conditions for structural transformation to occur? Explain

41. Consider two cultures X and Z. In culture X, parents live for their children and grandchildren where their current income is divided among current consumption, saving for retirement, and investment in the education of their children. In culture Z, children are born as assets for their parents so that the current generation expects to be taken care

of by the future generation. Output produced by the younger generation is divided into proceed and bequest for parents, and investment for future self-sufficiency.

(a) What is the direction of flow of resource of investment in the two cultures?

(b) What is the implication of the two cultures for growth?

0. Which form of aspiration failure is difficult to change through socioeconomic policies?

39. Why is that difficult to escape underdevelopment in a polarized society?

How does this explain the fact that middle income countries grow faster than both low and high income countries?

39. Why is that difficult to escape underdevelopment in a polarized society?

How does this explain the fact that middle income countries grow faster

than both low and high income countries?

35. The theory of convergence is not addressed in the Romer’s model of endogenous growth as the model is relevant to developed countries. What is the avenue by which the theory of convergence can be maintained in such endogenous growth models? What are the determinants of this avenue?

33. Compare the impact of population growth rate on level of per capita income in the Solow growth model and Romer’s endogenous growth model with deliberate investment in R&D.

33. Compare the impact of population growth rate on level of per capita income in the Solow growth model and Romer’s endogenous growth model with deliberate investment in R&D.