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Consider the following equations for a small open economy for both the goods and money markets.
C = 3000 + 0.8Yd; T = 1000 + 0.3Y; G = 6000; TR = 500; I = 4000 + 0.24Y – 100r; M = 3000 + 0.2Y; X = 2000; LP = 1000 + 0.15Y; LT = 2000 + 0.25Y – 15r; Ls = 1000 – 35r; MS = 40,000; P= 4
a. Derive both the IS and LM equations for the economy and compute the Equilibrium level of Income and Interest Rate.
b. At this equilibrium level of income and interest, compute the levels of disposal income, total transactions demand for money, investment demand and the value of net exports.
c. Suppose the government raises govt. expenditure by 20% in order to increase aggregate demand. Show how this policy results in the crowding out effect.
Consider the following equations for a small open economy for both the goods and money markets.
C = 3000 + 0.8Yd; T = 1000 + 0.3Y; G = 6000; TR = 500; I = 4000 + 0.24Y – 100r; M = 3000 + 0.2Y; X = 2000; LP = 1000 + 0.15Y; LT = 2000 + 0.25Y – 15r; Ls = 1000 – 35r; MS = 40,000; P= 4
a. Derive both the IS and LM equations for the economy and compute the Equilibrium level of Income and Interest Rate.
b. At this equilibrium level of income and interest, compute the levels of disposal income, total transactions demand for money, investment demand and the value of net exports.
c. Suppose the government raises govt. expenditure by 20% in order to increase aggregate demand. Show how this policy results in the crowding out effect.
Consider the following equations for a small open economy for both the goods and money markets.
C = 3000 + 0.8Yd; T = 1000 + 0.3Y; G = 6000; TR = 500; I = 4000 + 0.24Y – 100r; M = 3000 + 0.2Y; X = 2000; LP = 1000 + 0.15Y; LT = 2000 + 0.25Y – 15r; Ls = 1000 – 35r; MS = 40,000; P= 4
a. Derive both the IS and LM equations for the economy and compute the Equilibrium level of Income and Interest Rate.
b. At this equilibrium level of income and interest, compute the levels of disposal income, total transactions demand for money, investment demand and the value of net exports.
c. Suppose the government raises govt. expenditure by 20% in order to increase aggregate demand. Show how this policy results in the crowding out effect.
. Explain the relationship between inflation and unemployment both in the short run and long run.
Suppose a Mrs. Chakay marries her butler, Ato Tachakay. After they are married, her husband continues to wait on her as before, and she continues to support him as before (but as a husband rather than as an employee). How does the marriage affect GDP? How should it affect GDP?Justify your debate.
Find data on GDP and its components, and compute the percentage of GDP for the following components for 1950, 1975, and 2000.
a. Personal consumption expenditures; b. Gross private domestic investment; c. Government purchases; d. Net exports; e. National defense purchases; f. State and local purchases; g. Imports
* Do you see any stable relationships in the data? Do you see any trends? (Hint: A good place to look for data is the statistical appendices of the Economic Report of the President, which is written each year by the Council of Economic Advisers. Alternatively, you can go to www.bea.doc.gov, which is the Web site of the Bureau of Economic Analysis.)
Suppose a Mrs. Chakay marries her butler, Ato Tachakay. After they are married, her husband continues to wait on her as before, and she continues to support him as before (but as a husband rather than as an employee). How does the marriage affect GDP? How should it affect GDP?Justify your debate.
A farmer grows a bushel of wheat and sells it to a miller for birr100. The miller turns the wheat into flour and then sells the flour to a baker for birr 300. The baker uses the flour to make bread and sells the bread to Rift Valley University for birr 600.The Rift Valley University students eat the bread. What is the value added by students? What is GDP?
A key feature of a macroeconomic model is whether it assumes that prices are flexible or sticky. According to most macroeconomists, models with flexible prices describe the economy in the long run, whereas models with sticky prices offer a better description of the economy in the short run. Which one of thoughts discussed above do you support? Why? Support your answer with evidence.
Currently, we Ethiopian faced a problem of war in some part of Ethiopia such as State of Amhara, State of Afar and Tigray. This problem caused low production, output, high unemployment rate, low aggregate demand. The macroeconomics has considered the state of macroeconomics, the philosophies that have been most important in the 21th century. Given the situation, what would a state of macro economics recommend be done? And as off you what would be done?
